If you are not experienced in searching for a forex broker, you are the ideal treat for a bad broker. Despite the many warnings, crucial clauses that are hidden in small print and disclaimers, there are people who fall victim to sub-par forex broker’s every day, causing them to lose everything. Not only will you never achieve that pretty Corvette you have dreamed about – in most cases you will be left with nothing – at all.
The majority of low quality brokers will use a number of lucrative sounding words, such as leverage, liquidity, margin and fixed spreads, which can be confusing. The bottom line is that if you do not understand the way that the foreign exchange market actually works, you are going to lose your money, likely much faster than you ever imagined.
Some tell-tale signs that you are working with a market maker broker are highlighted here.
If you are not able to invest, at minimum, $10,000, to open your forex account, then you are likely going to get a straight through processing or market maker account. In the disclaimers, the majority of market maker brokers will relate to you that they will always act in what is their best interest, regardless of if it is in your best interest. These individuals are referred to as a market maker since they create their own market. Essentially, these individuals are using their own assets for manipulating bids, trades and spreads within an established intra-company submarket that is dominated by the firm’s assets.
If you start to work with a brokerage that tells you they will place your trade order on the market, but the contact says that the broker is making its money on the actual buy/sell price, then there is a good chance that the broker is providing you with misleading information and that they may not be putting your order onto the open market at all. In most cases, they will be placing your order into an in-house market, where the brokerage is able to manipulate the bid and sell price for its advantage.
There are situations where market making is not a scam. And some top online Forex brokers offer this type of service, especially to account holders who have a low balance. Remember, market making is legal, which means that you need to know the type of account you are signing up for prior to opening one.
