You’ve probably heard of Forex brokers ripping off their clients by using various dirty tricks. Some of the most common ones are: stop hunting, requoting, widening the spread to some ridiculous number, software disconnects, lagging/fraudulent price quotes, unfilled orders, and account banning. Yes, they will politely (sometimes not so politely) tell you to bugger off if you’re consistently profitable.
I bet you’d like to know what tools brokers use to accomplish their nefarious deeds. Well, I’ve got just the thing for you! Check out the screenshots below:
Yep, your eyes are not deceiving you. They actually have very specialized and advanced software that they use on their trading servers to make sure that YOU end up losing. In most cases the majority of these so called brokers don’t even deserve that title. Technically speaking a broker is only an agent who executes orders on behalf of clients, whereas a dealer acts as a principal and trades for his or her own account.
Someone asked on MetaQuotes forum “What is the Virtual Dealer plugin used for? Many pepople want to know.” and guess what happened:
Here is more:
Lovely, isn’t it? I very much doubt that only MetaTrader4 based brokers have this type of software installed on their trade server. I often hear brokers touting that they have “no dealing desk” and whatnot, but to me this is just exploiting the vagueness of language. When they say that they have no dealing desk they really mean it, BUT what they really mean is that they have no HUMAN operated dealing desk, and instead they use software dealing desk applications such as the one you see in the screenshots here.
Experienced trades already know the games dealing desk forex brokers play so this post is mainly geared towards beginning traders. Having said that my advice is this:.
1) Stick to only so called “reputable” brokers. Do your research before you open an account with any broker. It may also be helpful to ask them if they use virtual dealing desk software. Ask them to send you a written statement saying that they do not. If they refuse or do not answer then simply move on and DO NOT open an account with them.
2) DO NOT open up a large account with dealing desk brokers. I’ve come to learn that the majority of brokers have software routines that specifically flag large accounts. They will target you and incrementally erode your account balance using their dirty tricks.
3 ) If you can avoid this stay away from trading before/during/or immediately after important news releases.
4) Take money out of your brokerage account on a regular basis!
5) Learn learn and learn some more. Practice in a demo account until you are consistently profitable. When you are then I suggest you look to open an account with an ECN broker.
That about does it for this post. If you wish to discuss this topic you can either visit my forum or the forex factory forum thread.
Thread on The Money Guru Forum (my own forum):
http://www.moneyguruforum.com/forex-brokers/7050-proof-forex-brokers-cheat-you.html
Thread on the Forex Factory Forum:
http://www.forexfactory.com/showthread.php?p=1855072#post1855072
Happy trading everyone, and I hope you don’t end up being victimized. If you do please see me with your proof/evidence and I will gladly publish it on my blogs.
April 20th, 2008 at 4:42 pm
[…] http://alansforexblog.com/2008/04/20/proof-that-forex-brokers-cheat-you/ […]
April 20th, 2008 at 7:23 pm
Alan, what have you heard about Forexte…the Autopilot recommended one. I’ve done quite well with the EA over the past 9 days there in a demo account. Would my results be different in a regular account (i.e. would the broker be dirtier in a live account). thanks.
April 20th, 2008 at 8:49 pm
Forexte is just an white-label broker for Forex.com - Gain Capital form what I know. In other words they’re an introducing broker and they do not have their own server/liquidity providers etc. As for differences between demo and live, well, technically there isn’t supposed to be any difference but in reality that isn’t the case. Most people (including me) find that some brokers requote you like crazy, widen the spread ridiculously and in general try to pull other stunts to make the trade come out in their favor.
If you’re going to go with ForexTe do some research on their root broker - Gain Capital forex.com
Find out if they have a dealing desk. If they do be careful and do not open up a humongous account so they won’t pay attention to the “small guy”
I’m runnng Forex Autopilot with IBFX and so far I haven’t noticed anything fishy. But I wouldn’t be surprised if it happens sooner or later. As you can tell I’m very suspicious of nearly all brokers - I just don’t trust them when they have so much control over the trading environment.
I can’t wait for some ECN to offer MT4 so I can run my EAs in a true ECN environment.
April 20th, 2008 at 8:51 pm
Here is what one of the brokers that I use has to say about the difference between demo and live on their platform: (Alpari UK)
On the demo account deals are processed automatically (by the server) whilst on the live account they are processed manually (by a dealer). Making a trade usually takes 1-2 seconds on the demo account and 5-15 seconds on the live account (under normal market conditions).
On the demo account you can trade on spikes. A spike is an obviously wrong quote which appears in MetaTrader 4. On your live account you will not be able to trade at such prices.
April 20th, 2008 at 8:53 pm
Oh, and one more thing. Here is proof that ForexTe is really just a white-label of forex.com
“At this time, regulatory issues prevent Forex.com from opening accounts with retail customers who reside in British Columbia and United Kingdom (England, Scotland, Northern Ireland, Wales).”
Taken from here:
http://www.forexte.com/about_us.html
May 4th, 2008 at 9:37 am
do you can give me a name of 2 company that i can trust them?
i have a blog about forex and i want to put the names in my blog
May 4th, 2008 at 9:49 am
Hi Yoni. If you absolutely want to avoid typical tricks played by dealing desk brokers I recommend you look into trading with ECN brokers.
There are a few of them out there. Look into MB Trading, HotspotFX, Dukascopy, etc..
Stay tuned to this blog as I intend to review each one of these an many more.
Hope this helps.
Cheers,
Alan
May 4th, 2008 at 11:01 am
thx alot
i didn t understand what the earn from that they are cheat me?
do u can translate this article into hebrew and put in my blog?
May 4th, 2008 at 11:42 am
Sorry, but I don’t speak Hebrew. Try some online translation website or service.
May 4th, 2008 at 11:49 am
[…] 3
May 4th, 2008 at 12:11 pm
i vety sorry i mean to write do i can translete your article into hebrew
my mistake
May 4th, 2008 at 1:14 pm
[…]
May 4th, 2008 at 1:17 pm
for Anonymous
do you think that a fantasy that alan know hebrew?
and he realy find a time to translete for me?
May 4th, 2008 at 1:42 pm
[…]
May 4th, 2008 at 3:10 pm
I don’t know, maybe it’s just be but I don’t see what Mr. Anonymous has typed.
To answer your comment, I wish I knew Hebrew but I don’t so if you want to translate the article go ahead, feel free to do whatever, as long as you provide a backlink to my blog
thanks.
May 4th, 2008 at 8:17 pm
thx
May 30th, 2008 at 6:50 am
I have been in the hunt for a good ECN broker for some time. I have to say that I have not been impressed with any of the trading platforms. I have gotten spoiled by the simplicity and function of MT4, I guess that’s part of their secret. I’ve heard good things about Saxo Bank, but I was equally as unimpressed. I’m in the process of downloading HotspotFX’s demo. Do you have any other recommendations? Who do the pros trade with? Thanks again for a most insightful post!
May 30th, 2008 at 8:43 am
Saxo Bank is a market maker and not an ECN.
Yes you’re right, MT4 is beautifully simple and elegant. I tried HotspotFX’s platform and it’s not that easy to use. It takes some time to get used to. MBTrading has a very similar platform. EFX Group is now owned by MB Trading so they use the same platform from what I can tell.
InteractiveBrokers is another ECN broker, but to be honest I do not know much about this one.
Oh, and another ECN broker you may wish to look into is Dukascopy. They’re Swiss based and my opinion is that their platform is much better and a lot more “user friendly” compared to the rest.
I plan to write a full review of Dukascopy when I get back from vacation.
As far as what the pros trade with. Well, it depends. I think the really big boys and institutions trade with large banks or directly on the ECNs I have mentioned here.
So to recap here is my current list of ECN brokers:
InteractiveBrokers (IB)
MB Trading
HotspotFX
Dukascopy
and
Currenex - this one is hard or next to impossible to get into as an individual. If you asked for the big boys’ ECN - this is it.
Hope this helps dear Skeptic of bucket shops (btw I’m one too).
Thanks for visiting my blog! Cheers and happy and profitable trading.
May 30th, 2008 at 11:44 am
Oh I forgot to add FXall to the list
August 2nd, 2008 at 4:29 am
Forex.com is a scam do not waste your time, they freeze the software at the peaks and valleys until they pass so you cannot make a profit. They are registered with the CFTC but that means nothing unless you can prove beyond a shadow of a doubt they are doing something wrong. I filed complaints and they could do nothing. I have been trying the demo at MB trading and have made a profit on 100% of my trades. I will soon be opening an account and see if it is the same with the real account.
August 2nd, 2008 at 5:48 am
Hmm, I see. Thanks for sharing Reverend Ken. As for North Finance, I used their demo accounts all the time until they got bought out by some other company. They’re now a 5 digit broker btw. I never tried to open a live account yet. So I’d definitely be interested in hearing how your experience goes once/if you do open up a real money account.
Open up a thread in the following forum:
http://www.moneyguruforum.com/forex/forex-brokers/
August 6th, 2008 at 12:04 am
Hi, I am thinking of opening an account with Saxobank. How would rate Saxobank? My aim is to trade futures & forex using Saxotrader.
Being in the middle east I wasn’t able to open an account with Tradestation since they do not allow investors from ME to open accounts with them…
Appreciate your views on the above.
Thanks.
August 6th, 2008 at 3:26 am
Hmm Tarun, I can’t really say as I have no experience with Saxobank. On the surface they appear to be okay.
Here is one review of them:
http://www.forexpeacearmy.com/public/review/www.saxobank.com
The opinions vary from “outright fraud” to “everything is good” and everything in between. The total rating given on that review is not too reassuring however.
August 27th, 2008 at 9:25 am
good point about taking your money out on regular basis. However, in order to do so, make sure that there are no hidden terms and conditions that might stop you from it!!!
Basically, my advice, read everything about your selected forex broker, especially their terms and conditions. Usually the fishy stuff is written in tiny letters somewhere at the bottom of the page
August 27th, 2008 at 9:44 am
Yes, good point! Danielle, you deserve a high-five for that one.
Many scam brokers have unusually harsh and restrictive terms which prohibit you from taking money out of your account on a regular basis.
If your existing broker or one you’re interested in has such terms, AVOID it! As Danielle says, this is a clear sign that that particular broker is up to something.
I suggest that you fokls develop a regular habit of taking out money say every one and a half months or maybe even at the end of the month (if you’ve made profit that is) Learn to think of your forex trading account as a bank account that earns very high interest. Take the cash and run :p
October 1st, 2008 at 10:27 pm
Hi Alan,
Boy, have you saved me a lot of work (and maybe my butt) in helping me get connected between an ECN and the MT4 platform! I’ll let you know what happens…
While this isn’t on the thread, an comments about a decent auto-trade EA? Or can you recommend any unbiased reviews of EAs? I’ve looked at a number of reviews, but many of them conflict.
Please feel free to respond to my Email.
Bruce in Oregon
October 2nd, 2008 at 3:50 am
You’re welcome Bruce! Glad I was of some help.
As for EAs, well there are so many out there. I think the majority of reviews out there are biased in the sense that they’re trying to sell you the EAs their reviewing.
I don’t feel comfortable “recommending” you any particular EAs but I will tell you which ones I own.
http://www.forexautopilot.ca - (Forex Autopilot)
http://www.forexroboteer.com (Forex Roboteer - 3 way grid type system)
Forex Autopilot - this EA shows potential but it’s not for those with a weak stomach as it trades with out a SL (by default, you can set one, but curiously that affects its performance tremendously). You can find my performance test results on this blog as well as at my other blog http://alansmoneyblog.com
Forex Roboteer - this one is a new EA that is based on a system called RangeTrader http://www.rangetrader.net
The drawdown with this one is that it requires a $45 monthly subscription service. This is to pay for an auto optimization service. In other words the EA will download optimized settings automatically from the author’s server. This is one of those almost “set it and forget it” type of EAs.
Another EA you may wish to look into is the Bogie-NN-v8b. See the “Important news header” at the top of this blog and you can get a 20% discount on the monthly subscription fee. Well actually the company behind this EA makes other EAs (one of which is a contest winning - ATC 2007) as well, but I only demo tested the Bogie-NN-v8b system.
Now as for free EAs I recommend you check out Forex-TSD and sign up to have access to the “elite” section. Some semi-private and good EAs can be had there. $12 a month paypal subscription though. Keep in mind that you’d be helping out a great forum
very useful info on there.
If you come across any good EAs feel free to let me know. I’m always looking for a good automated trading system to ad to my portfolio.
So, in conclusion, check them out and draw your own conclusions.
Cheers,
Alan
November 2nd, 2008 at 6:34 am
My understanding is that bostontechnologies also can make a bt bridge between an mt4 platform and an ECN broker such as hotspot4x, currenex etc according to there website. Yet brokers use bostontechnologies help to come up with virtual dealer plug-ins.
November 2nd, 2008 at 7:07 am
Hmm, yes that’s true. This may sound a bit cynical, but they just follow the money. What can we traders do? I suppose the only logical choice is to just plain avoid all brokers that use a dealing desk model - virtual or human or whatever.
By the way, checkout this thread:
http://www.forexfactory.com/showthread.php?t=70582
November 3rd, 2008 at 7:54 am
Hi Alan, you said “I can’t wait for some ECN to offer MT4 so I can run my EAs in a true ECN environment.”
Do you know of any ECN brokers who are going to do this soon? I can’t wait either.
November 3rd, 2008 at 8:49 am
Hi Peter.
Well, there are some that claims this. Here are some that I found:
fastbrokersfx.com
dukascopy.com offers a free MT4 dll plugin that allows you to execute trades on their platform from within MT4 (but you can’t access their price feed unfortunately)
and there is always atcbrokers.com
Check them out. I hope this has been helpful to you Peter.
Thanks for visiting my blog.
Cheers, and happy trading.
November 3rd, 2008 at 11:14 am
Shoot, I forgot to mention HotSpotFX..hotspotfx.com I believe.
November 28th, 2008 at 8:10 am
Hi Alan, Your blog is very useful, I’m also looking for a reliable broker. The one that you mention is it still in the market.
Elaine
November 28th, 2008 at 8:41 am
Thanks Elaine!
The broker in the screenshot is still in business.
But if you’re serious about forex trading I suggest you avoid the dealing desk brokers at some point in your trading career. It is okay to start off with them for the small pip spread and small account size, but eventually once you’ve got a winning method and want to eliminate the possibility of your broker working against you go with a pure ECN broker.
Some popular ones are:
HotSpotFX (hotspotfx.com?)
MB Trading (mbtrading.com?)
Dukascopy (Swiss broker - http://www.dukascopy.com/ibentry.php?ibref=415 )
Fastbrokersfx (US based - http://www.fastbrokers.com/index.php?VA001 )
By the way Fastbrokersfx offer the MetaTrader 4 (MT4) platform within a pure ECN environment. Look for their FastFX Pro Feed.
Good luck, and if you find other good ECN brokers let me know.
Cheers,
Alan
December 14th, 2008 at 12:34 pm
Dear Sir
Thanks for your kindness to published forex brokers bad habit. I am one of their victim. Now, can you please give me a reference which one broker with good reputation? I really tired to play with scam and cheating broker. My last broker is Interbank Fx, that made 11 pips differential with the demo account after i made more than 100% profit a week. This horrible and disaster. Please recommend me.. Thanks a lot, May God bless you
Regards
Gema
YiM : kwee.cheng@yahoo.com
email: gema@stocksforliving.com
December 14th, 2008 at 4:15 pm
Gema it all depends on how much money you wish to fund your account with. I would recommend ECN brokers. The problem is that most have pretty high account minimums for some people.
To checkout some of the ECN brokers I recommend click on “Forex Brokers” at the top of this blog.
I’m going to add HotSpotFX soon. I was thinking of becoming an IB with them so I can offer people the ability of opening up accounts with a minimum of $3500 (normally it is $7500)
Just out of curiosity what are some of the brokers that you feel have tried to scam you?
December 15th, 2008 at 5:11 pm
hi, i heard of an ea forexautopilot turbo but i would like to know which broker is suitable with ea’s and if any one has tried it out yet and in which platform
December 16th, 2008 at 10:19 am
Good point about taking the money out. This is one of the rules I always follow. Yes, I loose some on transactions, but that is nothing!