Options for cheating on Forex
Traders, without knowing it, often become targets for fraudulent companies, and their deposits are the very tidbit that pseudo companies providing services in the Forex market are so eagerly hunting for.
It is worth noting that the deception technology itself is in a prominent place and right in front of the trader’s nose, however, behind the clever terminology, many people cannot figure out what scheme the broker uses and exactly how he can make money for you.
In the same article you will learn classic work schemes forex brokers, as well as methods of deceiving traders in the Forex market.
Schemes of work of black brokers
Scheme "Kitchen"The most common scheme for deceiving most dealing centers, which is called “Kitchen” among traders, is that all transactions that traders make are not put into the market at all and are nothing more than virtual transactions within the company.
That is why companies operating according to a similar scheme may not interfere with the work of traders at all, but simply wait until the majority withdraw their deposits.
However, when a large player comes in and really demonstrates profitability, such a black broker can perform the following actions:
1) Fraud and shift of quotes
The point is that the source quotes for a trader, first of all, it is your broker, who not only sees from the application in which direction the transaction is directed and its volume, but also the places where you set the stop order and profit.
The most harmless dirty trick a broker can do is open at an unfavorable price, shifting it several points against your position.
Also, since the dealer sees your stop orders, in critical situations he can easily add several points or large values to your price so that your transaction is closed according to the stop order.
2) Psychological pressure
By psychological pressure we mean the imposition of all kinds of services that can harm the trader. One of these popular services is a personal manager.
In practice, these are ordinary DC employees who constantly call the client and inadvertently force them to open more transactions or even offer to perform transactions on the trader’s account under the pretext of published news or unique statistics.
As a rule, this kind of pressure ends either with the trader’s own withdrawal under the instructions of the manager, or with the deposit drained by the manager himself, to whom you entrusted the account.
3) Review of trader's transactions
Any kitchen that makes money not from the spread, but from the client’s loss is in no way interested in having the most profitable category of traders - scalpers.
Such companies have a simple restriction, namely, if a transaction is on the market for less than three minutes, it can be canceled or revised.
If the trader successfully drains the deposit, the company does not pay attention to this, but if there is a profit, the broker blocks the funds and revises the transactions. As a rule, all losing trades are not cancelled, but profitable ones are either canceled or revised in a negative direction.
4) Pseudo shares
Many dealing centers, operating like kitchens, create very bright promotions, up to doubling or tripling your initial deposit.
However, in fact, the terms of the shares are written in such a way that the trader will never be able to fulfill their conditions.
Particularly cynical are proposals to participate in the action at a time of strong drawdowns on an account when the trader is under strong psychological pressure and is ready to receive additional funds under any conditions.
Cumulative position output scheme
The scheme for bringing an aggregate position into the market is considered to be a white method of broker activity, which consists in the fact that the company collects the total volume, and especially the excess volume that other players or the company itself cannot cover, and brings them to the interbank market.
However, the clearing itself, as in the case of kitchens, takes place within the company and only if there is a strong risk to the broker’s capital, the transaction is concluded on the interbank market.
Nevertheless, it is worth understanding that in most cases the dealing center independently covers traders’ positions, and in order to do this profitably, the company can shift the price in its direction, which allows for so-called brokerage (simple arbitrage).
In conclusion, I would like to note that the most transparent and safe way of trading for a trader is the so-called ECN accounts, where absolutely all trader’s transactions are transferred to the interbank market.
However, not all brokers can afford this service, but only the largest and leaders in their industry, such as Alpari And Amarkets.