1. Not All Forex Brokers Are Thieves!
It would be very unfair to take the attitude that Forex brokers are all delinquent. What you should keep in mind, is that most Forex brokers do not place their clients' trades in the real market, and charge us spreads instead of commissions. This means that most Forex brokers are in direct conflict of interest with their customers: the more their customers lose, the more money the brokers earn. In fact, your business model is based on the failure of your customers' trades.
It is a sad fact that most Forex traders lose, but this is mainly due to poor trading methods, and does not mean that Forex brokers have to act dishonestly to make gains
However, more profits are always good news, so there are some tricks that some brokers have in their sleeves to squeeze more money out of flexible customers, and here are some things you should keep in mind.
2. Spreads or High Commissions
Spreads have fallen a lot in recent years. Of course, the more money you have to fund your account, you'll probably find better spreads available to you. This is because brokers offering better spreads often require higher minimum deposits. In any case, you really should compare your options. The days of having to pay a spread of 3 pips per EUR / USD are over.
Recently, more brokers have been introducing commission-based models, where customers pay a fixed amount of cash per trade. When you encounter this, carefully calculate how much you usually risk in a trade per pip, and then calculate that "spread" you will be paying. Sometimes these more commission spread offerings are designed to make the offer look better than it really is, and you can only discover this once you do custom calculations.
3. Financing During the Night
Unless you are a pure day trader and close all positions before 10 pm or London midnight every day, you will pay or receive a small amount (usually less than 1 pip) for each open trade you have at that moment. This is based on the interest rate differentials between the currencies that make up that particular pair, but it is structured by practically every broker as a net loss for the customer. Some brokers are much worse than others, and many do not advertise these rates - you only see it in your statement the next day once the payment or deduction has been made. If you get in touch with most brokers, they will usually be prepared to quote your overnight financing rates. Get some quotes and compare them on the same currency pairs, and maybe be surprised by the results. If you enjoy holding long-term trades, make a few calculations about how much you are likely to pay on this overnight financing. You may find that it significantly decreases or even erases your earnings.
4. Execution of Sudden Stops / Increases
It is not widely understood that brokers control their own prices. There is no central market, and most brokers are not making real trades, and they can quote whatever price they want! Of course, they have to keep the prices fairly honest, otherwise they could use the prices of other brokers to correctly predict price movements, and as a result they would lose money. So you really do not have to worry that your broker will invent the price.
What might worry you is that a broker can see where your customers are grouping their stop loss orders, and if the overall market price comes very close to triggering these stops, the broker might be tempted to quickly push their price on that level and take profits. This can be done even more easily during news announcements or sudden shocks that have the effect of raising the overall price of the market up or down. An unscrupulous broker can always send the price a little higher or lower at those times.
To be fair, mistakes are sometimes made, and brokers often compensate for trades interrupted after excessive peaks when enough of their customers complain. However, it is something for you to be careful about.
5. Interruptions
There are times when the market is fleeing in a clear direction. If you want to trade and can not get a connection with your broker, or the trade is repeatedly rejected for some unknown technical reason, then be careful. This is a type of a broker who is using unfair methods to prevent their customers from placing winning trades. If it happens a lot, it's a suspicious signal.
This is not an exhaustive list of things to consider when choosing a Forex broker, but they are the most common broker problems that can make winning in Forex much more difficult than it should be if you do not consider them.
