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Food chain: How Forex brokers eat their clients

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Are Top Forex Brokers – the best ones?

The Forex market has several different brokerages in operation, which have varying ways of doing business with their clients. For carrying out the client’s buy or sell orders, they usually charge a commission per trade or a spread. This is the way they get paid for their services. Sometimes, they charge both a commission and a spread on a trade. Although some FX brokers may claim that they offer trades free of commission, they likely earn a commission by widening the spread on trades. In 2018 best Forex brokers also vary in the trading costs, with some offering higher than others.

The choice of a Forex broker is a very important determinant of success in the Forex market for traders in financial markets. Yet, some traders think that their approach to trading, their use of psychology and an effective money management system, are all they need to succeed. However, it is important for them to choose a good broker because even in the face of the most successful trading strategy if the broker is a bad one, the trader will still not get any profits.

To make the profit from Forex trading, you need a Forex broker with direct interbank execution who will not be faced with any conflict of interest and provide interbank market execution of every single trade. Nowadays, traders have become aware that they need STP/ECN trading accounts if they are going to succeed. Consequently, several Forex brokers now offer STP/ECN trading accounts.

How the majority of retail Forex brokers make their biggest profits!

If a well-reviewed Forex broker provides his clients with true and direct interbank market access where he executes all the transactions of his clients, he usually connects his MetaTrader 4 trading platform with a bridge so as to access liquidity from an interbank market platform and liquidity providers. These technologies make sure that there is no conflict of interest between a poor Forex broker or his market maker, and that trades are executed at the best prices on the interbank market.

Many traders think that the strategy they use in trading is losing because of market changes and that it has simply stopped being profitable. However, the truth is that several traders are losing money or making less profit than they could have made because of a dishonest broker. This is the way it works. Whenever you make a profit, a market maker loses the exact amount. So, if your trades are executed with the same and only market maker, you will never really be successful.

Therefore, if you want to achieve greater trading results and make more profit, you will need a direct access to the interbank market through your brokerage. There, liquidity providers will compete with the result that the best prices for your trades will emerge. Some people think the biggest problem is that trading is a zero-sum game, but that is not so. Traders lose the most money due to conflict of interest with the market makers. If the execution of your trades can be done without any such conflicts of interest, you will definitely make huge profits.

Very important Forex costs that are not well known

Again, several traders do not know that beyond a spread or a commission which they pay to their Forex broker, every single trade carries a cost which is called slippage. In fact, a spread or a commission is just a small proportion of the whole costs of every single trade.

What is called slippage is the difference between the projected price of a trade, and the price of the trade is actually executed at. This has a very significant influence on the profit or loss from your trades.

An honest FX broker’s slippage depends on the present market liquidity and the volume which you choose to execute. Dishonest and poor brokers increase the slippage artificially. This is not to say if brokers charge enormous spreads or commissions, they are the best because they are not likely to have large slippage. It is just an eye-opener into how the seemingly low-cost FX brokers still manage to stay in the market.