Forex Broker Scams

Have you ever wondered why the ads of '400-1 leverage' are shown all over the broker sites? Or have you jumped at them and looked to sign up for a Free Demo Account? Well the problem that most novice traders don’t see is that these brokers are selling you the supposed ‘benefit’ when in turn; the only ‘benefit’ is theirs. Let’s explain this. Dealing Desk forex brokers make their own markets - they make the bid-offer price to their clients. They work on the probability assumption that as most highly leveraged speculators lose then its good business to take the opposite position to them.

This is done automatically, so when a client buys Dollars against the Yen, the broker sells short the Dollar. When the client covers the position (either for a profit or loss) the broker is taken out also. If the client wins the broker loses and vice-versa. If the brokers stand to gain when a client loses, what is the best way to make sure that the clients lose big time? Easy, let them trade huge positions on a limited amount of capital so that the odds even for the best and most talented traders are pretty much – ZERO. This is how the leverage game is played.

Understanding how leverage works is also cruicial in deciding which broker to choose for your trading. The question here is does your forex broker immediately offset positions with their clearing house or do they actively take positions on the other side of their clients' trades? The purpose you should focus on here is to find a forex broker that is looking after your own interests not theirs.

Which Broker to Choose?
Find a broker where you can trade with low leverage, definitely lower than 300:1 or the ridiculous ratios like 500:1. Our recommended broker discourages high risk trading and prohibits the use of leverage in excess of 50:1.

Those brokers offering high leverage have a business model established primarily for transferring wealth from your account into theirs and are not looking after YOUR interest. Remember also that there is a big difference between the minimum margin required and leverage. If you don't understand these concepts you are at risk.
Nothing a broker offers in terms of technology, charts, news, training, narrow spreads, interest on unused margin or any of the many tricks the marketing wizards play will save you from the peril of too highly geared trading.

Do Some Investigation
It is imperative that you make sure that you are comfortable with the risks associated with your forex broker. You have to make sure you get satisfactory answers to some basic questions:
•Is your forex broker subject to a globally recognized regulator?
•Does the regulator specifically oversee the retail OTC forex
market?
•Does your broker have a registration / license number with the
regulator?
•Does your broker have a disciplinary record with the regulator?

Lastly enquire whether the forex broker is a small independent entrepreneurial firm or is it part of a larger financial group? If the firm is part of a large financial group it is possible that many of the risks associated with a smaller firm do not come into play. It is also possible for your broker in such case to indeed offset all trades with "mothership", thereby limiting the risks of "running stops", which may sometimes be to your disadvantage.

Dealing Desk brokers advertise "zero commission" trading on their websites to promote a supposed benefit when in fact this is not how they make money. They make money through the spreads they charge clients and which (if you have had some experience in the past with them) you would know that they tend to jump unexpectedly in certain times. With a non-dealing desk broker, the fees (commission) they charge are fully transparent and stated upfront. That cost is decidedly less than what you pay trading against a broker who controls pricing, can spike your trades and offer quotes whatever may suit them.

Forex Trading Money Management

You should identify how you would minimize losses and maximize profits.

•What is the maximum position for a single trade, in terms of capital that you will trade? You will not want to expose too much of your capital on a single trade. So for example if your capital was $10,000, how much of this will you want tied down to one trade? For Forex trading, I will commit on average 5% of my equity for one trade. This will determine also your trade size. What percentage you use, depends on your risk profile.

•What is the maximum amount you are willing to lose for a single trade? Many authors tend to quote anything between 0.5% to 2% of your equity. Some books quote more. You must carefully think about this and work on a realistic figure which should be set based on your risk profile. If you haven’t read “Trading for a Living” by Alexander Elder, you really must because this now legendary book amongst traders deals with this topic in a lot of detail.

•When will I take my profits? Generally try to take incremental profits when you can. This is how professional traders run their business. Forex markets trend very well and what can often be seen is that traders snatch their profits when the big trend is just about to start and they miss on the big move. Don’t forget the golden rule: “The trend is your friend”. Let’s get a bit more specific here. Many traders ask the following questions regarding money management:

1. How to determine the optimum money management for a given sized account?

2. How to choose the best money management strategy based on the nature of the entry/exit methodology and back test results?

3. How can I design my own money management system that works for me and my style of trading?

Let’s try to address some of these questions.
You only have to be trading for a short period of time to realize that money management is more important than the method or system. If you tell new traders this, they just look at you blankly. All they want is a system and signals that they can trade the next day.

Money management is really that important. Now, determining what percentage of capital you should risk is actually a function of your hit rate. For example, if you win 80% of your trades consistently, then you could risk more than if you win 50% of your trades consistently. You also need to know the maximum amount you can trade. In order to do that, you need to know your maximum drawdown recovery rate.

Good money management can be summarized in 4 basic principles:

1. Always risk the smallest amount you can, working on the worst case scenario all the time. How much money would I need to stay in the game if I had X number of losses risking the amount I am just about to trade, with X being the maximum number of losses you have ever had trading the system.

2. Protect your capital. You must calculate your potential loss based on where you will place your stop loss.

3. Most traders stop trading because they run out of capital before they learn enough to make money. The main priority should be to live to fight another day and not lose money.

4. Using a stop loss is one of the things you can control. There is no right or wrong place to where you should place a stop loss. It all depends on your trading plan. If you used certain indicators to enter a trade, you will outline that in your trading plan. Similarly, you will outline where you will put your stop loss based on the guidelines you have set out in the trading plan. For example, you might say: “I am going to enter a trade every time indicator X did this”. “As soon as I place my trade, I am going to place my stop at Y”. To determine Y you must have come up with a plan and back tested how many times you made money without Y being hit.

Forex Trading Strategy Based On Fundamental Announcements

Exchange rates of currency pairs fluctuate based on many criteria, particularly how investors perceive the value should be based upon news pertaining to the country of origin of the currency. There are many factors that contribute to the perceived value of a currency against another, but most importantly are the “Fundamental Announcements” from that country.

Countries and their currencies being traded on the Forex markets are like companies and their shares being traded on the stock market. If a company announces positive news, such as higher profits in their last quarter, then the stock market immediately
responds by the share price rising. Conversely, if the company announces negative news such as a loss in their last quarter, then their stock drops. In much the same way countries regularly make various announcements of economic importance, and the
value of their currency is also adjusted accordingly against other currencies.

You don’t have to know what the announcement is or even care about the news to profit by it with this system. All you need to know is when such Fundamental Announcements are being made, and how to profit from it as described in this system. This is like owning a magical crystal ball to know exactly the minute when the markets will explode, and how to profit from it. Regardless of whether the news is considered good or bad, and regardless of how the value of the currency changes due to the announcement you will make money. Typically a market responds by 50 pips to Fundamental Announcements (when it skyrockets); plenty of room to get profits in.

There are certain websites that publish a calendar of Fundamental Announcements. You can easily find these for free on many Forex related websites. So the first step is to go to view a Fundamental Announcements calendar to see what is scheduled to come up for tomorrow (weekdays, not weekends). Some days will have more announcements, some days will have less. Generally, the more announcements the more trading opportunities you will have, and the more announcements scheduled for a particular country at thesame time the more likely you will see some interesting price
action.

Before we continue you will need to know what your time zone isin relation to GMT (Greenwich Mean Time), as most announcements are published according to this time zone. Make sure you take into consideration “Daylight Savings Time” if your time zone changes time in the fall and spring. You will need this information to adjust GMT time to your time to know when the announcements will take place from the perspective of your time zone.This kind of opportunity happens all the time and is by no means
extraordinary. Fundamental Announcements occur at various times of the day and night, depending on where you live.

Pay more attention to the currencies that make their Fundamental Announcements at a time convenient for you. If you live in North America pay attention to the US and Canadian announcements, and then trade EUR/USD and USD/CAD respectively. US announcements can be traded against other currencies, the best are EUR, GBP and CHF. They usually react the same way, but often have larger or smaller moves. On the calendars you will see a list of countries that are planning to release announcements, what time the announcement will happen, and what the announcement is about. Again, you don’t really care what it will be about, only when and who.

How To Trade Forex

Many people want to know how to trade forex. Forex trading used to be the preserve of big institutions like banks, corporations, hedge funds and wealthy individuals three decades back. But with the coming of the internet age, forex trading is now available to almost anyone who is interested including individual small time investors like you and me. You only need a good high speed internet connection and a computer to start.


But how to trade forex. In the beginning everything looks complex. It's like learning to play tennis. You have the racket but you don't know how to hit the ball. Well just like in tennis first you need to practice hitting the ball, same here in forex trading. You will need to practice on your demo account.

The best thing for the beginners is open a demo forex trading account. You can easily do that in five minutes. Just go to the website of any forex broker and you can open a demo account. It is as simple as that!


What is a demo account? It is an account where you get real data and real charts and you can open and close trades with virtual money. In other words you will use fake money and practice forex trading. Practice as much as you can. Within a few weeks you will be confident enough to start forex trading on a live account. This is the answer to how to trade forex.

Now many forex brokers use metatrader platform. There are programmers out there who in collaboration with the forex traders have designed forex trading robots that can do trading 24/5 ( don't forget the forex markets are closed on weekends).

Now the best answer to the question: How to trade forex is that you can start trading forex with a robot on your demo account. Learn the settings. You can do that in half an hour. Install the robot on your demo account and let it run for a few weeks. By the way these robots are also known as Expert Advisors.

In a few weeks you will see yourself, how much money the robot has made for you on your demo account. If satisfied, you can go live. if not ask for the refund of the money spend on the robot. How much you have lost? Nothing! Not even a single cent. This is how to trade forex.

On this website, I recommend a robot that comes with a 60 days money back guarantee. Give it a try on your demo account. You will not lose a single cent. This robot can make you more than $100,000 starting from $500. So don't let it pass you by while others make use of it to make thousands of dollars while working from their kitchen tables.