This is a very common question I get asked often and I also see on some public forex forum “do broker trade against their clients?” It has gradually become a norm that when you make a loss in the market you just have to find who or what to blame it on. Either a forex trader blame it on their signal provider, their fellow traders or their broker sometimes they even put the blame on the news and other events scheduled for that day.
An average forex trader never takes the blame on his self when he has a losing trade or even to see the reason for the lost to occur. He just believe that “there is an external or internal force causing his failures” this is the wrong mindset and misconception that has continued to delude him, giving him a false hope or assurance that his a good trader and before he realizes his mistake he would have lost a good percentage of his trading account. Feeling depressed and a failure, he quits telling others that “forex is a scam” –while he was his own enemy all along.
Let’s examine these two traders; trader A and trader B are both day traders, let’s see their actions when they have a losing trade.
Trader A enters into a buy position on a particular pair, he places his Stop-loss and take-profit accordingly, then closes his trading terminal, after several hours he checked his mobile phone to see this opened position, only to see his stop-loss has been hit So his out of the market .
It happens to be that while he was away there was a high impact news that turned the pair bearish and later then the pair went bullish again – causing a spike.
Trader A doesn’t examine the candle stick to know the cause of his loss, he immediately concludes that his broker is “hunting his stop-loss” and start blaming his broker for his loss.
Trader B on the other hand, enters into that same buy position on the same pair with his stop-loss and take-profit in place and his stop-loss get hit exactly the same way with trader A.
Trader B looks at his chart, examine the price data and find out there was a spike that caused his stop-loss to be hit.
Results from Both Traders
From the example above, we can see that among these two traders. One was able to accept his loss and even went further to know why he made that loss whereas the other looked for whom to blame.
Trader B has learnt that next time, he will put his stop-loss a little further from his entry point allowing his running position to freely move or should I say “to freely breathe” gradually, he understands how the market react to certain news and his knowledge grows wider.
Trader A is arrogant, he neither want to learn nor even accept his failure, he believes that someone or something out there is messing with his trade so his eager to play the blame game.
When next he places his trade, he will definitely repeat the same mistake he had previously did. So he never learns, but does the same thing over and over again while excepting a different result.
When he had finally lost some of his money, he will take his blame game to a much larger audience (public forum) to either complain about his broker or about something else– which might definitely relate to his broker.
Let’s understand who is a broker.
A broker is like a bridge between you and the financial market, he simply finds the best quote (price) for you and when you place your order (buy or sell) he takes it to the exchange.
He earns his profits from spreads (difference between bid and ask price) or from the little commission he charges, his main objective is to find who to take the other part of your trade and as such, to cover his expenses he needs you to keep trading –so he can earn from the spread or commission
Let’s Understand A Little About the Market
The market doesn’t move in a straight line and when you look at the candle sticks on your chart you can simply confirm that. The past history on the chart can be misleading as you can easily feel comfortable and relax because looking at an already formed candle stick you might think that’s how the market moves –in an easy pattern.
But in reality , when a candle stick is currently forming you will see that price moves up and down rapidly example price might move 2 pips and fall by 6 points and then move 3 pip up suddenly fall by 7 pips so you can see the ever continuous battle between the bulls and the bears.
Are there scam brokers?
The truth is that their are scam brokers, these brokers are easy to identify examples on how to identify such brokers include through their customer care representative which are never on-line, poor website design, enormous sign up bonus, no regulations, slow execution speeds, spelling mistake in there write ups, etc. ways to find such broker are numerous.
But the number of these scam brokers is getting less. Each broker differs by their technology, business approach, skill etc. that’s why we have brokers which offer STP, ECN, DMA etc. mode of operation or even offer rebate program and other offers (minimal) sign up bonuses, less spread etc.
ALSO READ: Which Financial Market to Trade?
So in summary, before you blame your broker, take a good look at your chart, if there are no logical explanations for your stop-loss being hit go to your broker website and ask the customer care representative (sometimes, it is due to widen spread or server being down) and if you are not still satisfied with their responds, you can compare your broker chart with another broker’s and if it becomes clear that your broker is a scam broker quickly withdraw your money and find a new one.
I will love to hear from you all, please comment below.