Trading on a secure broker is one of the key components to ensure your trading success. Imagine if you already have a strategy and trading psychology is mature, but your broker was often cheated. All efforts and hard work will certainly be wasted. However, major trading facilities such as platforms, price quotes, and order execution are all provided by the broker. No wonder a broker really intends to manipulate his client’s trading, then any good trading method, and even calm mental conditions, will not help much for the safety of your trading account.
- Hunting Stop Loss
Brokers who often do this are also referred to as “Stop Loss Hunter”. With the help of certain types of robots, the broker monitors his client’s trading and manipulates the spreads. Not only using robots, brokers are also employing special experts to carry out the deeds. This trick is applied so that the trading position is quickly affected by Stop Loss when the price moves against your order.
- Mark-up Spread
Well, this one deals with tricks of ECN / STP brokers. Although they claim to be able to transfer orders directly to liquidity providers, but not all of these types of brokers apply the original spread from the provider.
ECN / STP brokers basically already earn revenue from commissions per order. It’s just that some of those who want to make more profit end up taking a cheat path. By marking up the spread, an ECN / STP broker will add extra pip into the base spread of the liquidity provider. For example the base spread of EUR / USD 0.5 pips, they will add 1 pips so the spread that trader will bear 1.5 pips. If coupled with the usual order commission applied, then the forex trading income will certainly double.
Here is an example of a case that retail traders often talk about. Slippage is basically the execution of an order at a price that is not booked. This condition can occur when the market is very active because there is a volatility spike. However this is only fair applicable to ECN / STP brokers, given their work system that sends orders to liquidity providers. The process does run automatically, but obviously takes time due to latency (time interval in transferring data from client to provider server of liquidity). When the market is very active, price volatility will increase rapidly, so it’s no wonder the order can be executed at a different level than the price you previously ordered. In this case, slippage is fair.