How to distinguish a Forex broker from the “kitchen”?

форекс кухняMost traders believe that to succeed in the forex market to develop quite a profitable trading system and have a high psychological stability. However, there is another important element in Forex trading that is often overlooked by novice traders - it is a choice of honest and reliable broker. To understand how a broker can affect the profitability of your trading system, you must have an idea of ​​how the broker, and how it differs from the "kitchen" of dealing centers who earn on your statement.

The operating principle of honest broker

When you open a position to buy or sell, the broker will automatically displays your deal on the interbank market. As a supplier of liquidity by banks, which are in the fight for his client offer the minimum size of the spread. In turn, brokers earn on the difference in the spread or other committees. However, they are not interested in the fact that their customers are quickly losing their deposits. On the contrary, the higher the volume of open positions, the greater will be the total size of the spread, which consequently is beneficial to increase the company's revenue. As a result, the trader gets really competitive and transparent trading conditions in the financial markets.

Features trading through dealing centers

As is known, 95% of all traders lose their deposits and only 5% consistently earn on Forex. This fact decided to use some unscrupulous company. Why output transactions in the interbank market traders, if the majority of transactions will still be closed in the negative? It is better to take the money himself than to earn a penny on the spread difference. This is the principle of any "kitchen". Money traders do not appear on the interbank market, and "cooked" in the company. But what if the trader did not lose the deposit, but instead increase their capital? That's right, "kitchen" are trying by all means prevent a trader to withdraw their honestly earned money. There is a system of levers, which are dealing centers used against the most successful traders:

  1. requotes - refusal by the application of trade at the current quote;
  2. Slip - deviation of the actual price performance of the price of the trade request;
  3. Price stuffing (spikes) - a strong deviation from the average quotation price for the purpose of fixing the loss on the client's position
  4. .

If this does not help, and the trader can not close their positions at a profit, then the dealing center begins to delay the withdrawal of funds or even stop responding support, completely ignoring the requirement for payment or refund of the deposit. The trader can only go to court, but here it appears that the dealing center is registered in an offshore zone and has no licenses and other legal documents governing the activities of the company. Thus, to return the money is practically impossible, since the trader profits - it damages DC.

How do you know that before you broker and not a "kitchen»?

Now on the Internet are filled with many ads, inviting beginners to earn a lot of money on the Forex. They attract the minimum size of the deposit, low spreads, high leverage size, which sometimes reaches 1: 1000, as well as various promotions and bonuses. However, most of these companies are dealing centers, which are skillfully disguised as brokers. How to distinguish this from the broker "kitchen"? If you are already working with one of these companies, then pay attention to the speed with which orders are executed. If the order is often requests a new price and trading terminal hangs up, the more likely you are dealing with a dealing center. Availability of fixed spreads also says that to you, "kitchen", because brokers are usually used only floating spreads. If you have not yet chosen a Forex broker, you should pay attention to the following points:

  1. In which country the company is registered? Do not work with companies that are registered in an offshore zone, it is best to broker was registered in such civilized countries as the US, Japan, UK, Switzerland, Australia or Canada;
  2. The broker must have the appropriate license for its activities. The best regulator is the FCA, which recently fined large brokerage FXCM (USA) more than 4 million pounds for the fact that it applied to trade "asymmetrical slippage" in favor of the broker;

  3. Application technology NDD. With the help of modern technology «Non-dealing desk» execution of all transactions carried out without the involvement of a broker that guarantees high-speed operation without delays of orders on time;
  4. The presence of ECN accounts. ECN electronic trading system automatically displays your transaction counterparty offering the best price. In this case the broker's earnings consists entirely of commissions from transactions without coming into conflict with their clients;
  5. Full transparency of broker If you have a real real broker rather than "food", it is the first request to provide all the information you need, for example, reports, audits, or information about the suppliers of liquidity;. < / li>
  6. floating spread. Keep in mind that the real market you will never meet fixed spread, it can only be floating. If the dealing center offers fixed spreads, the is the "kitchen".

Important! Before you open an account with a brokerage company, be sure to read the user agreement, as that is where you can find information about whether the broker displays transactions on the interbank market or not.

How to check out your transactions on the interbank market or not?
Trading in ECN accounts, you can see the glass application that displays offers from other traders traded instruments. To check out your transactions on the interbank market or not, one has to apply to the glass at one broker, and then check its availability at the other. Each application has two rooms - from a broker and a stock exchange. By signing the deal, you need to look at it and check the stock number on the stock exchange. If you did not find your deal in the glass applications of another broker, then your dealing center does not take the deal on the interbank market is a typical "kitchen."

It should be noted that the largest brokers impose strict requirements to the minimum amount of deposit, as well as request confirmation (verification) of your personality. Since not all traders can afford large investments in forex, it is often possible to meet "polukuhonnye" broker model. As a rule, they offer classic account with a minimum deposit amount and a fixed spread and ECN accounts with the conclusion of transactions on the interbank market.


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