Can Forex Brokers Manipulate Prices?
There is a common misconception with brokers; if people begin to take significant/consistent losses the first person to blame is the broker thinking it’s a scam or they are manipulating prices, so you do not succeed. Most often this is not the case; however, it has been known to happen that certain trading platforms/brokers have been including their transaction fees within the cost of the forex pair; in turn making it harder for traders to earn a profit. However, the most common scam that has been used by brokers in the past is leverage and this is still something which occurs within the community, but we will get back to that a little later.
Can They Manipulate Prices?
It is possible for brokers to manipulate prices; technically if you are trading through a broker and they have their own market displays and screens all they need to do is create an algorithm which can edit the code which provides the data/images to your screen to show different prices. Technically if they were doing this and they had not made you aware that their prices did not reflect the true cost this would class as Stock fraud, and they would be liable under the fact they are using deception as a means to obtain a monetary return.
So, you need to do your homework before choosing your broker; look for reviews, compare the prices they offer and make sure you are comfortable in letting them handle your investments and trades; it is you money so you need to be certain.
If you would like a list of reputable brokers, please feel free to contact us on the contact details below.
The use of leverage is usually within a ration such as 1:10. So every £1 of investment on put in I got £10 worth of purchased assets; this will help in increasing your profits, but it will also increase your potential losses. Personally, we do try to minimise our leverage spread to 1:15 to 1:30 in order to keep our risk low. However, we have been made aware of certain brokers offering 1:500 leverage which is unbelievable.
These brokers/platforms earn their profit by exploiting new traders and knowing they will take a loss but earning a large sum due to the massive leverage spread. If your broker offers 0 transaction fees; do your research into their leverage it is more than likely you will see some ridiculous numbers. This then demonstrates they are making their profit by making it harder for you to get a successful trade and hoping you fail.
The points mentioned within this blog are not so much a commonality within the community; however, it is imperative to remember they do still happen. So, when choosing a broker or a platform to trade on, make sure you have done your research. Make sure you know what the leverage is, look for previous customer reviews and read the feedback. If you are ever concerned about the changes in prices; log into another platform and compare the prices to ensure there is no form of price manipulation. If this is found to be the case, you must report it to the proper authorities immediately.
If you are unsure who to contact, please contact us on the contact details below and we will direct you on how to go about reporting it.
It is important to remember that everything stated within this blog post is our opinion based of our own personal experience as well as the feedback given to us from our clients. The comments mentioned within this blog are not directed at any brokers specifically, and the purpose is so new traders are aware of potential risks and scams that have been known to happen in the past.
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