How long have you been with your current forex broker? How many times have you changed forex brokers? What's your general feeling about forex brokers?
Forex Brokers Complaints and Solutions
Lets face it, every forex trader I believe has had a complaint or complaints of some kind with their forex broker. I suggest that many complaints are valid, and some not. For the beginner forex traders, the risk information from your forex broker is not up front most times, but spelled out in the fine print when you open the account that you may fail to review and take caution from. It takes two to dance so don't totally blame your broker for burning your account, but the bad forex brokers will help you burn it exponentially faster than the good ones. There are good forex brokers out there but there are a huge amounts of bad ones that give the good ones and the whole industry a bad name.
Forex Leverage Caution Warning
Your forex broker may tell you and may not tell you, but this is the most important. In my 8 years of trading forex, all the brokers I've traded with, which are many, did not tell me the amount of leverage on my account in the beginning of the account opening. The first crucial thing to know is the amount of leverage on your new account. The higher the leverage the more exponential the gains and losses. Beginner traders should start with the lowest leverage allowed. Usually forex accounts provide 1:100 to 1:500 leverage. Start with 1:100. Some even offer as low as 1:20, and if they do, new forex traders should start with this amount first before turning up the leverage to 1:200 or higher. 1:500 leverage is totally stupid in my opinion for new and small capitalized fx traders, but if you've got money to burn, its your money and your choice.
Forex Lot Size Caution Warning
Another way to adjust your leverage is with the trade lot size. The trading platforms have default lot sizes that may be more than what you should be trading. Make sure you know and set your lot size in the trading platform before placing trades. Typical forex lots sizes are 1, 0.1, and and 0.01. To keep your leverage as low as possible in the beginning, and trade the smaller 0.01 lots sizes. You can increase the lot size incrementally later to increase total leverage of your account at any time. The whole idea is to keep your leverage at 1% to 2% per position and or total account equity. Anything above that is exponential and your asking for financial trouble if you don't have a trading plan that keeps your losers small and your winners big over time.
Spreads and Volatility
Most forex brokers make their money through the spread. The industry average on spread for the forex industry is 3 pips on the major currencies. Anything above that and your paying to much, and anything below that they may be tacking on other charges you forgot to read in the fine print at account opening. If your broker provides 3 pips on the majors then thats fine. The ECN brokers don't have any spreads but charge in a different way to get their broker money. Remember, during Europe USA market hours especially during forex news reports and events, the spread can and will increase. I suggest to keep risk as low as possible, don't take new position on the news, but let the news happen, and after the price and spread have settled down, then decide whether your buying long or selling short.
One of the most common complaints is slippage, especially during forex news when volatility increses. Angry traders make more complaints with the slippage issue against forex brokers, who see potential winning trades turn into losers and small losers turn into larger losers. Slippage is the difference between the price you set your order for execution, in the case of a stop order, or the price you attempt to have an order executed, in the case of a market order, and the price at which you are actually filled. Stop-loss or stop entry orders become market orders once active. Once the specified pre-order price is hit you should not experience any slippage. Slippage is a part of the game, and you can deal with it by being patient to get the price you want. Remember, there's lot of deals out there in the world. Some good, and some bad. Knowing which one to accept is key to being successful.
When the market is moving fast, your market order may not get filled and requotes will happen often, along with the spread increasing possibly. Some fx traders hate requotes and change brokers but I just accept them after changing so many brokers I can't keep count anymore. If your market order is not accepted, don't automatically accept the auto requote flashing on the screen to fill your order. Click to cancel the auto requote, and hit the requote button to start again with the market price. A matter of a 1 to 3 ticks matter big time in the highly leverage forex markets.
What Time of the Day Are You Trading?
When, during the trading day are you trading? If you are not a news trader then be extra careful around news releases. News releases are times of big to huge volatility and chances of slippage are greatly increased. If you do like to trade the news see the caution steps below.
Forex Trading News Releases
Enter the market with limit orders. A limit order would only be executed at your specified price or better eliminating slippage. This is a more advanced trading method for beginner traders and is more common for pro-traders. On exiting your position with a market order you may experience slippage. If you have a preset fixed take profit target set, and the position is closed, you should not experience any slippage. If you do, this is a real complaint to be made to your broker so check completed trades in detail to make sure your broker is doing what they say they are supposed to do.
Enter a new position after the initial price spike up or down. The initial price move after a forex data news release is many times very strong creating what is known as a 'spike' in prices. Give some time for the price move to play out and digest the news and you will be avoiding most of the big volatility. In doing so, this gives you enough time to plan your trade, and grab a retracement limit order entry.
Dealing Desk or ECN Forex Broker?
There's different forex brokers. Normal forex brokers have a dealing desk with a person executing your trade from your terminal, can cause added delays, especially at busy times, and slippage is more likely to happen with them.
ECN brokers are totally electronic with no dealing desk and that fraction of a second saved can make a huge difference in your trading results. If you are actively full-time trading at busy times then an ECN broker is the best choice. On the other hand if you trade infrequently or you have a small account and cannot afford the commission fees that ECN brokers charge then a broker with a dealing desk may be adequate.
Do You Think You Broker May Be Trading Against You?
This very common complaint has lead to the forex traders thinking that a conspiracy theory of the broker is happening and they want you to lose your money because they are on the other side of your trades. The fact is most times you'll never know and it doesn't matter anyway because someone is always on the other side of your trades no matter who it is. If you short then someone else has buy long and vice versa so someone is always there wanting you to lose. Some fx brokers say they match their client orders at their dealing desk while other brokers have their dealing desk offset their clients trades with their own overall position in the market, which is called hedging. If a forex broker is hedged as best they can, then they simply collect the spread, which is more than the spread they pay in the interbank market to their clearing bank, which is their profit margin. The conspiracy theory is from the idea that most fx traders lose and it would be best for brokers to trade in the against their clients positions instead of trading in the same direction and hedge themselves. Complaints of delayed orders, slippage and "stop-loss hunting" have added more bad raps on brokers because they can possibly be easily explained as fx brokers stealing your money instead of real legitimate trading issues happening at busy trading times.
Win Lose Breakeven
On average, you'll find your forex trades winning one-third of the time, losing one-third of the time, and breakeven one-third of the time. So to profit in the long-term, you need a trading system that wins you more than you lose. As a general rule, if you can have one big winning trades and 3 smaller losing and or breakeven trades you have good chance winning in the forex market. Base on this, your winners have to be big, so you want to learn how to ride winners to their fullest using a variety of methods with a trailing stop-loss either automatic of manual to lock in profits.
Trading Forex To Win
These things above are things you can do to minimize and deal with real or not fx broker malpractice. If you think your broker is trading against you, then change brokers. The fact is you'll never really be able to find out in most cases, and trying to is futile. What's most important for your forex trading success is identifying your trading problems, and finding non-broker related solutions. I'm talking about your trading psychology and your trading strategy weakness's.
If you are unhappy with your fx broker because of too much slippage, re-quotes, poor customer service, possible stop hunting, trading platform freezing and holding orders then you should absolutely change brokers. Bad customer service secondary to the rest of these complaint issues. If after you've submitted your complaints to customer service and still unhappy with their response and action to it, change brokers, you may be trading with a "bucket shop".
Click here to review the forex brokers we recommend as the best and most fair.
Disclosure: Long and short forex.