Different scams are perpetrated in the forex trading space. These scams are organized by different individuals to defraud innocent people. Sadly, some of those who scam people are fraudulent brokers. In this post, we will be examining forex broker scams.
A forex broker mediates between the trader and the interbank market. They provide different services to their clients from accounts held with them.
Services offered by forex brokers include trade opening, leverage, deposit, and withdrawal. Therefore, it is easy for deceitful brokers to defraud their clients.
Forex broker scams are diverse and are perpetrated using different mechanisms.
Types of Forex Broker Scams
Types of forex broker scams are the following: spread manipulation, stop hunting and denying withdrawals.
Some brokers charge their clients excessive spreads. For normal brokers, the spread is usually between 1-3 pips. Some brokers charge spreads as high as 7 – 11 pips from their clients.
Thus they make a windfall from their clients. Even if the clients make a profit, the high leverage eats into the profit significantly. However, if the client loses, they still make their kill.
Some brokers take it upon themselves to hunt the stop loss of clients. Brokers who employ this are market makers. Therefore, if the client loses they gain. So, they trigger the stops of clients by quoting data not quoted by other brokers. This is to defraud their clients.
When clients of fraudulent brokers eventually make a profit, they do not send them their funds. Forex brokers who are scammers usually have a shabby and elusive customer support.
To learn more about forex brokers, click here.
In summary, scammers abound in different forms, including as brokers. You should avoid these scammers at all costs!!
Click to learn how to identify forex broker scams. Also, to learn how to avoid forex scams click here.
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