Secrets you should know about trading brokers
How much do you really know about the forex brokers that you trade with? It’s safe to say that it’s probably not enough. No matter how many reviews you read online, there are certain things that you will struggle to discover about them.
Naturally, we’re not talking about only bad things – as reputed brokers shouldn’t be involved in such practices at all. We’re talking about seemingly small things that could possibly change one’s perception of trading.
In fact, some of the following secrets of trading brokers might also change the way you trade online and even push you to manage your account and funds more carefully.
They Make Money No Matter What
Even if what you buy while trading increases or decreases in price, your broker will most likely tell you to buy anyway. Why?
Well, if the price increases, you should buy because there are hopes that the price will increase again. But what if the value of what you trade drops? Well, the broker might incentivize you to buy again since the price might get back to its normal value in the future, thus rounding up a profit for you.
In any case, the broker never loses money. Instead, they earn commissions for every trade/purchase you make.
High Commission vs. No Commission
There’s something called the suitability standard that might make you see trading differently. To be specific, a broker is allowed to pass on providing you with an investment offer that offers them no commission in the favor of one that gives them a commission.
Obviously, they don’t care if the trade that earns them a commission is worse for your capital. If there is an offer that is more suitable for the broker, they’ll skip the one that’s not as profitable.
Forex brokers specifically, alongside crypto brokers, are known for having rather aggressive and non-negotiable commissions. For example, one will pay around 2-3% commission for every trade they make. This, at first, doesn’t look like much.
However, if you make just five trades, you’re literally handing over 10% of your portfolio to the broker – regardless of how much you win or lose.
This is why it’s worth it to take your time and look for those brokers that don’t charge a per-trade commission.
Brokers are not forced to tell their traders if their record is clean or not. Sounds fair, right?
Well, it is fair, more or less. They provide a service and the client decides whether they want to trade with that broker or not. As a result, it’s the client’s responsibility to run a background check on their brokers to make sure that everything is OK and out in the open.
The Bottom Line
Trading brokers have many secrets. Some might be running without a proper license while others might not be regulated. In both cases, your funds are in grave danger and your portfolio might vanish overnight.
This is why thorough research must be done when choosing or switching brokers. At the same time, taking a closer look at their practices (especially the ones regarding commission) might teach you a thing or two on how to choose the best broker for you!
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