Pitfalls to be Aware of When Using a FOREX Broker
It seems that everyone wants to be a day trader at the moment and faux stories of people making millions online have of course sparked real interest in FOREX more than others. It is often very interesting to see the number of people who take up day trading and speak openly about it, yet they very often go pretty quiet afterwards, indicating that they possibly haven’t succeeded quite as well as they thought.
Much is made about the pitfalls which traders should watch out for and these are very important to understand. What many new traders will do then, in order to avoid many of these pitfalls is to use a FOREX broker, which is not a terrible idea by a long stretch. Unfortunately however the assumption that all brokers are made equal is just not true and they themselves have many issues and pitfalls which you have to look out for, in order to best protect yourself.
Pip Hunting is something which some brokers will do and it basically involves opening and closing a trading position within a very short space of time. Now there is nothing wrong with this of course but we have seen some traders build in clauses into their agreements with traders that this will be forbidden, and then they take away any profits which the traders has made. Pip hunting is juts an example of this, but building little clauses into a contract is something which we have seen many discredited brokers do.
Brokers have to be regulated in order to trade but there is a general assumption which many make that they are all regulated simply because they say so. If you have investments that have been made through a broker who is not registered then you run the risk of losing it all, regardless of whether you knew the truth or not. Make sure that you check registration before signing any agreements with a broker, don’t just take them at their word.
No matter how good you believe the broker to be, don’t get coerced or cajoled into moving your positions if you don’t feel comfortable. Brokers make commission on your trades os of course they want you to make money and make trades. If they offer advice then fine but don’t let them dangle possible profits in front of you in order to get you to invest more than you feel comfortable with. For many traders this is just a game and as much as they may care about you making money, most really don’t.
These are the main pitfalls which you should be looking out for when you hire a broker and why you must ensure that you do proper research before you start working with one.