Shocking Information About Forex Brokers - Exposed! By Jerry Smith At Isnare.com Ezine Articles

I have discovered important information about forex brokers!

As you may already know there are many brokers that will make it almost impossible for you to make money. The reason for this is because they are taking the opposite side of your trade and they make money if you loose.

The next thing that happens is if you place a stoploss order you may notice that the market may move quickly to your stoploss price and then go the other direction. The reason for this is because the broker moves the price to cause your trade to loose and their opposite trade to win.

Another type of broker is one that makes money when the spread is wide. When you place a trade you are either buying higher than the actual ask price or selling lower than the actual bid price. This difference can be anywhere from 0.5 pips to 5 pips. This can really add up quick and eat up your profit margin faster than you think.

The good news is that there are a few brokers out there that don't operate this way and they make their money from a commission that is charged per trade. This is the type of broker you want to deal with, not one that makes money on the spread or one that is a "bucket shop".

These preferred brokers are called ECN's, which stands for Electronic Communication Network. This means that your orders are matched up directly with other banks and liquidity providers. Some of the well known ECN brokers are: Dukascopy, MB Trading, Currenex, Hotspot, and FXDD(must request ECN account).

The way your orders should be filled is by another bid or offer, not simply when a quote meets your trade price. Also the spread for the major currency pairs should only be 0.5 to 2 pips during normal market conditions. However, right before and during major news events it is completely normal to see the spread widen. This is because there are not many liquidity providers or banks that are willing to take risks during these times so you must match your order at a higher/lower price.

Many traders think that when the price widens up to 10 pips or more that this means there broker is manipulating the price feed and that they are not a good broker. This is completely false if the broker is a true ECN.

A good way to prove this is to ask your broker for level 2 quotes. This way you will be able to see the current bid and offer prices along with the liquidity that is available at that price. You can also see the liquidity above and below the current quote.

Before you consider a broker, make sure that they are a true ECN and that they have many liquidity providers. This way you will get the smallest spreads and the best fills on your orders.

I hope you found this information useful, since finding the right broker is one of the most important steps in Forex Trading.

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