Are Forex Brokers Legit?
The Forex market is not on a centralized exchange. This means that various brokers may have slightly differing prices for the same currency pair. Because of this, many Forex broker scam people claim that all Forex brokers are scams and that they are out to get your money. While this may be true for a few brokers out there, the vast majority of them do not do any illegal practices to take your money. The majority of the brokers are legitimate businesses and it is very possible to make money with them!
There are usually two things that people say Forex brokers practice in order to scam you out of money. Those are stop hunting and slippage. Stop hunting is when the broker sees that there are a lot of stop loss orders in their books. People claim that the brokers purposely make the price go to that level so their clients get stopped out for a loss. Slippage is when you get a bad fill on your entry or exit order, meaning you do not get the price that you wanted.
If you look online, you will see that almost every Forex broker has reviews saying they practice one or both of these methods. Why is this? Are all of these brokers really stealing money from their clients? No, of course not. These reviews are usually from beginner and/or losing traders that can’t accept that they placed losing trades. Forex trading can be a tough game and most people are not mentally prepared to admit that it was their own fault that they lost money. It is much easier to blame the brokers for hunting their stops or purposely giving their orders a bad fill. If these traders were willing to put a little more work in their methodology and learn about market dynamics, they would know that this simply is not the case with the reputable Forex brokers.
Now, there have been some cases where the broker has been known to be at fault. These kinds of dishonest brokers do not last long and by no means should cause you to believe that all brokers are the same. It is in the best interest of Forex brokers to have many clients. Their commissions increase when their trading volume increases. So of course the well respected brokers see that and their goal is to keep their clients happy.
So when you are looking for a Forex broker, be sure to do your homework and you will be fine. Do an online search on them and see if there are any outstanding legal actions against the broker. Also, be sure to see if there are many complaints about clients being able to withdraw funds from them. If there are a lot of people saying they can’t withdraw their money, this is a red flag. When you find a broker that you are thinking about opening an account with, start small. Open a mini account with $100 or so and place a few trades. After about a month or two, try to withdraw your money and see if there are any issues. If you have no problems, then it should be a relatively safe broker to invest more money with.