Scammed by the broker? this is something terrible in the forex trading business.
Now time to learn how to protect from scams broker and beware to bucket shop broker.
Maybe you will feel that finding a good and trusted broker is very difficult.
Because of thousands of brokers there, many of them just want to seek as much profit from you.
But do not be discouraged, because there are still a few steps you can take to avoid existing scam brokers.
TenkoFX broker, a brokerage firm that serves forex traders to trade on the forex, CFD and crypto trading markets, regulated by the International Financial Services Commission (IFSC) of Belize.
Already have experience since 2012, it has received positive reviews from traders who have used trading platform services, on ECN, STP and Crypto accounts
Beware of Forex Bucket Shops
Read also Trading strategy using RSI
As we discussed in the previous chapter.
This is a type of dealing desk broker who is also referred to as a market maker and also a bucket shop broker.
A bucket shop is a type of forex broker.
This type of bucket shop broker has almost no connection at all to the price of running in the real forex market.
So, this type of broker does not execute clients’ transactions in real terms at market prices.
Bucket Shop tends to take opposite positions, so when a client opens a buy position, the bucket shop will open a sell position.
So in principle this broker “bet” on the traders.
In conclusion, if the client (trader) getting a loss, the bucket shop will get a profit from the total margin of the trader that loses.
Conversely, if the traders get profits, then this broker will get a loss.
In most cases, this broker tries to make it difficult for traders to open positions that are considered profitable, in most case as a trader may face with requote, slippage to the favorable broker, and stop-loss hunting
You need to be careful with this type of broker.
The characteristics of the Bucket Shop Broker
Maybe you as a beginner into forex will find it difficult to recognize which broker shops and which STP and ECN brokers, here are some characteristics that are often found in bucket shop brokers:
- Derived from places that are not trusted or only have a license from a weak offshore country.
- Most certainly allow money transfers with third parties or individuals.
- Registration is very easy and seemingly careless and without adequate verification.
- Prohibit certain trading techniques (such as scalping, martingale and so on). or allows all kinds of trading techniques but the system use an automated script installed that can block the technique (the script is usually called a Virtual Dealer).
- Trading conditions offered by Bucket Shop brokers are often outside the normal conditions of actual market, such as too high leverage (eg 1: 1000), low spreads that don’t make sense (for example: 1 pip fixed or even 0 pip fixed, whereas in actual markets spread is always changing every second).
- There are big bonuses that have the goal to attract customers to be willing to spend their money (which in the end is to “become a victim” by the fraudulent broker).
Fraudulent things that are usually done by Bucket Shop type brokers
When you already use a bucket shop broker, then some cheats that you often find are:
- Requote so often. Requote is you want to open a transaction at a certain price, but the platform instead proposes different pricing options.
- Slow order execution; if hit by Target Profit it is difficult to execute, but if hit by Stop Loss it is very easy to execute.
- Servers often down. If the server has a problem, then, of course, we cannot trade. It could be, we can not even close trading positions that have been opened.
- Price quote manipulation. Do not want to admit profit transactions unilaterally under the pretext of your trading is not valid.
- Withdrawals of funds are often held back or cannot be done.
- Incorrect statement. Be careful with statements from Bucket Shop brokers who often make misleading statements about their systems, such as stating that they are ECN or STP type brokers.
Therefore. check the existence of VERY IMPORTANT regulations so that you know that the broker has received supervision from a trusted institution not to cheat traders.
How to avoid a bucket shop broker?
You may already understand the concept of how a bucket shop broker works, but since you are still a beginner, you still need a way to avoid the bucket shop broker so that you don’t entrust your funds to them.
Because there are still many hundreds of brokers out there and even thousands of brokers who may include a bucket shop broker.
How do you avoid or differentiate between good and bad brokers?
The first way is to find a credible source of information through a forex forum that discusses forex brokers.
There you will find statements from traders who have used brokerage services, or at least there is better knowledge by giving tips on choosing a broker.
The second way to avoid bucket shop brokers is to look for information on the forex broker scam list.
If you find a broker that you might feel interested in to try, but it turns out that you are on the broker scam list, it means it’s safer if you stay away from the broker.
You can check off list broker scam in the trusted site like as forexpeacearmy scam warning
The main point is you looking for a trusted statement from the real trader that having the experience to use the broker.
How to Protect Yourself against scammed by the broker
Being a retail trader among the size of other market players, maybe you feel like a dwarf among the giants, you might find it difficult how to protect yourself from bad brokers
But however, it is still possible to do some steps that can avoid the fraud of brokers
Compare Price Feeds on several price feed sources
You might feel comfortable using a data feed from your broker, but actually this is a blind way.
Why is that? because you do not know more about what is happening in the other forex markets.
So you might not realize that the broker you use is monopolizing prices, or widening spreads, and even using stop loss hunters, you will never realize that it is cheating you.
You are like running on a blind horse where the vision of the horse will be blocked by blindness, and if he crosses the obstacle then it will require a lot of energy to be able to jump over him.
Therefore to not be a blind horse, as a trader you should subscribe to some of the data feed, one, two, three or four, so you will be able to distinguish whether prices really move like what actually happens in the market because you have data to analyze the broader market. Its way is good to protect scammed by the broker.
Record all your trading journey
Before you file a lawsuit in a case, you must have support by providing evidence to support the lawsuit.
Always record all your orders by taking screenshots on each of your trades, always and always, this might be useful if you feel you have collaborated with a broker who cheated you. This is also one way to protect scammed by the broker.
Besides being useful for evaluating your trade, taking this screenshot will be useful later if you find irregularities in your trade using a broker that you suspect as a fraudulent broker.
So having some proof by screenshot will help when you filled a lawsuit if you feel you have been cheated a broker.
Take legal action
If all you do is not to solve the problem with the broker, then you can take legal action to resolve the problem.
Or you can also try to take the approach to the regulatory agency where the broker is registered.
This will help you solve problems with a fraudulent broker.
The governing agencies for popular brokerage firms are CFTC and NFA
Both are institutions that regulate trade in financial markets in America.
You can find information about institutions that give permission to establish a brokerage company that you use because maybe your broker is not from America, it’s useful to prevent scammed by the broker
Have good trading habits
Maybe this tip is a bit strange as a way to protect from scam brokers.
But this is one way for you to always maintain good trading habits.
Like an athlete, he will be disciplined with training to get optimal results.
Then it will be useless if you have got a good broker, but you yourself have bad trading habits.
Even though you have a good trading platform and use your sophisticated trading software.
If you ignore discipline it will fail, it’s to prevent scammed by the broker.
And this is not the fault of the broker but because of your own mistakes.
Read broker reviews on trusted sources
Ensure that there are no complaints from traders against your broker regarding money withdrawals.
If you find complaints regarding withdrawal, its to avoid scammed by the broker.
Try contacting clients who have experienced similar problems to find out the chronology and solutions based on their experience.
Read the broker’s terms and conditions regarding withdrawals before opening an account.
Incentives offered to clients to open accounts.
Such as bonuses and other promotions, which can be used to deter traders when they want to withdraw.
If your investigation shows that the broker is okay, open an account with low capital first.
Try trading for a month or more, then try to withdraw. If the trial runs smoothly.
You can start thinking about to add a deposit again.
However, if you encounter some problems, try to discuss them with the broker.
If likely you can’t find a solution, you can switch to another broker
Taking preventative action to measures before register account on the broker is the first step in finding a safe broker this way to avoid scammed by the broker.
Therefore, the best way to start trading is to investigate the broker.
Open an account and try with low capital and then trade for some time according to your experience.
Then just decide whether the broker is worthy or not to trade and submit your money as a deposit to trade for a long time.
You have earned your money with hard work and sweat pouring down, you must protect your money from heavy losses