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Signs of A Bad Forex Broker
The new and inexperienced Forex trader is the ideal snack of a bad Forex broker. In spite of the multiple warnings, disclaimers and crucial yet easy-to-ignore tiny print clauses, many people still fall prey to bad brokers every day. The brokers would sound nice and swanky using terms like liquidity, leverage, fixed spreads, pips and margins that may sound too smooth and end up confusing you. As a result, you may be ending up losing all your money, faster than you would imagine!
Few general traits to identify the bad brokers and be wary of the snakes in the grass:
Market Making
Many-a-times if the capital to start trading is not big enough, you would probably end up in a market maker account. The market makers, in their disclaimers, state that they will always take action in their best interest - that may mean it may not be coinciding with your interest. These brokers make their own markets, use their assets to manipulate bids, spreads and would trade with an in-house sub-market. Although it is not illegal, however, they may tell you that they are placing your funds on the open market but your contract says that the broker is eligible to make money only through bid/sell price, the broker is most likely misleading you. The money is not put on the open market at all and may be used in intra-firm submarkets. It is therefore advisable to crosscheck the type of account offered. .....