The Forex Markets
are accessible through
a number of pricing levels.

The Inter-Bank Market
provides the highest level
of access but is reserved
for big players such as
Central Banks, Corporations,
Hedge Funds and any other
financial institutions
that deal with very large currency transactions.

With the rise of online trading, the Retail Forex Market allowed
Retail Brokers to connect smaller players, such as you and me,
to its trading platforms. As this market lacks the stringent
regulations supported by higher levels, unscrupulous brokers
have the opportunity to increase their profits by manipulating
your trades unethically.

Basically, there are two types of Brokers which are those with
dealer desks called Market Makers and those that employ Electronic
Communication Networks(ECN). Each has pros and cons.

Market Makers are the most common type of broker functioning as
intermediaries to the inter-bank market as opposed to providing
direct access. They do this by trading large blocks of currency
on the inter-bank market and then providing smaller units to retail
traders.

This can mean that when you open a trade, you are doing so in
direct competition with your broker who wins your money if you
lose. 

 This, of course, is a major conflict of interest. Many traders believe
falsely that their broker makes revenue from the trade spread only.

As Market Makers control their own pool of currency, they can dictate
the price feed(bid/ask) that you can assess with the following
disadvantages:-

Prices may not be competitive because they are single sourced.
Unscrupulous brokers may spike prices to trigger your stops as well as
manipulating your spreads as you are about to action a new trade.

Brokers can manipulate the price spread to wide levels because they
generate a portion of their profits from its width.Re-quoting can
be a problem as well and comes into play when you are about to place
an order. Your trade intention is exposed when you click on buy or
sell to ask for an accurate quote. An unethical broker is now aware
of your intentions and can sometimes issue a quote worse than the one
that the current market supports.

Re-quotes can also occur under dynamic conditions when the market
quickly moves away from the quoted price. Delays in execution of the
new trade can happen as a result.

Your chosen broker should be able to supply you with an order close
to the price quoted. If you experience too many re-quotes then you will
need to try out other brokers.

In conclusion, should you use Market Makers remember that there are
good and bad ones. The ethical brokers are seeking long-term
relationships with their clients whilst unscrupulous ones do have the
opportunity to plunder your account. You will have to take time to
choose wisely through experimentation and reading reviews.

Good Luck with your Forex Trading.

If you have any queries, please leave a comment and
I will do my best to answer it.

Regards,

Terry Allen 

Please be advised that Foreign Currency trading involves
substantial risk of monetary loss.

All information contained on this website is provided as general
commentary and must not be constituted as investment advice.

I will not accept liability for any loss or damage, including
without limitation to, any loss of profit, which may arise directly
or indirectly from use of or reliance on this information.