The Dark Side of Forex Trading: Exposing Scandals and Malpractices

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The dark side of forex trading is one of the most terrible aspects that is associated with forex trading. Just like many careers have a dark side, forex trade also has its dark side. However, many traders rarely talk about it and they rarely let people know that forex trading can be the reason why many lives and homes have been destroyed. More so, telling people that the dark side of forex is the bane behind many unexplainable tears and pain has been a fear for many traders, especially when they are involved with teaching many folks on social media. For that reason, they keep it as a secret to themselves and most times, die with it. However, amateur traders who are very serious about building a career in forex trading get to realize this dark side after many years of striving to succeed and still be in the same pot.

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If this is one of the interesting topics that you have been looking forward to reading about, then stay glued to the article to the end.

Many factors are associated with the dark side of forex trading. These include manipulations and scandals. As little as these two words sound, they are so wide in scope that every trader needs to be very careful not to fall into its deep shit. First, let us talk about manipulation.

The Dark Side of Forex Trading: Exposing Scandals and Malpractices

Forex Manipulation

Manipulation is the first and most frequently mentioned word that many forex traders talk about when they are with each other in their circle. They see it as the first reason why trades do not go well. Manipulation has been reputed as the reason why 60% of successful traders lose their money. For instance, why would a well-analyzed market with more than four (4) confirmations violate all the principles of trading and then go south? After, the same trade returns back to the first forecast that was violated. Someone would say manipulation!!! Yes, Manipulation is the reason.

How is the forex market manipulated? Forex is manipulated in so many intricate ways. This may involve words like, spread, swap, slippage and through liquidity pools.

Forex Spread

Spread is the difference between an ask price and a bid price in forex.  The bid price is the price where many traders BUY a forex pair or an asset. It is always lower than the ask price. Conversely, the ask price is the price at which a seller is willing to sell a forex asset. It is always higher than the bid price. Hence, in trading, the bid price is always lower than the ask price.

The dark side of forex trading

Picture A: shows the Ask Price (Marked by the red line) and the Bid Price (Marked by the ash line)

Spread in forex

Picture B: shows the Spread (marked by the green line as 8, 31, and 41)

For instance, using the picture above, the ask price is denoted into the righthand side (the side marked with ash colour) while the bid price is to the lefthand side (the side marked with red colour). When this difference is widened above the usual levels, this calls for an in-depth analysis as brokers and market makers are responsible for such manipulations. A widened spread margin (Picture B) is manipulation. And this is to ensure that profitable positions are slowed down while negative positions run faster. Hence to avoid being a victim, avoid brokers with very widespread margins. In addition, avoid trading during fundamental interplay because high-impact news often comes with wide margin levels.

Forex Slippage

Slippage is another way brokers manipulate forex trading. This is achieved when orders placed on instant execution take longer time to trigger. In addition, when these order(s) trigger, they do not do so at the set price but rather trigger above the bid price for a buy trade or lower than the ask price for a sell trade. The essence of slippage is for the entry price to lead the trader to a certain level of loss that the trader cannot explain. To make this happen, brokers alter trading signals and make open trades to load continually as if there is a network problem. When this happens, many traders think that their local network is poor and hence, will blame losing trades on their network provider without knowing that a broker is the cause. With consistent replies of this act, a sensitive trader should know such brokers are manipulative. Thus, to avoid this, study your broker very well before deciding to trade with them as most of them are predators.

Forex Swap

Swap is another dark side to forex trading. Swap is the overnight fee that a broker charges. It often varies per broker, per volume of trade, per lot size, per market traded. What this implies is that brokers charge different fees for holding trades into the next day. These fees vary between brokers and with the market traded. That means trading two different brokers will mean experiencing different swap charges. Also, trading different markets will mean having different fee charges for the overnight position. Similarly, this applies to the lot size and number of trades taken. Due to these charges, one of my mentors advised that forex swap is a hidden monster and the principal reason why many traders decide to either scalp or day trade.

For many traders, this may seem like a little issue. However, the accumulating effect of swap can be very devastating over time especially when assets traded are frequently affected by fundamental news. For that reason, avoiding swaps can be achieved primarily by closing trades (both winners and losers) on the same day. This might limit the trader to intraday positioning but, could also serve additional charges if such trades were either winning or losing trades.

Liquidity Pool

The liquidity pool is a position where many forex orders are stacked. This is otherwise called the strong support and resistant zones. Here many traders stack their orders (both instant and pending) and thus, accumulate a lot of money in these zones. When brokers and market makers see such liquid pools, they manipulate the market by driving the price either above or below the liquid zones to trigger these orders. Depending on the direction of the highest volume, they drive the price in opposite directions to make traders close in losses. This generates funds for the market and increases the volatility. However, when many stop losses have been triggered, market makers counter-trade in the opposite direction to run winning trades into losses. This also makes the trading adventure frustrating such that many traders feel like someone is monitoring their account. This happens when you hear traders say that the market buys when they sell and when they close the buy order and start selling, the market starts buying.

Trading in support and resistant zones should be carried out with caution to avoid liquidity pool manipulations by brokers and market makers.

Forex Scandals

Forex scandals are theft issues and criminal activities that have been conducted under the umbrella of forex. So many scandals have been linked to forex such that whenever forex is being mentioned, many people see it as an online scam. Examples of forex scams include crowdfunding and Ponzi schemes, crowdfunding, forex robot scams and forex signal scams.

Crowdfunding and Ponzi Schemes

In many countries, so many forex firms are built on debt. They collate money from various sources (both online and offline) and make a remittance of a certain percentage of the money per month. Over time, when the volume of money accumulated gets to a reasonable amount, the company liquidates and leaves the people whose money was in their care, stranded. This is a regular and annual circumstance that many people have fallen prey to. In many instances, when such culprits are caught, the excuse given is that the forex market has folded or the bank has frozen their account. This type of excuse is very common among thieves who use scam people in the name of forex.

Is forex, therefore, a scam? No. I know of so many successful and honest forex traders who are doing just fine and will relate the truth to you. However, forex trading is a mentally demanding exercise that demands caution and patience. To succeed, a person must be ready to invest only an amount of money that can be lost. For that reason, one must be greedy to gain so much and then lose his money to online and offline scammers. Thus, to avoid this crowdfunding and Ponzi scheme scandal, please avoid anybody who promises a juicy return on investment for your money. More than 90% of the time, they are predatory scammers.

Forex Robot Scams

One of the numerous forex scandals is the use of forex robots. Robots are automated machines that can be used by many traders to reduce the mental stress inherent in forex trading. However, many scammers use selling forex robots as an avenue to scam people. This gullible strategy comes with a lot of persuasions to many traders such that, ‘the do-it-yourself’ is the best way to avoid forex scams. However, this do-it-yourself is one way to incur losses that can ruin anybody.

To avoid this robot scam, do not buy robots that you do not know how to use. Do not also buy forex robots that you do not understand the risk program built into it. Moreover, buy robots that you know can help you to achieve your trading aim. This way, forex robot scams can be bypassed.

Forex Signal Scams

This is another means of scamming people in forex. Forex signals are trade suggestions that are given by traders to foretell the possibility of a winning trade. However, this strategy is often used by scammers to make a high volume of money from gullible traders who pay for this service not minding if the trade suggestions are in profit or loss. With consistent losses incurred by traders, they lose their money and possibly run into debt.

This is one of the dark sides of trading that many people do not share. However, to overcome this menace, get a mentor that you can access when necessary. Pay for forex classes and tutorship and be patient enough to develop yourself patiently to learn and master the art of trading. Mistakes will be made but success is guaranteed over time.

If this publication has been helpful to you and you desire to know more about what it takes to be successful in trading, kindly do the following.

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Risk Disclaimer

Deriv offers complex derivatives, such as options and contracts for difference (“CFDs”). These products may not be suitable for all clients, and trading them puts you at risk. Please make sure that you understand the following risks before trading Deriv products: a) you may lose some or all of the money you invest in the trade, b) if your trade involves currency conversion, exchange rates will affect your profit and loss. You should never trade with borrowed money or with money that you cannot afford to lose.


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