Secret of brokers success
By a new-able we are going to open account in broker first.But we don’t know the secret of brokers success. We don’t ask myself why broker give you so much facilities. Also we do not fine the secret of brokers success. If we know secret of brokers success than we may easily reach the SECRET OF FOREX and making so much profit fast.
BEHIND THE SCENE: secret of brokers success
- Your ignorance and greed
- Inability to think deep
- Proneness to respond to seemingly lucrative offers
- Your consideration of visible things only, not of deep ones
- Not taking broker as your rival
- Your being ignorant of invisible tricks
Suppose ABC Broker offers you low spread and also you can place buy stop and sell stop orders at 0 (zero) pip distance from current price. This is a very good thing so far. As you find this offer attractive you must look into deep because the broker is going to give you a mar later. The broker has low spread and initial deposit is 2,000 dollars. 2,000 dollars is quite a significant amount. Also note that despite knowing the risk of losing all your funds you invested. This means you are (mentally) prepared to lose and taking a chance here. The broker calculated all these before. So simply goes the calculation how to trick not to pay you. Now, as the broker targets your 2,000 dollars it offered you 50% bonus on deposit. As you accepted the bonus the broker got a chance to invest in your business and also that you do not know it is going to leave when you reach the end. You are happy that your 2,000 dollars is now 3,000 dollars. Wow, it’s a great amount now. Greed worked here as the first element and also your mental agreement to lose, your ignorance and inability to think deep worked as second, third or other elements.
And, as you are greedy you are going to lose all. GRASP ALL LOSE ALL.
Now, the broker divides the margin into two – one for base currency and other for quote currency. As you place a trade you use margin. If any margin (out of these two) falls short trade is automatically closed by the software. Usually the minimum margin to be maintained for most brokers is 41%. But there are some brokers requiring more than 120% of margin level. Usually account goes red at 40% margin level, but I found broker where account goes red at 120% of margin level. And, your losing of money starts. Now, the point is that you may close the trade in loss manually if you want. But it closed the trade automatically giving you no chance for the trade to come in profit. And, every time your margin falls short trade is automatically closed and you lose. When margin is divided into two parts hedging does not work. You cannot hedge your account with opposite trades. Suppose you have 2 long positions on EURUSD. You found the market is going opposite direction, so placed 3 short positions. No, this will not work here. As the price keeps down trend your long trades are in more loss and your EUR margin is falling short. And at one stage when the minimum level exceeds one of your long trades which has the most loss will be closed automatically. Now you earned 50 dollars profit from you sell trades. But the broker earned 100 or 150. Thus your 2,000 will be eaten up bit by bit.
In my strategy hedging is a very important thing. But this strategy will not work for the broker where margin is divided into two. So if your investment is a bit big you must consider tolerance level or margin level: at what percentage of margin account goes red and what percentage level trades are closed. Good broker has this level at low. Good broker also does not divide margin into two. Remember, YOU CANNOT HEDGE ACCOUNT IF MARGIN IS DIVIDED INTO TWO.
That ABC Broker is very much expert and experienced, so used every possible ticks. They left no option to change leverage once account opened. Now look here how leverage has good to do with your account and why this broker has no option to change leverage as it targets your money.
Leverage strengthens your money, so your money gains more tolerance to stand against odds when you use leverage. The higher leverage means your money is strong to stronger. You find leverage available in different slots as 1:1, 1:50, 1:100, 1:200 etc. You must have the scope to change leverage from small to big. So, do not use the highest at first, because leverage is your hope in danger. You must have the scope open, to switch to higher leverage when balance falls short and account is in danger. If you use the highest leverage at first, you have no scope to switch to higher when you need to provide support to your account. Good broker will give you chance to change leverage at least once daily. When your
account goes red, switch to a bit higher leverage and this will strengthen your money and your account will not go red at this stage next time. But that ABC Broker had no such option to change leverage and trader cannot change to higher leverage. Remember, your proper use of leverage is neither taking the highest at first nor to be a moderate user of leverage. Proper use of leverage is to use leverage bit by bit and to leave the option to switch small to big available always. When you reach the highest you must come back to a smaller so that you may use the higher later. Now think what would happen if you do not know how to use leverage and also if your broker does not allow to change or you have reached the highest and can use no more higher.
Unfortunately some marked leverage a very negative thing. Now also be rational that in Forex trading only 5% is the gainer, most are the looser. So, simple logic is you must not listen to the most, you must listen to a few.
During high volatile news there is always sudden big move. Trades need to be opened or closed in mili or micro second. The broker with low spread offers its best during this time. The best offer is you cannot open or close trade during high volatility and if you cannot do this, loss is a must. YOU WILL FIND LOTS OF REQUOTES DURING THIS TIME. And also at the weekend when the market is going to sleep for two days you will find the spread is 6 to 7 times higher than usual while some other brokers do not have such during the close of market. Remember, when the spread is high you use more margin and your balance may fail to support account. It may go red and also account may go nil. Though usual spread or the spreads you were shown was 0.6 to 0.9. Now the spread is 7.00. Certainly your account will fall in danger or account may go nil, if you have many trades in loss. Here the broker gave you a mar at the weekend. And, no wonder the broker bags many accounts in the weekend. So be careful before you go on holiday on weekend. Your account may also go on holiday. Better you use fixed spread or zero spread.
Back to 2,000-dollar account again. The broker did not tell you about withdraw charge, nor did you enquire after it. You just foolishly invested. At the time of withdraw you find the broker charges you a percentage of your money and also it made obligatory for you to leave an amount in the account that you cannot withdraw. The system is just the same as you opened a bank account and must maintain a minimum amount in the account. They apply all rules as laws allow and take the benefit from it. Though you send a withdraw request you cannot withdraw the whole or the rest amount. Here it is also obligatory to maintain a minimum amount in your account which means another cut from your money.
Thus in the whole of your Forex journey you only lost. So do not think of big investment. Only think of big profit with little investment as this is the nature of such business. I know many scandals in stock and forex market. All scandals are done keeping the laws in mind and laws hardly have anything to do with it.
Forex trader & analyst