Brokers and traders are central entities in the forex trading ecosystem. They are interconnected and have a mutually beneficial relationship. Brokers provide facilities for traders to trade, and traders pay to use those facilities through commissions, swaps, and spreads.
Given their mutually beneficial relationship, brokers and traders should be ideal business partners. Their collaboration should make the forex industry thrive. However, in reality, their relationship is often not harmonious. Brokers are often considered to be harming traders and even deviating from their main role as intermediaries between traders and the market.
It's not just a few brokers, but almost all brokers essentially commit major sins against traders. Brokers, who should be serving traders well, instead try to make traders lose money. It's as if brokers are not facilitating traders, but fighting against them.
There are at least 7 deadly sins committed by forex brokers against traders:
#1 Writing Terms and Conditions in Tiny Font
All brokers write their terms and conditions in a very small font size, making them difficult to read. Many brokers don't even include the "terms and conditions" option in the main menu at the top of their website, but place it at the bottom.
This effort seems to be aimed at hiding important information from traders. It seems that brokers don't want traders to read the rules they set, let alone understand them. Yet, this information is the foundation of the business relationship between brokers and traders.
It's not an exaggeration to assume that the content of the agreement is detrimental to one party, in this case, the trader. Therefore, the other party (the broker) tries hard to cover it up.
#2 Canceling Trader Profits for Rule Violations, But Never Trader Losses
The rules in the terms and conditions usually include several conditions regarding what traders can and cannot do while trading. These usually relate to trading methods, minimum position holding times, and so on.
If a trader violates these rules, they will be penalized. This can range from being blocked as a client to the cancellation of profits earned in trades that violated the rules.
Of course, this is a legitimate action for brokers to take. However, brokers usually only cancel trader profits, not trader losses, even though both are the result of trades that violate the rules.
If brokers consider trades that violate the rules as invalid transactions, they should forcibly close those positions from the beginning and inform the trader of the reason for closure. However, brokers don't do this; they wait until the trader completes the trade. If it results in a profit, the broker will cancel the profit; if it results in a loss, the broker will let it stand.
#3 Offering Bonuses with Difficult Conditions
As a promotional effort to attract many traders to use their services, brokers actively distribute bonuses to traders. These bonuses can be in the form of additional balances or even free balances.
But it seems that brokers don't understand the concept of bonuses correctly. A bonus is an additional incentive or reward. In the context of business relationships, bonuses are given as appreciation for performance or as encouragement for a better business relationship.
However, with the bonuses offered by brokers, they give the bonus to traders upfront. There is no business relationship between the broker and the trader yet if the reason is to strengthen the business relationship, and the trader has not shown any performance yet if the reason for giving the bonus is for appreciation.
The worst part is that brokers add difficult conditions when giving these bonuses. It's as if they understand the concept of a bonus not as a gift or reward, but as a challenge.
#4 Withdrawal Process Always Slower Than Deposit Process
Every broker in the world always processes deposits faster and withdrawals slower. It's nonsense if the reason is for security. Brokers don't allow traders to withdraw to accounts different from the ones used for deposits. Even if the withdrawal is made by someone else, the trader's money still ends up in the trader's account.
Brokers seem very eager to receive trader deposits and immediately convert them into trading balances, but very reluctant to return the trader's money. In fact, a fast withdrawal process would also benefit the broker's reputation because it can increase community trust in the broker, so many traders would choose to use their services because they feel safe.
If the reason is that the trader's balance is in a custodian bank, the broker should be transparent with that information by including the name of the custodian bank they work with or even providing guidance so traders can verify the truth of that information. This would also increase traders' sense of security and make them understand the withdrawal process being slightly longer than the deposit process.
The problem is that no broker transparently provides that information. They may say that client funds will be deposited in a custodian bank, but often it's just a claim without proof. Who knows if they're lying?
#5 Encouraging Traders to Deposit with Low Minimum Limits
Although not all brokers do this, most brokers offer low minimum deposit limits. On the one hand, this seems like a beneficial action because it allows people with limited capital to enter the world of trading. But, on the other hand, this also leads many people to failure.
Small capital has very low loss tolerance. So the chances of failure for traders using small capital are much greater than when traders use large capital. Brokers definitely know this, but they still provide this facility as if that's the goal, to encourage more people to lose their money.
This becomes illogical if brokers are running a business as a provider of trading services. Brokers should be taking care of their clients because the broker's profit depends on how long those clients survive as traders. Traders are like regular customers of the broker, the more traders that survive, the more secure the broker's income.
But this would make sense if the broker is not acting as a broker. If the broker's main business is actually as a market maker, then it's natural for the broker to want traders to lose their money. Because the trader's loss is the broker's win, the trader's loss is the broker's profit.
#6 Providing Excessive Leverage
Leverage is a facility that allows traders to open trading positions with very low margin requirements. This allows traders to trade with sizes much larger than the margin they provide.
Just like the minimum deposit limit, high leverage also has two sides. One side is bringing profit because traders can increase their trade size, so their profit potential increases drastically. While the other side is that high leverage brings losses, where high leverage often encourages traders to become greedy and impatient. Many traders use high leverage so they can increase their trade size. Hoping to get fantastic profits, but in reality, they lose big.
If from the broker's point of view, traders are valuable customers, then brokers should not encourage traders to take excessive risks that make them fail. Because that means brokers will lose their loyal customers. But on the contrary, if brokers do not have such a view of traders, and consider traders only as prey, then all of that makes sense.
#7 Actively Encouraging Deposits but Passively Handling Trader Complaints
Lastly, brokers are very active in encouraging traders to deposit and trade. Even the broker's side always contacts first for things like this. If they don't manage to contact the trader on one day, they will try again on another day. If they can't reach them by phone, they will leave an email.
But brokers become passive when traders are having problems. Their responses become slower and even only respond to trader complaints with template answers. Usually, brokers never give certainty about when the problems experienced by traders will be resolved and only ask traders to be patient and wait.
Things like this again show as if brokers are only focused on one thing, which is encouraging traders to deposit. They don't seem to care about the trader's experience in using the services they offer. Even though their main business is selling those services. If traders are not satisfied, traders will look for other service providers, move to other brokers.
The sins of brokers above are still being committed today. Sadly, it's not just done by one or two brokers, but almost all brokers are like that. Even though traders are their main customers, their source of income, and the success of customers is also beneficial for them. But seeing what these forex brokers do, it seems that traders are not seen as business partners but only as profitable objects.
This kind of relationship is certainly not ideal. Brokers should maintain and serve traders maximally. Try to provide comfort and help traders not to fall into failure. That way, the ecosystem in the forex industry will become a healthy ecosystem. Where the actors involved in it help each other to achieve success together.
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