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How Forex Brokers Find Their Customers

You can see the brokers ads everywhere, from the search engines to forums, personal blogs and trading related sites. Brokers spend so much money on advertising. According to the advertising manager of a trading related site, brokers advertise on trading related sites at any price.

Brokers always request to place their links or banners on our site too. They usually offer to pay a lot of money to do that, but we never agreed to place any ads on our site, specially when it comes to brokers because it is too hard to trust them.

In addition to advertising related purposes, brokers email and invite us to become their affiliate or introducing broker and refer our website followers to them. When you refer to their websites as a trader, you see nothing but the best and most fascinating offers like low spread, fast order execution, connecting to several liquidity providers and… . But if they email to invite you to become their introducing broker, you will find out that what they claim on their websites is not true.

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For example, this is one the emails we have received from a broker recently:

There is nothing wrong with advertising or emailing the others and sending them a partnership offer. This is how things work over the Internet. You have to build a network to promote your business or product.

However, what made me write this post was the contradictions the above email has with what they are advertising on their website to attract people like you to open a live account with them.

What do you understand from the above email?

First, it says their affiliate program offers commission fees up to 80% of the spread.

It means if we become their affiliate and then refer you to them and you open a live account with them, then 80% of the spread you pay in your trades will be paid to us. For example, if you take a GBP/JPY long position and pay a 5 pips spread, we earn 4 pips.

Still there is nothing wrong with this, because it is their own business to compensate their affiliates in the way they want. However, there is a fact behind this offer:

  1. They are the one who determines the spread, not the market.
  2. They have to increase the spread to make more money.

Although they claim to be an ECN/STP broker on their website, the above email reveals that they are not, because they have full control over the spread, so that they can pay us 80% of it.

The other thing they are offering is that in addition to 80% of the spread, they pay a percentage from every deposit our referrals make. It means, if you open an account and deposit $10,000 in it as our referral, a percentage of it will be ours as your referrer. Let’s say they pay us 5% of your deposits, then we earn $500 from your $10,000 account. Now, if you load your account again, we will have another 5% while we are making 80% from the spread as well. (5% of your deposit was just an example by me to show you how it works. They pay a much bigger share from your deposits if we agree to become their affiliate.)

This is another reason that they are market maker. Because they can pay us a percentage from your deposits only when your entire money is in their own pocket. If they were a true ECN/STP, they couldn’t pay us any percentage from your deposits, because your money had to be deposited in the account they have with the liquidity providers, and it is the liquidity provider who has access to your money after this.

Now, if we become their affiliate and want to refer our website followers to them to open a live account, we have to hide the truth and pretend that we are referring our followers to a true ECN/STP broker. Our followers will never know that we have a share from the money they deposit in their trading account and also from the spread.

It will make millions of dollars for us, but from the money you lose, not the profit you make.

We receive so many emails like this from different brokers from all over the world. We are not trying to sabotage any business or company here. As you see we covered the company name and website address on the above email. We are just trying to open your eyes on some facts that most websites don’t tell you because they are also after making money out of your trades and losses. Unfortunately it is getting worse every day and it is becoming harder to trust the brokers and their affiliates or introducing brokers. Be careful!

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"Whether you think you can, or you think you cannot, you are right." - Henry Ford

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16 thoughts on “How Forex Brokers Find Their Customers
  1. Titanium Titanium says:

    If we didn’t know this site, we would not being able to distinguish an ECN from a market maker and would be easily cheated by the many scams out there. Your work is really invaluable.

  2. Olawale LAWAL says:

    Nice, sincere information. Thanks. Keep up the good work. God bless you.

  3. fawaz bamakrait says:

    Thanks for the awareness of this issue, it’s really hard to find some real brokers, but we have no other way to not open an account with to trade, we are doing our best to verify the broker as much as we can based on our knowledge we learned from this site, more over to avoid get them any chances to play with our accounts is (trade the high time frames) i think is the best to kill some of their dreams and strategies.

  4. moaied suhail says:

    Dear Chris, refusing good offers like this reflects your sincerity to this community and your genuine personalty too.

    Thank you for showing us the other side of bad brokers.

  5. Louis Esselen says:

    Thanks Chris,

    I have read your other articles on the subject of Brokers and although it is not very encouraging it is still very informative and vital to know.

    I don’t believe the way to go is through an online broker. There may very well be good ones but they are difficult to find and you have to read all the fine print on their website which most people don’t do and will not do because it is time consuming.

    My opinion is – if you want to test the waters with forex trading then go with a well established broker and open a small account to see what goes and what their slippage is, re-quotes etc.. how quickly your orders get filled, and what the spreads are etc..etc..

    My conclusion here and the only way I would go is through a bank. Not all banks here in my country offer trading to retail traders but there is one that does.

    There are a few differences going through a Bank though. The min at this bank in my country is about $4500-5000 to open a forex trading account.

    Obviously, there are advantages and dis-advantages to this. Its a lot of cash to start with and what if you blow that. ..Ouch… it could hurt you if you did not really have that kind of cash lying around in your draw at home.

    The good side of this is slippage in minimal if anything at all, you get filled with your orders and the spread does not go crazy, and they don’t cheat you !!

    Another good side is they do not offer any leverage or may offer very little leverage, and this is a good thing because you have a little more control over your equity management.

    Lastly it is a better way to go if you want to start living off your proceeds as soon as possible.

    I have been tempted many times to open a live account and start with $200 but glad I have not as I have given myself more time to sharpen my skills, strategy, equity management and trade journal while still trading on a demo account.

    That’s my five cents for what its worth.

    Knowledge is powerful and essential in this game.

    Happy trading guys,

    • LuckScout says:

      Hi Louis,

      Thank you for the tips.

      If the bank is offering any leverage, then be careful, because it is the leverage that wipes out your account or leaves a negative balance.

      The problem is, without leverage you have to deposit a lot of money to make a reasonable profit.

  6. Maurice Parchment says:

    Dear Mr. Chris,

    Thank you for another great article. Truly is an eye opener, greatly appreciated!


  7. Ben Aqiba says:

    Hello Chris,

    this is just one more example for all haters and scam who came here to criticize and to spread negative energy, how great you guys are.

    Thank you

  8. ssy says:

    Chris, while not sure about any of the affiliate programs, I don’t see anything wrong with putting brokerage ads and banners on the site.

    – We all know that having an ad on a site does not mean the site in any way endorses the business or its services.

    – Even if money is of no concern to the site, but as you had written somewhere, you could always take the money and use it to help others if you want. After all, these brokerages all have an ad budget they must spend, if not on this site, then on other sites.

    – Since you have been tirelessly warning others about this issue, you had already given your readers the best protection against unscrupulous brokers. In return, I’d say LuckScout is the most deserving of the ad money from the brokerages. And blocking their ads here won’t accomplish anything more since their ads are everywhere.

    Looking at the above email, one can’t help but appreciate the fierce competition online brokerages must be facing. As in any business, they strive to make money however they can while staying within the law. It is only prudent to protect ourselves as consumers, regardless of what kind of services we are talking about. Here are a couple of things to consider:

    – Always use a limit order to enter a trade (There had been countless times my limit price was too far from the action because I was too cautious, and the train left the station without me.)

    – Use market orders sparingly. I use it only to take profit

    – Trade live only when you have some concrete strategies to follow. If your trades mostly end up on the right side of the market, there’s not much the broker can do to take advantage of you, let alone take all your money.

    Many people trade live without knowing what they’re doing and promptly lose all their money, but the broker is hardly the real culprit here. While there are many bucket shops out there, most brokers do want their clients to be profitable and do all they can to educate new traders. It is only good business.

  9. Charles Booth says:

    The truth shall set you free…Even better save you a bunch of money, heart ache and time…thanks for another informative and valuable lesson mentor Chris.. 🙂

  10. Abdul A. says:

    More grease to your elbow for the information. Stay blessed.

  11. sunday sokenu says:

    thanks mr chris, God bless you.

  12. Boniface Akhuiwu says:

    Thanks for your information Chris.

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