Lesson 7: How to Protect Yourself Against Forex Broker Scams

While you may feel like a dwarf among big bad brokers, it doesn’t mean that you have to take their abuse!

If you are disheartened because it seems that brokers have all the advantage, rest assured that there are a few simple measures to help even the odds.

How to Protect Yourself Against Forex Broker Scams

Compare Price Feeds

Imagine a horse with blinders. This horse’s vision is limited to what’s in front of him.

If there is a hurdle in front, this horse has no other choice but to exert the additional effort needed to jump over it. This horse is a very sad horse.

If you only use the price feed on your trading platform, you are basically trading like a horse with blinders on.

You have no idea what’s going on in the rest of the forex world because you have limited yourself to your broker’s price feed.

If your broker chooses to widen spreads, manipulate rates, and run your stops, you have no way of knowing if the move resembled the general market.

You do not want to be a sad horse. Because you are a smart trader, you want to have the most complete view of the market as possible.

The best way to do this is to subscribe to a second, third, or even fourth price feed. That way, you get another view of the market, and you’d have a chance to confirm whether price really moved the way it did.

Record Everything

Record Everything

Always keep a detailed journal tracking ALL of your transactions! Always, always, always! Like in a courtroom, you need evidence to make a case. You may FEEL cheated, but if you have nothing to back it up, then that feeling will remain just a feeling.

The easiest way to keep records is to take a screenshot of each order you put, each trade you take, and other suspicious broker activity like odd price feeds.

Not only is this good trade journaling, but it will come in handy if have been victimized by an errant fill. By properly tracking the trades you take, you can assure yourself that you will always have the evidence needed to support your case in the event that you file a dispute with your broker.

File Legal Action

If you cannot settle your conflict with your broker, then it is time for you to take legal action. Most brokers give in when faced with the threat of legal action, but if they do not, you can approach either the Commodity Futures Trading Commission (CFTC) or the National Futures Associations (NFA).

The CFTC has a Reparations program that provides an “inexpensive, expeditious, fair, and impartial forum to handle customer complaints and resolve disputes between futures customers and commodity futures trading professionals.” You can check out their program here.

Likewise, the NFA has an Arbitration/Mediation program that helps resolve disputes. For more information, just head on over to the NFA’s website.

Good Trading Habits

Like a disciplined nun who wears a habit, you too should develop good trading habits. We know that joke doesn’t make sense, but it sounded funny so we might as well put it here.

In any case, even with the proper weapons to protect yourself against evil brokers, the most important thing is still to become a better trader.

Know that no matter how advanced your charting software is, no matter how much time you put into finding the right broker, no matter how complicated your trading system is, without proper discipline, you will end up losing.

It is very easy to put the blame on brokers, but at the end of the day, it is really your choices that get you to where you want to go.

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