Can Forex Brokers Ban You For Doing Too Well?

PJ2001 · #1 01-23-2009, 08:19 AM

Hello,

I've heard rumors about how forex brokerages will suspend your account if you are profitting consistently. If this is true then how do people "make a living" with forex where such becomes their sole source of income? Wouldn't the broker kick them out if they made that much money?

Actually, the reason why I ask is because I'm with FXDD and there have been rumors about this software called the "Virtual Dealer" plug-in that cheats the trader via the Metatrader platform. Here's a link:

http://alansforexblog.com/2008/04/20...ers-cheat-you/

Now what I'm wondering is this.... if this were true, then how much is too much money made before the brokerage starts messing with your withdraw requests, take profit/trailing stop/stop loss functions, etc.

I always thought that brokers made money from you through the spread - which always made me think that they would want you to do well. But, then again.......

Thanks
PJ

liggy002 · #2 01-23-2009, 03:20 PM

Hi PJ,

Your concerns are indeed a topic of discussion on this message board.

There are several different types of brokers- to answer your questions, it depends on the type of broker you are dealing with. One of the questions you should ask yourself when you sign up with a broker is: "Do they stand to lose anything if I win?"

As a response to this question, a "market maker" or a broker that runs a "dealing desk" will take the opposite side of your trade. When you buy, the broker sells. When you sell, the broker buys. Ergo, if you win they LOSE. Just to repeat that once more for emphasis- if you WIN, they LOSE. It is not in your best interest to trade with this type of broker as they will have to keep in business- and in order to do that they will want to see you lose.

On the other hand, an ECN broker connects you to the true forex market and not some dealing desk where the broker can manipulate pricing and spreads. ECN brokers will connect with other traders, governments, banks, hedge funds, and even market maker brokerages who trade on there. ECN brokers have no interest to see you lose (at least as far as I know) since they do not profit when you lose. They get paid on commission (yes, not all forex is commission free) and the spread. The problem with ECN is that it requires more trading capital to get started and the spreads may get a little high.

To sum up, if you can help it do not trade with a market maker. If, however, you must trade with then- do so only until you have enough money to go with an ECN.

mike360 · #3 01-23-2009, 04:20 PM

Quote:

Originally Posted by liggy002

Hi PJ,

Your concerns are indeed a topic of discussion on this message board.

There are several different types of brokers- to answer your questions, it depends on the type of broker you are dealing with. One of the questions you should ask yourself when you sign up with a broker is: "Do they stand to lose anything if I win?"

As a response to this question, a "market maker" or a broker that runs a "dealing desk" will take the opposite side of your trade. When you buy, the broker sells. When you sell, the broker buys. Ergo, if you win they LOSE. Just to repeat that once more for emphasis- if you WIN, they LOSE. It is not in your best interest to trade with this type of broker as they will have to keep in business- and in order to do that they will want to see you lose.

On the other hand, an ECN broker connects you to the true forex market and not some dealing desk where the broker can manipulate pricing and spreads. ECN brokers will connect with other traders, governments, banks, hedge funds, and even market maker brokerages who trade on there. ECN brokers have no interest to see you lose (at least as far as I know) since they do not profit when you lose. They get paid on commission (yes, not all forex is commission free) and the spread. The problem with ECN is that it requires more trading capital to get started and the spreads may get a little high.

To sum up, if you can help it do not trade with a market maker. If, however, you must trade with then- do so only until you have enough money to go with an ECN.

I found this webpage informative.

http://dailyforex.com/_373_article__..._the_hill.aspx

ardor · #4 01-24-2009, 03:25 PM

From the dqailyforex article above.

"Many brokers ...offer features which just make it prudent or advantageous for new or smaller account traders. For example, some guarantee that you’ll never have a negative balance, meaning you can’t lose more than you’ve got in your account. Actually, this is a very prudent, very wise safety feature. And ECN brokers just can’t offer that."

I'm so used to not being able to lose more than my deposit, that the above is scary.

ardor

moneydream · #5 03-19-2009, 01:04 PM

Only scammer brokers will ban you for doing too well. If you play by the rule the brokers set by, you will always be safe.

JillyB · #6 03-19-2009, 06:47 PM

Quote:

Originally Posted by Jene

My answer would be ‘NO’ straight away. No broker can ban you for doing well as they want you to do well as then they can generate revenue. Simultaneously the signals and updates they sent to the client will automatically be well known.

Sorry but you're wrong. They can ban you. They can freeze your account without notification and then ask you to leave. ODL did this to me after I'd been using fapturbo for 2 weeks and my account had gone up 50%.

moneydream · #7 03-21-2009, 12:37 AM

Quote:

Originally Posted by JillyB

Sorry but you're wrong. They can ban you. They can freeze your account without notification and then ask you to leave. ODL did this to me after I'd been using fapturbo for 2 weeks and my account had gone up 50%.

That has proven what they're doing.

No broker will deny more trade (more trade equal to more business). Only those brokers who made profit off your lost will do that.

Miksa · #8 03-21-2009, 10:45 AM

Quote:

Originally Posted by moneydream

Only those brokers who made profit off your lost will do that.

yeah, that's true. and it looks like most retail, non-ECN brokers do that. here is what Alpari has in their customer agreement:

Quote:

...ALPARI’S INTERESTS MAY BE IN CONFLICT WITH YOURS.

... THE PRICES ALPARI OFFERS MIGHT NOT BE THE BEST PRICES AVAILABLE AND ALPARI MAY
OFFER DIFFERENT PRICES TO DIFFERENT CUSTOMERS.

IF ALPARI ELECTS NOT TO COVER ITS OWN TRADING EXPOSURE, THEN YOU SHOULD BE
AWARE THAT ALPARI MAY MAKE MORE MONEY IF THE MARKET GOES AGAINST YOU.
ADDITIONALLY, SINCE ALPARI ACTS AS THE BUYER OR SELLER IN THE TRANSACTION, YOU
SHOULD CAREFULLY EVALUATE ANY TRADE RECOMMENDATIONS YOU RECEIVE FROM
ALPARI OR ANY OF ITS SOLICITORS.

alan · #9 03-21-2009, 12:06 PM

Exactly why I stay away from Alpari. There are a ton of bucket shops out there and if you can avoid them DO SO. Forex is hard enough as it is, why make it harder for you by using a broker that trades against you.