It is hard enough to successfully trade Forex. On top of that, to employ and deal with incompetent broker is certainly something nobody should put up with.
In addition to regular issues with non-supporting tech and customer support lines, here are some of the other ways you will know right away your broker is not going to be a part of your long term success.
No. 1 – Unstable platform: If your trading platform freezes or loses connection with your broker while your other internet applications are running just fine, you do not need to guess where the problem is. Good brokers provide stable connection 99% of the time and perform maintenances only on weekends when there is no trading.
No. 2 – Re-quotes: You place a trade at certain price and two or more seconds later, your broker comes back and offers if you want to execute it at a different price. Run away from this broker - run for your life! He is trying to skin you alive.
No. 3 – Amount of Slippage: I had a broker who offered nice tight spreads but every market executed trade would carry equally ‘nice’ slippage with it. So then, what was ‘my spread’ I was paying?
No. 4 – Unexpected widening of spreads: Some brokers reveal beforehand that they widen their spreads during high volatility following news release. But when spreads widen unexpectedly even when volatility is low, watch out! It seems your broker is cooking up something, something that is better left not tasted.
No. 5 – Different quotes: I actually tested a broker who out of sudden displayed quotes with both asked and bids either 3-4 pips above or below those that were quoted by major brokers. At first I could not believe it. What an arbitrage opportunity!!! How could they do that and still be in business? From what network were they quoting me? I had no idea, and I did not even want to waste energy to find out. Maybe that broker was not a broker at all, but just a scam. So I left.
Yes, there are certainly a lot of scams out there. It’s not to say that you should only trade with brokers who are NFA members, but at least do a good deal of research on them as there are a lot of reviews out there. Just don’t be naïve. I usually do not tend to believe the “best broker ever” posts, but certainly like to look at the negative ones. And don’t fall for brokers that heavily advertise themselves as being ‘no commissions’. Of course they make money. You should just hope that only money they try to make is thought the spreads you pay.
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