I have worked in Forex brokerages and I can tell you the type of traders they love are day traders why? Because if there market makers or even offsetting trades, they know that they will make more money from them, than long term traders – why? Because they lose money. Day traders don't make money long term and a broker knows this and this is the view of them from market makers and offset brokers:
How Brokers View Day Traders
A market maker contrary to believe doesn't hunt day traders stops, there so close anyway that the market will just take them out and the broker does need to hunt them down. Also from a market makers perspective, they don't really have any big risk taking day traders and their trading systems because they never hold a position for the long term. This means there is no real chance of them getting lucky in a currency pair and banking a big trade against the house. A market maker is happy - because 90% of all traders lose and in the case of day traders, he doesn't even have to worry about a price spike against his position.
An offset broker knows the statistic that 90% of traders lose and the attitude here is – well there going to lose anyway, with their trading signals so its best, they give us as much commission on the way down as possible. Of course a day trader will give them a lot of commission as they erode their trading accounts to zero.
Think the above is harsh? Answer is the brokerages are just looking at the odds and in many cases they now act like online casinos and try and get traders, to trade as much as possible and here are some of the ways they do it.
Offer a Account Opening Bonus
Just like online casinos offer a bonus to tempt you to deposit money so do online trading houses but check the conditions – there mostly related to trading a set amount of currency pairs in a specific period and this volume of trades needs to be placed for the trader to get his or hers trading bonus. They know, by encouraging traders to over trade, they will see the trader wiped out and have protected their bonus.
All Forex Robots and EA's Welcome
The vendors of these systems often put about the story, that brokers would stop a buyer trading the robot EA or trading signal service as its so profitable! The story of course is ridiculous but brokers take advantage by saying - all system traders are welcome and of course they are. There mostly day trading and scalping systems and the broker sits back, takes a lot of commission and the traders deposit so another load of easy money swells there balance sheet.
Leverage – Give them Enough Rope
Give them enough rope and they will hang themselves and this applies, to leverage. Any Forex trading strategy no matter how good it is, will lose if its over leveraged. A day trader is a gambler by nature and will use high leverage - so give them enough and they will blow up there account. I have seen brokers give up to 500:1 leverage which is irresponsible, when you consider that most pro traders use about 10:1 leverage but again, the broker is tempting the trader to lose money and of course he does.
Social Trading Accounts
Another ploy to get traders to over trade. Brokers tempt traders to copy others and show the most profitable over the last few days ( I.e. the ones who have had a good or lucky trade) which is given them a big gain. The novice traders see these traders and start following them and over trading and of course lose. No trader should follow anyone unless they have a 3 year track record of audited gains not just look at some lucky gains which have been achieved in a short space of time.
Forex Alerts and Trades
Many brokers will provide you with Forex trading signals to your email or even your phone and some give them everyday – Should brokers really be doing this? No – these signal services are just a temptation to inexperienced traders to get in and scalp or day trade and lose money. In my view, brokers giving any type of currency trading education in the form of - systems, signals and tutorials on how to trade currencies should be heavily regulated.
Are brokers bad people? No but you need to be aware that the services they give are designed in many ways to encourage you to over trade and no broker will tell you day trading or scalping is a low odds way of trading because they make so much money from this segment of the Foreign exchange market. Get a decent Forex trading education, avoid day trading and scalping, trade longer term and use your broker for orders only and you will have a good chance of enjoying long term currency trading success.