How many times have you heard that a forex broker cheated somebody and posted on MT4 a price which did not exist on the market? This is one of the common issues you can find among traders. They compare brokers, share screenshots and from the first glance it looks like the broker played unfair to take traders money.
But often no matter what proof the trader has the broker does not admit mistake and refunds a loss. Brokers are not dumb, and they know people talk and this affects their reputation. Why?
To begin with let’s talk about honest players. We are talking about solid brokers, like FBS, XM or Exness for example. The ones who have been in the game for long enough to realize the value of reputation.
Many traders, especially newbies, have this believe that in Forex or CFD trading all prices with all brokers are same. And if gold in broker A reached 1840 you should see same (or at least very close) price in broker B.
Well this is totally right when you talk about stocks or futures trading. If you trade corn future, for example, regardless broker it moves same. And there is very good explanation for it: there is a place where prices originate, where they come from. All pricing for futures and stocks is regulated by exchanges where such stocks of futures traded. For example, corn is traded on Chicago Merchandise exchange and this exchange sets rules how you can trade it.
You can see how the price behaved for this future on the exchange website
However, when it comes to Forex there is no such sole place where prices for currency pairs come from. Simply, there is no exchange as a place with precise location for currency pairs trading. There is no such single stop where prices for FX pairs come from.
As opposed to stock or futures trading, trading forex is so to say de-centralized. There are many big banks and companies called liquidity providers, which decide at which price they are ready to buy or sell currencies. But since there are many of them such players would have their own prices which can obviously be different from each other.
These big players are used by retail brokers to receive prices and execute (settle) clients’ transactions. And a retail broker may decide which liquidity provider it will work with. Or sometimes a broker may have agreement with several liquidity providers and chose where to clear clients’ trades.
Often solid retail brokers will have liquidity providers different from each other, XM may want to receive prices for gold, for example, from liquidity provider A, and FBS uses liquidity provider B for gold. Liquidity provider A may quote gold at 1840 and liquidity provider B at 1850. Therefore you often see different prices for the same financial instrument in terminals of different brokers.
It’s like buying petrol from different petrol stations: prices may be similar but not identically same and every station decides at which price they want to sell their petrol.
However sometimes you may experience some unusually long spikes on your chart. Say you traded gold and the price was around 1840 and all a sudden it drops to 1200. It is obviously an unusual move for gold and here it is 50/50 chance that the price given by a broker is wrong.
Either there was some IT issue with broker when receiving prices from liquidity provider, or it was a glitch with liquidity provider or something else. Nevertheless regardless reason it was a faulty price which did not exist on the market.
You may cross check it with other brokers and if you see that others did not have same price you should contact your broker and ask to recalculate your affected trades. If the broker cares about their reputation it will investigate what happens and often compensate clients their losses. At least this is what Tickmill does for their clients. It takes some time for a broker to understand what happened, so do not expect immediate answer. It may take a few days but eventually you will be rewarded for your patience.
This is why when looking the price reaching some level at one broker don’t expect same to happen with another broker. Be smart and learn how forex market works.
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