Here is a question that has come through our inbox a few times so I'll respond to it here. I also answered this on Quora back in 2018 as well.

Do Forex brokers really trade against you/cheat on their clients?

Yes they do. But I wouldn’t use the term “Cheat” as you aren’t losing anything and still have the opportunity to profit.

Brokers will categorize you depending on your winning, losing and profitability.

They’ll place you in what’s called “A” and “B” books.

As a new broker client, Forex brokers will keep your trades “in house”. Basically your trades aren’t sent to the real market. The broker will execute your trades and bet against you, taking the other side of your trade.

Why do Forex brokers put you in the “B” book?

Firstly, because the “B” book is a profitable business model. Statistics prove that 90% of traders lose all of their deposits within 6 months. So the stats favor the broker.

IG Markets holds the biggest “B” Book in the world.

Why do Forex brokers put you in the “A” book?

Brokers will put you into the “A” book if you’re profitable. Brokers send profitable traders out to their liquidity providers because no one wants to bet against profitable traders.

FBI wrote: Sun Jun 16, 2019 6:04 pm

I never imagined that it would be so easy for the scammer broker to get the money out of their customers' pockets.

Skyold wrote: Sun Jun 16, 2019 6:19 pm

I never imagined that it would be so easy for the scammer broker to get the money out of their customers' pockets.

Yes, we are very sorry, we had a technical issues with data, but everything is fine now.

FBI wrote: Sun Jun 16, 2019 6:23 pm

Yes, we are very sorry, we had a technical issues with data, but everything is fine now.

For the compensation you will receive a bonus of 500 EUR on your next deposit of 5000 EUR

I can totally picture a scammer saying that.

I thought to add a few lines on brokers and their operating models and the big difference between regulated and unregulated brokers.
Many may have seen Anthony Kriel's (ex GS) youtube vid in which he labelled all brokers as dishonest and just take the other side of the bet of loser traders but he was selling a product so was happy to be a bit dishonest himself.

The 2 most valuable things for a large broker in a regulated country are their licence and their reputation, if they lose one or both they are finished so will guard both as if their life depended on it, which it does.

These brokers, as described above in the OP, operate an A and B book, you could also describe them as retail traders and professional traders. When the new ESMA regulations were introduced Euro and UK wide with a massive reduction in amount of leverage offered (same to happen shortly in Australia) another of the new rules was to ban perks for favoured clients, so no special rates, no improved spreads. At the time brokers knew their business would take a hit because of the new regulations so they all went on a drive to recruit more clients. The interesting thing was that they all went after the professional traders (A bookers) not retail traders (B bookers).
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The reason being is that they want to pair shorts with longs in-house as much as possible and take the spread off both parties, most of their clients are retail and most retail lose, though there are many times more retail clients professional clients actually trade the larger amount in size. Once the computer has matched shorts to longs in-house (often matching A book to B book) any excess is bundled up and these must be hedged so if there are 1000 lots of longs not matched the broker goes to the liquidity provider and takes out a 1000 lot bet long. If the long wins the client and the broker both win so the broker collects off the liquidity provider and hands it to the client, if the long bet loses then the broker collects off the client and hands it to the liquidity provider. The broker must pay a spread for the hedge but rest assured they get far better prices than what they offer to you. So the broker can't lose and in fact profits no matter what.

Compare that to some unregulated brokers, they look to attract retail clients and are likely to have few if any A book clients. Without a regulator watching over their shoulder why bother hedging anything, 75% of retail lose anyway so just take the other side of the bet and pocket the profit. But occasionally retail get it right big time and suddenly ABC brokers are out of business with massive debts and very angry ex-clients. But not to worry, CBA brokers have just opened up next door so you can sign on with them instead.

Not all unregulated brokers will behave like this but the small broker with few A book clients needs to hedge much more than the large brokers which crimps profits and being smaller they are naturally more vulnerable to large market swings.

ps; have deliberately kept to dealing desk brokers and avoided STP, ECN and DMA type brokerages.

Before I start I want to make it clear that I'm not conspiracy theorist or any of that kind. I have to say that I've seen enough to start agreeing with intuition. Occasionally you see forum members posting similar ideals only for to be ostracized as someone belonging to the tin-foil hat club or a victim of their paranoia or just another disgruntled loser. I've experienced too many coincidences of my own to believe that things are just benign coincidences. I've posted an occasion where I watched a the price trickle down in the Asian session about 15 pips to my eur/usd stop at 1:01am Jan 31st (1:00am DEU retail #'s came out and missed horribly) and only one pip later start a 70 pip bull run that ended up parabolic. Later in by the US session industrial numbers came out mixed slightly to the positive side. I don't want to get away from that stop out. Mind you I placed it pretty obscurely....was it placed on a support level?? Meh...one could argue, but that wasn't really a conscious decision. Was I really that important, the position wasn't that big. Thing is I've only used a stop order maybe three times this year, that being one of them. Not saying stops aren't a good thing.

Now here's what's got me back to you my observations and really my belief. On a small account less than a G, I had a short position this past Friday, put on during the later Asian session. It gained a six pip profit and slowly started to erode to negative closer to the London open. I say to myself let's see where they want to take this. Suffering from a bit of hindsight bias now cuz soon after the open DEU factory numbers came out strong. So I let the loss run - not taking heed to any rules. So around comes the NY session and later the NFP and Employment #'s. I'm already upside down and really don't want to care so again I say let's see where they want to take this. Later that day I get a margin call notice of closeout. I'm feeling a bit revenge here so still stay pat. Now here's what all this is getting to, I get closed out @ 1.13529 and then in that same minute my broker's price reaches H of the day @ 1.13547 then sells off to fade the entire session. Mind you all this happened AFTER the NFP and employment release and numbers were pretty strong. So the whole even took 127 pips and came down to 1.9 surplus of pips after I was closed out and the high of the day was printed.

I find this extraordinary and have to ask how they keep doing this? There's no doubt in my mind that Broker's algos are coded to take out take advantage of every possible scenario. But, why am I really that important. With such a small account?? I rarely use stops and the one time I don't remove it I get taken??

There's more that we know about Forex retail. I am certain that there's things that only a few people are privy to as far as what's behind the curtain. There's no doubt that the brokers - especially largest and well capitalized - are manipulating the markets. There's a truism about price and that it moves for more than one reason. In actuality price doesn't have to be manipulated because the retail trader will always find ways to lose themselves. The market maker needs to fill orders that are below before they take the price up...regardless if their stop orders or buy orders....they're just doing their jobs is the explanation.

There's no question that what we experience on a intimate level in retail spot Forex is the manipulation of the brokers. Again the larger, well capitalized ones. A little insight that the retail crowd fails to realize is that these big guys don't want you to realize is they have very large clients. Liquidity is not something that's infinite. The retail "trader" makes the mistake of basing their decisions and thoughts off their own experience and circumstance. You can just click and get your lot filled no problem. There's a bigger picture that's going on and they don't want to show their hands to you or their competitors.

They're gonna take the price from point A to point C, but they're not going to show until it's too late. And if you suspect that it's going to point C they're gonna take it to point B first and you're going to be tested. Or they're gonna make it look like they wanna take it to point C but the whole time they really wanted point B.

There is a tug of war going on with a lot of players. That's why spot fx is what it is...A mish-mash of confluence.

Do not trust your friendly broker. One things for sure they do not take to winners lightly. Be ready for a new market environment every week.

oh dear you got it bad, 'why oh why do we keep losing'. You are nearly right but so so wrong. A legit broker facilitates trades, they take the same cut off both parties, it doesn't matter to them who wins or who loses.

Are markets manipulated? Absolutely. Who's doing it? Well you are for a start (or at least trying to), all participants really. Does anyone care about your 1 G account, of course not. The thing is your technical analysis and entries and stops and TPs are in the same place as everyone else's.

A big player who wants/needs to buy 100 mil of whatever, does he use TA? No, he looks at the chart and says 'there must be a cartload of contracts just beyond that point and I want them', spend 10 mil to force price beyond that point then start buying up all those newly available contracts and keep buying all the way up until your order is filled, then sit back and watch the FOMOers carry price further on.

There are scammer brokers out there but reputable brokers in well regulated countries have far more to lose than gain from trying to fleece you out of a couple of quid.

There's a party that believes that brokers are profiting just off the spread. I don't cater to that belief. I use a very large, worldwide and very old broker. Don't believe in the pairing of parties. They are the counter party. They are a very well capitalized and in a very regulated jurisdiction(s).

The CFTC doesn't pay attention to the small accts. Being a market maker is enough explanation for a stop run...because there are orders there regardless. You can't tell the them they can't fill orders below even if they take the market north immediately afterwards. They are just doing their job...

Viewing the forex (commodities actually) industry with the same secular and generalized securities vantage is a mistake.

Your broker is an adversary not your friend. They have no qualms of losing accounts and they want a fresh generation of paper and they get it.