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In short explanation, there are 2 kind of retail brokers out there. One is market maker type, the other is ECN type brokers. Both have plus and minus side.

The market maker is kind of broker that operate as your counter party in trading. They provide you the liquidity provided and when you buy the currency, they give you what you need in certain price. They got their money from collecting the spread and or commission and also from your loss. Yup from the loss. Lets said when you go long and the market soon go down, then you execute your stop loss. It means you sell it in cheaper price. And since they act as your counter party then when you got loss, they got the green pips. Vice versa.

Please, do not judge the market maker as an evil broker. Though they act as a counter party, still they have to report their balance sheet to the REGULATORS. It is NFA in US, FSA in UK, etc etc. So it keep the traders safe from what you call it "stop sweeper" action.

A scammer brokers has many ways to manipulate the price and bring you the loss. Usually a retail brokers has very little power to push the price in the real market. It takes millions of Dollar to push Euro for 1 or 2 pips. So what do they do? When you got the profit all the day (which means loss all the day for them), they can manipulate only your quotes, widening your spread (only your spread), or simply reject your withdrawal request. You list it. There are so many ways.

In other part there are ECN that act not to be trader's counter party but simply pass thorough every order to the bigger entity (usually banks) and collect only spread and or commission. Wow, sounds good huh? Seems ECN is a hero compared with market maker one. Not really. When you trade in ECN broker enviroment, some times it means there are some jumping price (volatility condition), slip page, or more trading cost (many market makers have very low spread and no commission whether ECN has to collect commission from your trade). Same like market makers, ECN type will also need to be regulated by the government.

So, when you choose your broker, the first thing is you have to choose a regulated brokers. Try to choose a well known brokers and regulated under US or UK. Some scam brokers said that they're regulated in a fairy tale country such as Belize, Samoa Island or any where in pacific ocean country. Second is, go ask people who have open real account already and ask them whether they're satisfied or not. Try the demo first before you go real. Reading some independent broker-rating site will also help.

Now it becomes long explanation. Lol. Sorry.

over 2 years ago

Source(s):

• http://www.forexfactory.com/showthread.php?t=8046