Every novice trader has repeatedly heard unflattering reviews about Forex Kitchens. In order not to get into an unpleasant story, probably every beginner wants to know – how does a Forex kitchen work?
So what is a forex kitchen?
A forex kitchen is usually called an unscrupulous broker who enriches himself not so much through honest commissions from clients’ trades, but by using all sorts of dishonest methods, “helping” traders to lose their money. Taking into account the fact that ‘kitchens’ usually do not take their clients’ trades to interbank trading and do not pay commissions for such operations, they conduct trades inside the company and are interested in making the trader lose his money. After all, the loss of money of a client, whose transaction was not taken out to interbank trading, is the Forex kitchen’s earnings.
What are the fraudulent methods used by forex kitchens?
Chatting on forex forums, traders share their experiences with forex cooks and describe the most common ways unscrupulous brokers scam.
‘Drawing’ quotes
One of the most common ways to cheat clients is ‘drawing’ quotes. That is, the broker gives incorrect quotes that differ from the true ones and as a result of such substitution, many traders incur losses, especially those who set small targets on minute timeframes, respectively, and small stops. During volatility spikes, during the release of important news, such brokers can ‘add’ to the current quotes a few tens of points, they have price ‘pins’ are much longer than the true range of price movement.
Communication breakdown
This method is very effective and it is practically impossible to prove forgery from the broker. At the most important moment, when the trader is about to fix the profit, suddenly the connection with the server ‘breaks’ and the order to close the order ‘hangs’. While the client tries to contact the broker in the telephone mode, the market can already turn round and the open order becomes not profitable but unprofitable. The broker replies to all claims from clients that it is not his fault in what happened, just some communication failure, force majeure and so on.
Breach of regulations or transactions on behalf of a client
This method of fraud is probably the most unpleasant and cynical. In case of successful trading, the client gets a good profit and is about to withdraw it, but the broker cancels the withdrawal of money because, allegedly, the trader violated the regulations of trading operations, so the transaction is cancelled by the broker. If the client tries to get to the truth, his trading account, with the remaining funds, may be blocked altogether.
It often happens that a trader is surprised to find that the balance of his trading account is zero. When he contacts the broker and tries to sort it out, the broker simply replies that the trader himself made some unprofitable transaction. And if he personally did not make any transactions, then he is still guilty, because he is personally responsible for the safety of passwords from his trading account and personal cabinet. Allegedly, it is quite possible that someone hacked the password and made a losing transaction on behalf of the client.