Options trading is always risky, but not only because it is difficult to read the charts and open the positions in the right moment. The other thing is that you should be careful not to fall victim to brokers’ manipulations. In old times, brokers sometimes tampered with the price charts so they get more money from the traders. But this behaviour was stopped by the financial authorities who verify the validity of trading platforms. The brokers invented new methods of getting their hand on the traders’ money. And in this article, I want to tell you about them so you can stay away from them
The first trick is based on emotions, mostly greed. It is no so uncommon for traders to come to the market with the hope of making money fast. This could be achieved by trading short timeframes like 15, 30 or 60 seconds.
The truth is that it is very difficult to predict where the market will move in such a short time and the brokers know it very well. Price may change within a millisecond and it can cost you your trade. Each trade you lose brings more money to the broker from your account.
When you agree to trade with a particular broker, you must be aware there will be commissions taken from your trades. They can be really small, but on a bigger scale, they will bring some money to the broker. Imagine an option with 75% payout. You may wonder what happens to the additional 25%. This 25% will become a commission that the broker collects to enable you to trade. If a lot of traders open 1-minute transactions for such an option and, let’s say 100,000 trades win, the 25% commission the brokers will take will be multiplied accordingly.
The commission is something you need to agree for, but what you can do is to make fewer transactions so that less money will go to the broker.
Selling a trade
On most online trading platforms there is a possibility to end a transaction before its expiration. This is quite a good option when you see that you are going to lose a lot, but remember that you are not going to receive all your money back. Part of them will go to your broker. And if the situation on the market changes and you have already decided to exit a winning trade, the money you gain is only a portion of the sum you could have earned.
So be careful when making a decision about selling the trade. Do it only when the market is turning against you and closing the transaction earlier will protect your balance account.
How to avoid these tricks?
You have just learned about three tricks the brokers are using to get more money from you. Now I want to tell you what to do to defend yourself from them.
My advice is simple: be patient!
Patience is a key skill in trading. You will need it often. First, go to the Olymp Trade demo account and check the effectiveness of the strategies you chose. Once you have done that, move onto the real account. This way you will save yourself from some losing trades and from losing money for the broker’s benefit.
I often suggest holding a position opened for a longer period. I would say, using 5-minute timeframe is a good solution. But again, you will need to be patient. Trading longer timeframes means longer waiting. First, you have to spend many hours analysing the market and awaiting the suitable market conditions to reveal. Then, you will have to wait for the whole 5 minutes for the result of your trade. Initially, it may be difficult. But with time, accurate analysis and strategies, you will see the majority of your transactions will end up gaining profit for you.
As I said before, you cannot fully avoid commissions. But you can pay them as little as possible by performing fewer trades. If you add up good market analysis and proper strategy, you will get lots of winning trades and more profit on your account and not of the broker’s account.
The last thing is to avoid selling the trades before their expiration. If you open the trade well prepared and open 5-minute positions, the chances for success are pretty high. And the fewer transactions you close before time, the more money for you and not for your broker.
Follow these steps, have patience and remember there is a free Olymp Trade practice account to check your skills before investing real money. Share your thoughts with us in the comments section below.
Wish you high profits!
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