For many traders, one of the main concerns when choosing a financial broker is the risk of falling victim to various shady tricks.
The experts at Octa, a globally regulated and trusted broker since 2011, explain some of the questionable practices that traders must look out for when planning their journey in the markets.
Trading CFDs, or contracts for difference, is a well-established industry with mature regulatory frameworks and security protocols.
Yet, alongside legitimate brokers, there exists a shadowy area in this field built on malpractices, manipulation, and dishonesty.
The arsenal of questionable brokers includes a range of sophisticated tricks to defraud or disadvantage their clients. Among the most exposed to risks are retail traders who lack the experience or technical awareness to detect shady practices.
To provide fair trading for clients, Octa broker always offers full transparency, reflecting all its fees and charges in the terms and conditions. The broker also aims to maintain a fast and efficient withdrawal procedure and keep segregated client accounts to ensure traders’ deposits are secure and easily accessible. Octa’s trustworthiness is evidenced by its long and successful track record and thousands of positive online reviews.
Some less experienced traders may think that brokers are all alike, and the only differentiating factors are spreads, bonuses, and promotions. However, not all industry players play by the same rules.
Price manipulation
One of the most ubiquitous tactics used by shady brokers is price manipulation. Instead of providing genuine market prices in real time, such brokers offer clients distorted or delayed quotes. This trick allows them to trigger stop-loss orders, delay take-profit orders, and execute trades at price levels that never existed in the broader market.
When these situations arise, traders may be completely unaware of the manipulations. On the contrary, they may be certain their positions were closed due to market volatility or initiated at unfavourable prices due to a lack of liquidity. In fact, the price movements could have been artificially manufactured by the broker.
This type of malpractice occurs particularly often when a broker acts as the counterparty to their clients’ trades and profits when traders lose—a fundamental conflict of interest that incentivises this kind of manipulation.
Slippage abuse
Another widespread type of manipulation on the broker’s part is the abuse of slippage. Price slippage in trading refers to the difference between the expected price of a trade and the actual price at which the trade is executed. It occurs due to rapid market fluctuations or low liquidity, causing the instrument price to change between the placement and the filling of the order.
In highly dynamic markets, slippage is inevitable, but some brokers abuse this phenomenon to their advantage by executing trades at worse prices when it benefits them. At the same time, they ignore favorable slippage when the market moves in the client’s favor. With time, this unscrupulous approach on the part of the broker can cause significant profit erosion for traders, especially if their strategy relies on tight execution margins.
Execution delays
When a trader tries to enter or exit a trade, particularly in volatile markets, the broker may intentionally delay the execution. Instead of confirming the order, the platform responds with a requote—offering a less favourable price. These delays are especially damaging for scalpers, killing their profits and making their strategies useless. In more extreme cases, brokers refuse to execute profitable trades altogether or mysteriously disable the trading platform at the ‘right’ moment.
Conclusion
Many shady brokers’ tactics are rooted in a fundamental lack of transparency and accountability. In a regulated trading environment, brokers are required to segregate client funds, follow best industry practices, and provide full transparency of their conditions and fees. On the other hand, brokers that use shady tactics thrive in obscurity—they muddle the waters by offering vague wordings and unrealistic promises while avoiding straightforward communication with clients. To find a trustworthy broker, traders must scrutinise their terms and conditions, look into their regulatory status, and peruse online reviews.
Disclaimer: This article does not contain or constitute investment advice or recommendations and does not consider your investment objectives, financial situation, or needs. Any actions taken based on this content are at your sole discretion and risk, and we and Octa do not accept any liability for any resulting losses or consequences.
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