There are several tactics that CFD brokers use to manipulate their customers. Here’s a list of the 4 most common ways of CFD manipulation. I’ve obtained all this information from Ezchargeback which is a website that specializes in identifying and reporting all types of CFD scams. This website is the perfect platform for all CFD beginners who wish to learn vital information regarding CFD trading. So do check this website out and you won’t be disappointed! Now let’s discuss the four ways by which you can easily be manipulated by CFD traders and brokers.
This is something you want to avoid at all costs if you sign up with an online broker. You’ll notice how good brokers will always tell you that there are no requotes on their trading platform whenever you sign up with them.
This makes it clear that requotes are not a good thing and any broker saying they are is likely to be a fraud. Through this brokers can stop you from entering beneficial trade and as soon as you realize you can get a profit on the trade they’ll send you re-quotes.
Liquidity Issues and Gapping
The market conditions affect several types of financial transactions and it increases the risk of the loss. If there are insufficient trades being made in the market for an asset then your existing contract can easily become illiquid. This allows the CFD provider to require additional margin payments and even close the contract at lower prices. Since this industry is incredibly dynamic the price and value of the asset can fall before your trade is even agreed upon at a previous price. This is known as gapping and it results in losses for the investor/ customer. Liquidity risks and gapping are yet another common way CFD traders manipulate the market and the customer. They can easily track customers and this costs you double the actual amount or more and results in significant losses.
Artificial Price Setting
Artificial price setting is yet another common way for brokers to manipulate the customers. The CFD brokers or traders can easily spike the prices or they can set artificial prices solely for the purpose of manipulating the traders and gaining a higher profit. Many CFD traders are dishonest and because it’s an unregulated market there is no check and balance on the overall market activities.
There is no government intervention and there is no financial institution that is responsible for monitoring the sudden changes and the exchange. It is all unregulated and this leads to over-the-counter trading and broker manipulations such as artificial price-setting tactics. This results in immense losses for the trader and it proves to be beneficial to the broker since they are communicating the wrong price and setting it artificially to manipulate the trader.
The contracts for difference are commonly illegal in the United States of America and in Hong Kong and they are prohibited by the SEC (securities and exchange commission) however they are still available in tons of countries which makes it prone to fiddling and manipulation. The CFD brokers will be market makers which primarily means that they will set their own prices for any deal. Since the market is unregulated and it is dynamic, prices often change. There are many times when there are unexplained blips on the brokers chart which didn’t occur in any others and this might take out some stop loss orders.
Since CFD trading works on margins you do not have to pay the full share price and you’ll simply get the difference between the price you take them out and the price at which you close or end the trade. This can either be a loss or a profit depending on the price movement. Several times the CFD broker might be betting against the client and the one way they can do this is to spike prices to trigger losses for the trader. This results in price manipulation and these brokers are very dishonest. The broker can easily spike the prices and manipulate you. If you feel your CFD has been manipulated then you can contact Ezchargeback.