Top 5 Hidden Truths About Forex Trading That No One Talks About
Today, I will reveal the top five hidden truths about forex trading that no one talks about. You will not hear this from any influencer, broker, marketer, or anyone related to the forex industry. They always want this to remain hidden so that people don’t understand the truth and instead run after something that does not exist.
This does not mean forex trading is a scam, nor does it mean that making a profit is impossible. Forex trading exists, and you can make a profit. But if you know the truth, it will help you understand what really happens behind the scenes when you open a trading account or make a deposit.
1. The Profitability Truth: Who Really Makes Money?
When you open an account with a forex broker, you might have high hopes. You will see several people online who make a living from forex trading, which is literally true. But a question remains: who is more profitable—the trader or the broker owner?
The hidden truth is that traders are almost never profitable because the market is designed in such a way that 90% of traders will be losers. On the other hand, the broker owner is the counterparty to the trader, and in 90% of cases, broker owners are the gainers.
So, when you are buying something from a broker, you are making a loss—you are giving money to the broker. When you make some profit, the broker is paying you from their own pocket. Don’t listen to the stories about liquidity providers or banks. The money is coming from somewhere—it’s not like the broker is paying you from thin air.
In 90% of cases, brokers don’t connect your account to a liquidity provider. Even if the broker connects your account to a liquidity provider, the broker himself invests in the liquidity provider and becomes a shareholder. So every penny you lose goes to the broker, and every penny you earn comes out of the broker’s pocket.
2. Real Servers Are Not Real
When you open an account, you will see the server name as “Broker-Demo Server 1,” “Server 2,” or “Server 3.” But when you make a real deposit, you see in your MT5 history that your money is deposited in the “live server.”
However, kindly note that there is nothing like a live server in the world. Brokers have the MetaTrader manager, and they can create enormous numbers of servers with a click. The name of the server—live, demo, or whatever—is just a label they give so they can distinguish their work. So the “live server” does not mean you are connected to intermarket liquidity or that your account is connected with real money. It is not something like that.
When you make a deposit in your account, your money remains in the broker’s pocket. Instead of real money, they add some digital figures to your account so that you can feel that your money is deposited in your MT5 account. They can add real money or figures to your account within a few clicks, but the money you have deposited remains in the broker’s pocket.
3. The Hidden Truth About A-Book and B-Book Brokers
Well, people think that an A-book broker connects the account to a liquidity provider, and a B-book broker does not connect the account to a liquidity provider—that the funds remain on the broker’s premises.
In 90% of cases, brokers do not connect the account to any liquidity provider. But the broker has the ability to connect the account to a liquidity provider at any time.
When you make consistent profits, observe your record. Of course, if they believe your trading style is good and you are making a profit, only then will they connect the account to the liquidity provider. Moreover, if your account balance is very high, the broker will not take the risk because any money in the broker’s premises will need to be paid from the broker’s pocket. Only in that case will the broker connect the liquidity provider. Otherwise, they won’t.
So, if you make a deposit of $100, $500, $1,000, or $10,000, don’t expect that your account is connected to any liquidity provider.
4. Slippage Is a Broker’s Game
Well, when news time comes or when the market closing time comes, brokers say that spreads might be wide. When you make a complaint to your broker, they might tell you several reasons for expanding spreads. Believe me, every slippage is done by the broker itself.
Okay, when the market moves rapidly during news time, traders can make a significant amount of profit within a minute or even within a second. Also, when the market opens and the new daily candle appears, fast movement might happen that can allow traders to earn quick money.
As I said earlier, brokers don’t want you to make a profit because every penny you earn will be paid from the broker’s pocket. In that case, the broker itself expands the spread or implements slippage to protect their profitability. It is not any third party, any liquidity provider, any bank, or anyone else doing this for no reason—it’s the broker.
If they say the slippage comes from the liquidity provider or the spread comes due to market conditions, each line is a lie. The broker does it itself, and there are dealers who work as brokers to manage the money that we invest.
5. Simulated Money: The Largest Truth About Brokers and Prop Firms
Well, this is the largest truth about brokers and prop firms. When you make a deposit to a card or any other method, it goes to the broker’s payment processor. They usually have a third-party processor, or they open a company to process any payment and keep the name similar to the broker’s. Its main aim is to process the payment—to receive the payment and pay it out. It does not involve any deposit to the broker.
What usually happens here is when you make a deposit, it goes to the payment processor’s bank account. They collaborate with the payment processor and confirm the payment. When they receive it, they just add a similar amount to your MT5 account. So, if you are depositing $500, the $500 will go to the payment processor’s bank account, and the equivalent of a $500 balance will be added to your MT5 account.
Kindly note that no real money is deposited in your account. So next time when you open your MetaTrader 5 account and see a $500 balance, don’t think that this is a real balance. This is basically a simulated balance. Your real balance is gone—or they are unable to pay anything. What they withdraw from your MetaTrader account does not have any real value.
What Do Brokers Think About Traders?
If you are a trader, you are a money machine for the broker. The use of forex and the use of currency here as trading instruments through the broker is not considered real trading. But the question arises: how do brokers make money?
What brokers do is collaborate with the liquidity provider so that any loss from the trader goes to the liquidity provider’s bank account. Later, this profit is shared with the broker in a certain percentage, and this is the business behind forex brokers.
How Do Brokers Make Profit Then?
Okay, brokers do institutional trading, and institutional trading is the real business, right? They make money. Brokers’ accounts remain in a different condition—they remain connected with the bank, and their server is not like live, demo, or something else.
The first profit they make is by observing the trading behavior of the client and taking the opposite position, and they make money. Moreover, sometimes they invest money in the real market, which is the stock market, where no leverage is applicable, and they can claim real ownership of specific shares.
Final Thoughts
So that’s all from me. We have learned how brokers make money and the truth about forex trading. I hope next time when you open a trading account with your broker, you might not expect to consider the deposit as real money. Make sure that the money is in the broker’s pocket, and the amount you see is just simulated.
The profit the broker pays does not come from anywhere—it comes from the broker’s pocket, and every penny you earn from the broker is an expense for the broker itself. The same thing applies to the prop market, and probably I will write a different blog post regarding institutional trading.
