Kardec Trader breaks down how forex brokers and gurus work together to extract money from retail traders. Brokers route losing trades internally (B-book) instead of to real markets, gurus get paid commissions and profit-sharing, and fake marketing accounts are used to lure new victims into the scheme.
In Forex, a trader will place a buy trade and that trade will go to the broker, which after charging commissions and spread will put the buy order through a so called dealing desk. And the dealing desk will process each order manually or more often automatically with an STP system and decide if that trade will go through the A book or through the B book. Through data analysis, the dealing desk will try to accurately assess if your trading behavior exhibits the typical traits of losing traders or a profitable one. If they think you could be profitable, you will go to the A book. If they think you're a losing trader, they will put you in the B book. The E book will send your buy order to a liquidity provider to typically a bank will sell the order back to you and be your counterpart in the B book. Your buy trade will be sold back to you by the broker itself who will act as a market maker. So the money you will lose will be credited to the broker. And in all of this, the guru who tricked you into depositing money into this offshore broker with a free signal room will get a percentage of the commission you paid, of the spread you paid and even of your losses thanks to a P L agreement with the broker. If by chance you'll be profitable, they will artificially create spikes in price, widen spreads automatically, or even re quote prices so they can make sure you don't win. They keep the money and blame it on market conditions. In the meantime, the broker will provide the guru with a so called marketing accounts, which is another word for fake account with a fake trading history that looks real but was simply fabricated by the broker to help the guru get your trust. The money the guru earns is then reinvested in lifestyle watches, Lambos, jets, so they can hook more people in to keep losing money and keep the money machine going.
