To keep this explanation short, let’s just take Slippage example to understand how Forex Brokers deliberately make money through Asymmetrical and Artificial Slippage using a Virtual Dealer Plugin?
What is Asymmetrical Slippage & Artificial slippage?
Before understanding these 2 terms, let’s first understand what is “Slippage”.
Slippage – Slippage is defined as the difference between the requested fill price and the actual fill price. If your requested price is not available in market, in such case Broker will fill your order at next available price, this new available price can be both in your favor or against you (positive or negative slippage).
So, how does slippage happens? Why can’t our orders be filled at our requested price?
It all goes back to the basics, a true market consists of buyers and sellers. For every buyer with a specific price and trade size, there must be an equal amount of sellers at the same price and trade size. If there is ever an imbalance of buyers or sellers, this is what causes prices to move up or down.
So as a trader, if we go in and attempt to buy 100K EURUSD at 1.3650, but there are not enough people (or no one at all) willing to sell their Euros for 1.3650 USD, our order will need to look at the next best available price(s) and buy those Euros at a higher price, giving us “Negative Slippage”. But of course sometimes the opposite could happen. If there were a flood of people wanting to sell their Euros at the time our order was submitted, we might be able to find a seller willing to sell them at a price lower than what we had initially requested, giving us “Positive Slippage”.
With good Forex Brokers, there is a 50-50 chance that the price will move either in favor or against the trader as a result of slippage.
But with manipulative Broker, traders usually get “Asymmetrical” or “Artificial” slippage.
Hope, till now you understood the term “Slippage”. Now, let’s understand what is “Asymmetrical Slippage”? and how Brokers are creating it using a Virtual Dealer Plugin and make profit out of it.
So, when there is positive slippage which is Trader’s Profit, Broker takes a huge part of it. But, when there is negative slippage which is Traders Loss, broker pass it wholly to the trader.
This form of manipulation is called: “asymmetrical slippage”, which is done using Virtual Dealer Plugin.
This approach would make it difficult to identify if a broker is using the Virtual Dealer Plugin. Even if the customer has the occasional price improvement, the virtual dealer plugin is set to profit the broker
Now, let’s understand what is “Artificial” slippage and how Brokers are creating it using a Virtual Dealer Plugin and make profit out of it.
Virtual Dealer Plugin allows Broker to delay trader’s order by a period/time frame (2 to 15 Seconds) specified by the broker.
Market price usually changes during this delay period. If this change in price (slippage) occurs in favor of the trader i.e if trader gets a better price, the broker will not execute trader’s order at this better price but broker will execute the order at the original requested price by the trader. This allows Broker to takes the difference i.e all Positive Slippage as their Profit.
However, if the order is executed at the worse price (slippage), this cost is passed on to the customer.
As you can see this Virtual Dealer Plugin can be used by dishonest brokers to create “Artificial” slippage by delaying the execution time from 2 to 15 seconds to gain at the expense of their customer’s Loss.
If you are placing more than 10 orders a day, broker will use Asymmetrical or Artificial slippage with at least 3 to 4 orders in a day.
Shocked or Doubtful?
If you are still unconvinced, then here are some authentic proof that shows how Forex Brokers use Virtual Dealer Plugin to trade against their clients –