The foreign currency market, also known as the forex market, is the largest financial market in the world, which has a daily trading volume of more than $5 trillion. Not only does it enable corporations and central banks to trade with each other, it also allows speculators to take advantage of a market where they can trade 24 hours a day, 5 days a week. In order to begin trading in the forex market, you first need to find a broker. Shopping around for a broker before settling on one is of the utmost importance because not all forex brokers are legitimate.
If you do an internet search on forex brokerage scams, you will come across staggering results. Even though the forex market is becoming regulated slowly, there are numerous unscrupulous brokers who shouldn’t be in business. When you want to trade in the forex market, identifying viable and reliable brokers should be a priority. In order to sort out reputable brokers from shady and scam ones, here are a few things to check:
There are a number of prominent and renowned organizations in the world that regulate forex brokers, which include the Financial Conduct Authority (FCA) in the UK, the Australian Securities and Exchange Commission (ASIC) in Australia and the Cyprus Securities and Exchange Commission (CySEC) in Cyprus. Every legitimate and trustworthy broker will be regulated by a well-known agency as they have nothing to hide and are transparent about their operations. No scam brokers will be regulated because there are certain requirements to be met and rules to be followed, which they cannot do if they want to scam people.
When choosing a forex broker, it is important to take a look at their background records. Who is behind the brokerage? You need to know the parent company, the name of the founders, the main team and how long they have been in business. This will not be difficult to find in the case of legitimate brokers because they usually have this information displayed on their website. In contrast, you will not come across this information when scam brokers are involved. Even if you do, most of it will be fabricated.
Terms and Conditions
In the case of reputable forex brokers, all terms and conditions are stated on their website for you to peruse and decide if you want to avail their services. This includes their security and privacy policies, the kinds of trading fee and other costs they charge and any other relevant information. These brokers are open about everything from the beginning to avoid confusion. Scam brokers, on the other hand, will spring up hidden fees and charges on you, use your data and even sell it to advertisers and other third parties.
Scam brokers tend to have unverified and unsecure payment methods that can steal your financial details and use them for nefarious purposes. Legitimate brokers only use verified channels like bank transfers, Neteller, WebMoney and Skrill as they value their clients’ safety.
When you trade with online brokers, you get leverages on your trades. Leverage is the contribution that comes from your broker to help you control big trades. When you start your trading account, the available funds in your account are not enough for many trades. Some trades are too big for you to execute because of the amount of money you have in your account. What do you do to get access to those trades? You use leverage. Leverage allows you to increase the volume of your trade and trade even the most valuable assets in the financial markets.
The contribution can amplify your profits by increasing the size of your trade. Leverages are provided to you by your brokers in ratios. You can have a 1:5, 1:10, 1:25, 1:100 and even 1:400 ratio for leverages on your trades. These ratios just show how much money your broker is willing to contribute in your trades. However, the biggest problem with scam brokers is that they try to use leverages to attract new traders to join their trading platforms. They will offer you leverages of 1:1000 and even 1:2000. That’s the only point they have to make you sign up on their platforms. The rest of the features on their trading platforms are pretty mediocre.
It might seem a bit weird but you will be surprised to know that the scams have a completely different tone than the best online brokers. The reason or their different tone is their motive. When you sign up with a legitimate broker, you are doing business with a legitimate entity that wants to help you with your trading career and is regulated. On the other hand, a scam broker is only interested in making money from you. If you are okay with spending money for no reason, the broker is happy with you. That’s because the broker’s fake sales pitch is working on you. A scam broker is almost always pushy.
You will notice that it will tell you to sign up because by doing that you would become rich. It will keep pushing you to sign up so you can become a millionaire. It will also try to imply that the promotions available today will not be available tomorrow. On the other hand, you will notice a very serious tone from a professional broker. The broker likes to talk business, tell you what should matter to you, informs you of your available options, and guides you in the right direction. Everything seems in order when you are with the right broker, whereas the opposite happens when you sign up with the wrong one.
Elusive Customer Support
You know that a scam broker does not want anything but your money. It is not interested in your trading career. What it is interested in is making money from you. However, since scam brokers know that they are doing something wrong, they want to stay as far away from you as possible. So, you will notice that they usually do not provide you with a proper way of contacting the customer support. They will say that they are present in many countries and regions of the world, but will provide you with customer support through email only. On the other hand, the right brokers will provide customer support in your native language, or will try to do so.
The best online brokers have their phone numbers, email addresses, and even live chat features right on their websites. When you want to contact them for something, they are always there to help you. On the other hand, scam brokers are finding ways to not get in touch with you. They usually provide you with an online contact us form only. Even the email address they have is usually created on a free email service like Gmail and Hotmail.
Extremely Difficult Withdrawals
This one is going to surprise you, or say shock you at the wrong time. Why at the wrong time you may ask? Well, the point is that withdrawals should not be difficult when you are withdrawing money from your account. Would you imagine depositing money with a bank that does not let you withdraw your money from the account? Well, that’s exactly what happens when you sign up with the wrong broker. The broker tries to keep you on board and is only interested in keeping you busy in trades. Your withdrawals are not in the favor of the broker and so it makes withdrawals hard for you.
You will notice a lot of things while withdrawing your money that you were not told at the time of signup. For example, you will start seeing a lot of new fees and commissions popping up. So, you have to deposit a fee for withdrawing money from your own account? Does that sound fair? Well, apparently, it sounds very fair to the scam broker. In some cases, scam brokers have some weird policies in place and terms and conditions. Unless you fulfill those terms and conditions, you are not allowed to withdraw a penny from your account.
The “Robot Will Do It” Slogan
Last but not least, you have these online scam brokers that tell you that you only need to create an account on their trading platform, and the rest will be done by their trading bot. What is a trading bot? It is just a software that can trade automatically. There is nothing wrong with automated trading. In fact, some of the best online brokers offer you automated trading. However, when the broker tells you that the bot will do everything for you and you can just sit back and relax and see your account grow, you can be sure that there is something wrong.
No robot will ever do things for you unless you define a trading strategy and a lot of other filters. In addition to that, robot trading is still as good as manual trading. It does not guarantee you any results and outcomes in any way.
So, now you know how to spot an online scam broker. Yes, it might take you some time to research and find the right one, but you will be thankful to yourself for spending this time, as it can save you from getting robbed of thousands of your hard-earned dollars.