Forex markets dabble with trillions of dollars daily. Traders around the world are always on the lookout for the best broker to trade forex, CFDs, stocks, binary options, cryptocurrencies, etc. New forex brokers pop up constantly, and determining if they are legitimate can be challenging.
It is important that you, as a consumer, research a company before you deposit money to trade.
Go through this checklist to avoid forex trading scams:
Regulation of the Broker
Unregulated brokers are risky since they are not accountable to a governing body, meaning if they scam you through glitches or malfunctions, it will cause severe slippage in the system, or they will not process your money. Then, there is nothing left for you to do except post a bad review online since they do not have any legal authority to answer.
Check the bottom of the website to check a broker’s registration. Notice if the company specifically warns of the risks that come with trading CFDs. The company should be registered somewhere and should have an address posted. It should be authorized and regulated by the Financial Conduct Authority and have a registration number.
A regulated broker should include proper risk disclaimers and regulatory information on their website pages.
The Trustworthiness Of A Broker
Scam brokers also at times claim to be regulated and registered by a governing body that has nothing to do with the regulation of forex companies. Forex brokers regulated in a major hub are usually more trustworthy compared to brokers in emerging hubs, but it is best to practice caution. Check the authority of the governing body regulating the broker.
Check the website of the governing body and search for the registration number and verify the legitimacy.
Profits And Rewards Offered To Open An Account
A broker scam can also look like an offer to make $50 a day from just a $250 investment or a 96% success rate. These claims are baseless, be it forex, CFDs, or binary options they are endorsing.
Forex brokers cannot technically promise any kind of guaranteed returns. Basically, if a broker is promising you money, it is a scam. Other common broker scams are advertising pictures of expensive cars given away to lucky investors.
Most binary option “brokers” were exposed as fraudulent operations. In these scams, there is no actual brokerage, the customer bets against the broker, who acts as a bucket shop. Price data manipulation to make customers lose is common.
Withdrawals are usually stalled or refused by such operations; operators usually stop taking their phone calls. Binary options trade on a regulated exchange sometimes, although they are generally unregulated, working on the Internet, and are prone to scams.
If you are being promised big returns on your investment, it is a scam.
Cash bonuses are scams
When you are being offered an unusually high cash bonus, the broker is not regulated and does not show offer details for the bonus; it is likely a broker scam. Any vague promotional offers taking you to a sign-up pop-up is a scam. Most regulated regions do not allow opening new accounts for promotional bonuses except the United States and Asia.
Automatic Trades Or Signals To Guarantee Profits
Scam brokers also offer automated trading done by a bot or algorithm claiming to make you money. These brokers claim to generate money through their robot’s trade-off signals. These brokers often focus on cryptocurrency or binary options.
No company can consistently generate huge profits through automated or signal trading, and if they did, they would not offer it for free to everyone.
Credible Information About The Company
If the company has not mentioned any information about their company executive team, its location, or the phone support offered, it is a scam. Broker scams do not want names, locations, or contact info linking back to them when they end up in trouble. Look for reviews of the broker; if it lacks depth and reliability, it is a broker scam.
Check for disclosure documents, providing critical information about the company. If there are no disclosures, they are probably not regulated and should be viewed with caution.
Take time to read multiple reviews. If there is no honest information and reviews about the company, executive team, location of the business, corporate history, or financial information, stay away.
Are The Awards Verifiable
Scam brokers claim to have great rewards that are not viewable or unreliable. Broker scams often post fake awards from a few years ago because they are hard to verify.
The scam broker can also have awarded with media outlets that are reliable but are fake. Check claimed awards to verify their legitimacy.
Avoid assuming a broker is trustworthy just because it sponsors a football club or professional athlete. A firm should not be trusted on the basis of its sponsorships or if its name is on a jersey.
Do not trust a forex broker just because it sponsors a football club or professional athlete.
Not all brokers are scams, but you can find out the bad players if you keep a checklist handy. Don’t trust a broker for their promotional offers or their guaranteed reasons.