Seeing how there is no centralized exchange and how currencies are often traded over-the-counter (mostly via the Internet), it doesn’t come as a surprise that there are many would-be scammers out there. To avoid falling for one of their nasty tricks, budding traders need to properly educate themselves on how to spot a shady broker.
If you happen to be one of these traders, then take a good look at these tips down below!
Take Your Time and Investigate
One of the best ways to avoid a forex trading scam is to take your time and investigate first; conduct a thorough background check.
Not registered with any known regulatory bodies? A clear red flag! Operating from a small island country — where the local laws protect them from being prosecuted internationally — yet another.
The “About Us” and “Policy” pages are always a good place to start. Scan them for anything that looks out of the ordinary; here’s a list of various forex regulators to help you with that.
Do your initial research and make sure that the broker in question is actually legit before engaging in any trade whatsoever; otherwise, there’s a good chance you won’t ever see your money back.
Look for Customer Reviews
Scour the Internet for customer reviews and comments to determine the legitimacy (and honesty) of a particular forex broker. If you have difficulties finding one, tuck tail and run — you’re probably dealing with a shady broker. The same goes if there are too many reviews that look and sound fake; the occasional shilling is normal though.
Additionally, take a closer look at the complaints; especially the ones about withdrawals. Were they ever resolved? How long did it take for them to find a proper solution? Are there any unanswered complaints still? All in all, the answers to these questions will give you a good idea of whom you’re dealing with.
Ask for a Demo Version
If a particular forex broker lacks a trial option or hesitates to offer one, chances are you are dealing with a scammer. As such, a demo account is usually a good indicator of a trustworthy broker.
For example, the reputable Ever Forex trading platform offers a free demo account where you can practice your forex trading skills before you start live trading. That way you get a much better understanding of how trade is conducted on the forex market, allowing you to spot scammers and frauds more easily.
After you get a firm grasp of the market, you can finally deposit some funds and start trading.
If It’s Too Good to Be True, Then It Probably Is
Like with any other skill, forex trading takes years to master. Anyone claiming otherwise or — even worse — offering a quick way to make loads of easy money is most probably a scammer.
Just think about it for a second. Why would anyone share their ‘secret formula’ with you instead of just using it themselves? Simple, they wouldn’t — it’s all utter nonsense. To make money via forex trading you must first gain some experience, learn how to trade properly, be patient, etc. There’s no going around it, so you may as well learn what you can.
Familiarize Yourself with All the Possible Schemes
Lastly, to avoid getting scammed, you need to know all the tricks and traps shady brokers use to cheat unsuspecting victims of their money. Some of the most common ones include:
- Signal Sellers — these scammers offer ‘accurate forecasts’ to inexperienced traders that are guaranteed to make money; for a fee of course. In short, the information they offer is totally useless and the string of testimonials and achievements they present are fake.
- Scam Software — smart AI that can seamlessly adapt to any market and generate profit all on its own… Yeah, perhaps in the next Star Trek movie.
- Investment Scams — you place money into an investment fund that an experienced trader uses to make a huge return on your investment; only that there is no real forex expert and no actual investment fund to be found.
In the end, it all comes down to common sense. If something sounds fishy, investigate it first. Never invest money in something you don’t’ trust 100%.