As a newcomer in a trading market, you need to be cautious about many of your decisions. This can include choosing specific currencies to buy and sell, strategies to employ, and tools to incorporate into your trades. Choosing a Forex broker is no less important at the initial step.
Unfortunately, it’s not difficult to come across a scam broker firm. Especially since they have learned the ways to mask their schemes, whether it’s offering high leverage rates, low commissions, or seemingly stable trading platforms.
With tens of millions of traders around the world, the opportunities for scam brokers are boundless. And while their main targets are beginners, some of them are so good that even the most experienced traders are having a very hard time to tell if they are dealing with a legit or a scam broker. So, if you are trying to understand how to avoid being scammed, follow us to stay safe while trading Forex!
Forex scams explained
As we have already said before, there are many companies on the market that are trying to lie to people and get their funds illegally. The number of the above-mentioned companies is increasing every day, and they are doing their best to lie to people, get their trust, and use their funds for wrongdoings.
To overcome the challenges that were raised because of the scam companies, different jurisdictions around the world have decided to come up with regulatory agencies that would take care of the scam companies and help people find safe and trustworthy companies.
These regulatory bodies are working on different types of regulations and restrictions that create a safer and more secure environment for traders, but, even after that, there still are many scam companies on the market. Mostly, these are the brokers that are registered with offshore regulatory agencies. The regulatory framework of these bodies is not enough to safeguard the rights of traders, which is creating a very dangerous situation for traders on the market.
Because of the fact that there are so many scam FX brokers, traders all around the world are having a very hard time finding trustworthy brokers. Over the last few years, scam companies have changed their attitude towards the trading market and now they are doing their best to look legit. Some of them are even going as far as saying that they are authorized, while, in reality, they do not own any licenses.
Spotting Forex broker scams
While looking for a trustworthy Forex broker, there are a lot of things that traders have to keep in mind. As of today, it is getting very hard to differentiate trustworthy brokers from scammers. However, there still are some things that traders can do to maintain their safety.
One of the biggest giveaways that can help you spot a scammer is if the company guarantees large profits with very little or non-existent risks. The thing is, when we are talking about Forex trading, there is nothing guaranteed. The market is changing constantly and there are a lot of things that can happen and affect your trading experience.
There are many Forex scam types on the market, and differentiating them from legit companies can get very hard. But, mostly, the companies that are offering too good to be true services are mostly scammers. Also, it is very common for scam companies to offer traders huge amounts of bonuses, no commissions, and no spreads.
Legit FX brokers on the market charge a certain amount of spreads because, for them, that is one of the only ways to earn money. If a broker does not charge spreads, it means that either they are lying, or they are getting funds from shady sources, which should be enough reason for you to avoid trading with them.
Attractive offerings and Forex market scams
The offerings that scam companies have to sound very attractive for most o the newcomers on the market. Since they don’t know how the Forex trading market works, they very frequently fall victim to scams. According to the regulatory framework that European Forex brokers follow, they are unable to offer bonuses and promotions to traders. One of the major reasons for it is that it attracts more people to the market, which actually is very risky.
On the other hand, scam companies are working as hard as they can to offer unrealistic benefits to people on the market to attract them. They are also coming up with different types of lies, telling people that they are regulated, follow strict restrictions, and many other things.
Only trust regulated brokers to avoid Forex scammers
Not many people understand this but one of the most important things while trading Forex is to trust regulated FX brokers only. But, this sometimes is very hard. A huge part of many types of Forex scams is claiming that they own authorizations from official regulatory bodies. Although this might be a little scary, you can make sure that you are staying safe by doing a very simple thing.
Most of the regulatory bodies on the market as of now have special pages dedicated to the Forex brokers that they have regulated. You can check out these pages created by regulatory agencies to make sure that you are trusting the right Forex brokers. Also, many of the agencies are making special announcements regarding scam Forex brokers on the market, which can be very helpful for those traders who are having a very hard time deciding which company to trust.
In general, regulations are one of the most important things when it comes to your safety. Thanks to the regulatory bodies around the world, it becomes very easy to safeguard the funds of traders around the world. But, the thing about regulatory bodies is that all of them work in a different way. While some might be more trustworthy, there are some that don’t do much.
This is why you should only trust the leading regulatory bodies, such as FCA, CySEC, ASIC, etc. Others, mostly offshore regulatory bodies, simply do not have strict enough regulations to make the market safe. There actually have been a few cases when scam companies have managed to get the license from one of the offshore regulatory bodies, which means that it simply is not good enough.
What you need to know about Forex scams
There are a lot of things that you must know about Forex trading scams to make sure to avoid them, and we have already discussed part of the things above in this article. But what we have not talked about yet is that there are some companies on the market who are calling people directly, offering them investment options, and try to get their attention. A huge amount of these companies are actually scams and should be avoided at all costs.
To make sure that you are not getting scammed, do not trust the companies that are calling you directly and asking you to make deposits. According to the regulatory frameworks of different regulatory bodies around the world, it is illegal for brokers to call traders and ask them to make deposits. If a company called you and asked you to make deposits, it is a great sign that they are scammers.
Another very important part of identifying Forex scams is to go online and look for the feedback that people are giving. There are many forums online that are full of people talking about their experiences, it could be a great way to tell if you can trust a company or not. There are many ways you can spot a Forex scam and identify them, but we will be talking about that below in the article.
Different types of FX trading scams
There are many different types of Forex trading scams, and understanding how they work can be very helpful for traders to make sure to avoid them. Scam companies on the market are working very hard to come up with new ways to scam people and get their money illegally, because of this, sometimes it gets very hard to detect which companies are scams.
The way scammers are working is changing constantly, and they are adapting to the changes that happen on the market, but the general idea about them mostly stays the same. There are some major scam types that most traders are falling victim to, and below, we are going to discuss them and tell you how to avoid being scammed.
Forex robot scams – How do they work?
These types of scams are one of the most “popular” ones on the market today. They have recently emerged significantly and many people have lost their money because of them. Generally, a Forex robot is a software that uses special types of algorithms and analytical tools to signal traders about when and how to open and close trading positions.
Many people have this misconception that every type of robot is a scam on the market, but this is not true at all. There are some that are very much trustworthy, but scammers have found that Forex robots are a great way to scam people, and they are using them very actively. There are many robots on the market that are designed in a way to use Expert Advisors, which are very helpful in the trading market. The thing is, trading Forex online scams work very hard to make themselves look real, which makes it hard for traders to tell them from legit ones.
Since traders who are using signals are trading robots with all their money, robots are becoming a tool for scammers to victimize more people on the market. To avoid getting scammed by a robot, you can try and double-check the information that you are receiving from the robot. Also, in many cases, scan robots are sending very unrealistic messages to receivers. If a signal is telling you that with a simple movement on the market you will get millions, well, just don’t trust it.
While using robots, you must look at it as a business and set your emotions aside. Search for the most trustworthy robots and never trust those that have negative feedback from users. Internet is a great tool, which can be used by traders in the process of finding trustworthy trading companies.
Forex investment scams – Signals
The above-mentioned robots are one type of signal, but there are other types of signals as well. They are called manual signals, which are created by expert Forex traders. These signals are then sent to traders, who want to use signals for trading. Generally, this can be a very helpful thing for beginner Forex traders, but, if you fall victim to scam signals, you might end up losing a lot of money.
If the signal provider is asking you for unrealistically high subscription fees, it means that they are scammers. On the market, signals do not cost that much, and paying huge amounts of money simply does not make sense – and mostly, those who are asking for huge fees are scammers. Also, always try to use signals that are verified, otherwise, you never know if the signals were made by a professional team of traders or just some random people trying to scam you.
Also, you can always check the signals that you are receiving. If you see that the thing simply does not add up and there is no connection between the reasons and the signals, it is much better to avoid them and just do the research on your own and open and close positions when you think it is worth to do so.
Types of Forex scammers – scammers who call
This is something that we have already discussed above. There are many scammers on the market who are calling traders directly and are offering them the ability to sit back, relax, and just make a profit by sending their money to them. The thing is, most of the regulatory bodies around the world prohibit FX brokers from calling people, and if a company calls you, either they are a scam or they do not own authorization from official bodies.
Final thoughts on how to avoid trading scams
There are many things that you can do to avoid getting scammed, but, there is one thing that is the most important. Education is the key, it is something that helps you identify the companies that are trying to lie to you. If you know how the market works and what is possible and what is impossible, it becomes a lot harder for scammers to lie to traders, it simply makes their job a lot harder.
So, let’s say that because of your experience and knowledge about FX trading, you know that European regulations prohibit leverage of higher than 1:30, this means that you will be able to easily tell that the broker offering higher leverage in the country either is not legit or is violating the rules in the region. Both of these options are bad, and you should avoid the company at all costs.
Also, trusting only reputable and regulated Forex brokers will give you another layer of safety. FX trading is already a very risky market, and trusting an unregulated broker does not make any sense and will only make your job a lot harder.