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Red Flags – How to Know if an FX Broker is Scamming You

19 October 2020 No Comment

The foreign exchange market is very competitive. Just thinking about having to sit and think about all the available brokers can give a trader a major headache. The story doesn’t end with a variety of brokers in the FX market. Choosing an FX broker was much easier in the nineties. The times have changed and of course, technology is now at its best, so to choose the proper broker is almost like choosing a life partner. The foreign exchange market is getting bigger and bigger and it goes without saying that brokers and trader numbers are growing rapidly. Sadly, there are also the people who chose the wrong broker for themselves and they are now known as a scam victim. Now, brokers with criminal intent on their minds can easily take advantage of many vulnerable people and just lie to traders so much that after all, they are left with nothing.

The internet, unfortunately, is the greatest platform for scammers. It’s very easy to be good on the internet and it’s also very easy to make someone’s life a living hell. To save yourself from the broker that will most likely scam you, one must have a keen eye and a skeptical mint to weave through the maze of ads that can excite, manipulate, and force the trader to spend all the hard-earned cash they have.

How can the trader have protection?

There are dozens of characteristics that scammer brokers are having. The industry of trading is not fully protected, that is why scamming is happening in there. When the scammer brokerages are found out by the authorities they are switching the location, changing the name, and almost every time, they are just continuing what they were doing before. The foreign exchange market is reacting and responding to this with new rules and regulations. Still, the fraudster number is growing rapidly.

Almost always, the face brokerage sites are full of happy people’s pictures. They are enjoying a good life because of working with this broker. But, there are no names shown on their webpages and their official sites are active for 2 or 3 months. You can google phone numbers too if you see that the brokers are giving them to you. People are always talking about scammers and if they are one – a trader can get that after proper research.

Sadly, many trustworthy and valid brokerage companies are losing their reputation over the lies of other brokers. Some brokers scam traders with the multi-currency accounts and they are using reliable broker names. Generally, the smaller a broker the more likely are they to be fraudulent. But this is also dangerous for companies themselves. For example, the recent searches of Axiory scam or not query were quite disturbing for Axiory as a company. Because should just one of those results depict them as untrustworthy, it’s almost impossible to get out of that perpetual cycle of accusations and name-calling.

A good broker needs to have a correct balance between security and low transaction costs. Good forex brokers will always let the trader withdraw the profits hassle-free. The broker should always have a trading platform to offer, it is mandatory that they are giving the trader the best possible prices. One of the crucial parts is customer satisfaction, if you read the bad reviews from the good traders, trust them. When there will be any problem, the trader needs to have a possibility to discuss it with the broker, so customer service is very important.

Red flags

One of the biggest problems can appear if the broker is not regulated or licensed. Sometimes they claim to be regulated but in reality, they are very far from it. That is why the trader always needs to verify their regulatory credentials and the broker always must discuss risk tolerances with you. Don’t trust anyone who’s promises are too good to be true and make sure that every investment you are making is understandable for you and not just a “You’ll be a millionaire in one night” thing.

Below is a list of countries with their corresponding regulatory bodies:

  • United States: National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC)
  • Australia: Australian Securities and Investment Commission (ASIC)
  • Switzerland: Swiss Federal Banking Commission (SFBC)
  • Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
  • France: Autorité des Marchés Financiers (AMF)
  • Canada: Investment Information Regulatory Organization of Canada (IIROC)
  • United Kingdom: Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)

As a trader, one needs to research before choosing a broker to trade with. Keep your eyes wide open and research for websites where they are discussing the brokers that are scamming the people. There are also some lists of shady brokers, so one just needs to have a look at them. There are many dishonest operators across the globe, but there are also legitimate firms in overseas markets too.

Today, technology allows people to be included in the foreign exchange market. The trader needs to be very cautious, no need to jump in with both feet. At first, brokers need to win the trader’s trust. Your job is to avoid the glitz and find if there are true “diamonds” inside the brokerage. Actions always, always speak louder than words. Make sure that everything that the broker is promising, is very close to reality. Let the broker earn the trust because, at the end of the day, they are your business partner. Make wise choices.

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