Question: Guide to Identifying and Avoiding Foreign Exchange Scams
Question: Guide to Identifying and Avoiding Foreign Exchange Scams
Answer
The Forex market is filled with competitors, and more and more brokerages are popping up every day. With so many options, comparing choices can be difficult, if not overwhelming. Novice traders aren't always adept at spotting forex scams , as many of these brokerages have nice websites and look legit to the uninitiated. Unfortunately, there are many scammers. (Article to read: How to resolve a dispute with a broker )
Don't let us scare you, there are good brokers out there, you just need to be able to tell the difference. Below are some tips that can help our readers know what to avoid when looking for a broker .
- Transparency: A good broker offers a transparent website. Details regarding their account types, funding methods and fees, leverage options and minimum deposit requirements should be clearly explained. If you find yourself with more questions than answers, look for a broker that provides you with this information upfront. After all, this is essential information!
- Check if the broker is regulated. This should be clearly stated at the bottom of the website, but you can also check the broker's 'About Us' page. Regulation is a good sign that the company is legal, although US-based residents may need to lower their standards because many regulated brokerages cannot service these clients.
- Remember that it is impossible for a broker to promise that he will make you rich. It is impossible for them to know that you will make a profit, so any such claims are a bad sign.
- Researching general company information is a great way to verify the legitimacy of things. User reviews can also provide insight into any hidden issues. Reviews may detail issues where brokers are not releasing funds for multiple clients, or other issues that you would otherwise not be aware of.
- Don't forget to check the funding page for withdrawal rules. Some brokerages impose ridiculous rules and minimums that make it difficult for traders to withdraw their profits.
- Check the customer service options offered by the broker. Today, large brokerage firms can usually afford to employ LiveChat agents where smaller firms cannot, but listed contact methods and an address are all good signs.
- Use common sense: if something seems too good to be true, it probably is. Trading in the forex market is risky no matter what, and brokerages need to make a profit.
- Always check the type of spreads offered by the broker. On the benchmark EURUSD, spreads should be around 1.5 pips or less. We have already stressed the importance of transparency: never open an account with a broker who does not inform you in advance of its spreads.
Forex robot scams
Although Forex robots are different from brokerage-based scams, they can still cause a lot of damage. Before buying a robot, research the company or person selling the product. Avoid claiming that the product is guaranteed to make you rich. Instead, look for good test results and advice from the author. Many providers allow users to rent such a product before paying the full price, or at least test it out on a demo account.
If you are ever unsure, reading user reviews and testing are the best methods to find out the truth. Be aware that many of these products are unprofitable and companies may present one backtest out of hundreds to trick traders into believing that their robot is more profitable than it actually is.