Forex trading is one of the most lucrative markets for both new and experienced investors. Whether you’re looking for ways to build a diverse investment portfolio or simply want to understand how the market works, forex trading is an enticing option.
The low barriers to entry combined with high liquidity and round-the-clock availability make forex trading particularly popular. Also, traders get access to excellent leverages, making it easy for beginners to try their hands at forex trading.
It isn’t surprising that currencies worth more than $6.6 trillion are traded every day on the market.
- The Reality of Forex Trading
But there’s one slight catch with foreign exchange trading. There isn’t a central regulator, such as the SEC (in the U.S) and FCA (in the U.K.), that controls forex trading. Instead, you need to rely on a trustworthy forex broker to buy and sell your trades. This, in turn, makes traders extremely susceptible to forex broker scams.
Moreover, the decentralized nature of the forex market makes it difficult to identify and reprimand fraudulent brokers. Recovering lost money from forex broker chargebacks is complex and time-consuming. Also, it requires the help of a specialized fund recovery service.
The best way of avoiding such online scams is to choose the right forex broker. If you have a feeling that your broker is out to dupe you of your hard-earned money, we’ve got you covered. In this blog, we’ve listed a few potential red flags that indicate it is high time you find a new broker. Let’s take a look.
- Lack of Transparency
Has your forex broker been hesitating to provide you with concrete proof of regulatory compliance? Have you been unable to find any license or registration number on their website too? Well, chances are they belong to the league of online investment scammers who are out to con you.
Here’s the thumb rule of forex trading – you should only choose brokers who are registered with a respected regulatory body. For instance, reputable forex brokers in the U.S. need to register with the CFTC (Commodities Futures Trading Commission) and NFA (National Futures Association).
Similarly, forex trading regulators in other countries include:
- ASIC – Australian Securities and Investments Commission
- CySec – Cyprus Securities and Exchange Commission
- FINMA – Swiss Financial Market Supervisory Authority
Depending on the country in which a forex broker operates, they’ll need to be a member of one or more of these regulatory bodies. Any broker worth their salt will be ready to share their license and registration details with you.
Before signing up with a broker, make sure you check the “About Us” section of their website to find out whether they’re registered with the right authorities. If the licensing information is missing from their website, don’t hesitate to ask your broker for the same.
Also, it’s a good idea to work with brokers who are licensed with a regulatory body in your country. That makes it easy to trace and implement forex broker chargebacks.
- Poorly Designed Trading Platform
A bad trading platform is one of the most prominent signs of an unreliable forex broker. If you find it difficult to navigate the platform and enter/exit trades, it’s a clear indication that you’re on your way to becoming a forex scam victim. Also, trading on a poorly designed platform could lead you to make costly investment mistakes.
Respectable forex brokers provide traders with a simple and easy-to-navigate interface that comes with plenty of useful analysis tools. Sophisticated trading software solutions even come with a “panic” button to help you swiftly exit from all open positions.
A reliable trading platform will offer a ton of other trader-friendly features, such as automated trading, trading alerts, and demo accounts. They’ll even let you customize the interface according to your preferences.
- Negligent Customer Support
Ultimately, a forex broker is only as good as the quality of customer service they offer. Even the best trading platform would be of no use if traders don’t have instant access to resourceful customer support reps.
If your forex broker provides limited customer support channels, make sure you trade with caution. Similarly, if the reps aren’t helpful or take too long to respond to your queries, consider it as a major red flag.
As a ground rule, you should only choose brokers who maintain constant communication with you. Also, respectable forex brokers often provide a plethora of educational resources and tools to guide new traders.
Choosing a dependable and trusted broker is the key to ensuring a seamless forex trading experience. Browse their website to find their registration details and evaluate the type of service they offer.
Don’t forget to leverage the demo account and take the trading platform for a spin before paying any deposits. Apart from the above indicators, you should also keep an eye out for suspicious withdrawal terms, as well as unrealistically high leverage.