Recognize and avoid Forex fraud and scams
Why is it so important to trade with regulated companies and how you can avoid online Forex fraud
It is no secret that nowadays Forex trading has become one of the fastest growing and one of the most lucrative industries around. And while there are many established legitimate FX trading platforms available to you, such as eToro, FXCM or IC Markets, there are many people out there who would like to take advantage of the phenomenon for a quick win/scam, instead of investing time and money into developing a legitimate trading business.
As a Forex trader it's extremely important to learn to recognize scams when you stumble upon them, obviously since it would be extremely unpleasant to get ripped off when all you're trying to do is invest in the financial markets. Fortunately, most of these fraud businesses are not very cleverly disguised and can be spotted quite easily with a minimum amount of research.
Browse the site
When you come to a site offering Forex trading services it is very important to search for a few key pieces of information.
You should always check what company operates the site and if that company has all the necessary licenses to deal Forex. This industry is highly regulated and a non-licensed broker would get shut down within a very short amount of time.
If you look at the eToro.com site, for example, you will see that the company lists all of its regulating bodies, and even provides links to their license registries. This is the kind of thing you should be looking for. If there's no mention of license and regulation, this is most likely a scam.
Furthermore, you should browse the entire site to get a sense of how professional this provider is. Legitimate online trading companies put a lot of effort into their site since the site represents the face of the company to the public. If you see that the site is a slap dash attempt at putting up some sort of front, if it has abundant spelling and grammar mistakes, looks generally unprofessional and doesn't provide relevant information you have plenty of reason to believe that you might be looking at a FX scam.
Get a second opinion
The great thing about the internet is that you can't run a scam for very long before the people you scam start spreading the word around. Now this doesn't mean that you should believe every person who claims that a site is a scam, since you can probably find Forex scams accusations about every legitimate trading company online. Here you should really do some research to find several examples of public opinion to form a more unbiased view of the provider in question.
If you find that most of the public responses to the provider claim that it's a fraud, you might have legitimate reason to think that it's a scam. You should however read the claims and decide for yourself whether they're actually based on any real evidence or not. When you find claims that the most popular provider online, such as eToro, is a scam, it's most likely not true.
Download or register to the demo
Most legitimate providers offer their clients a demo version of their platform so that new users can get an impression of the software and how the company operates before depositing funds. Taking the example of eToro once again, this company offers a complete demo version of their platform for all free account openers, with absolutely no strings attached.
If the provider you're checking out doesn't offer a demo platform, that's already a reason to be suspicious of a scam. If they do offer a platform, we suggest that you download it; if they have an online version of the platform, like eToro, even better. In any case, you should definitely have your antivirus on when downloading, just in case.
Once you've downloaded the platform, try opening a few trades to see how it operates. Also, it's important to check the live Forex data against a few other sources as this is a good indication of whether the broker is legitimate or whether they're just making it up as they go along.
This is really the ultimate proof. Any real Forex broker has 24 hour support to assist their customers. Scams don't have the actual capital to invest in a support team.
We suggest that you do this over the phone (most financial brokers have toll free support numbers) since chats and emails can be answered by chat programs or non-professionals. If you talk to an actual support representative who knows his chops about the company and the services his/her company provides, you're most likely dealing with the real thing. Plus, you just might get a special bonus offer out of it.
The basic principle that you should go by is that scams are out to make a quick buck; therefore they're not going to put much effort to make their scam actually look legitimate. If they did that, they might as well have become a real dealer. You should always do a thorough check of the provider to get a sense of their level of professionalism. If you see that the provider has put a lot of effort into their site, their platform and their support team they're just not likely to be a Forex scam.