Forex markets are notoriously unregulated which leaves average traders open to Forex Trading Scams. It is slowly becoming well regulated, but many scam brokers still appear. They usually do not last long, but the cautious traders should still be aware of their presence.
Trading is a hard business without your broker double crossing you. It is important to be as informed as possible when choosing and dealing with your forex broker.
Here we will attempt to wade through an overwhelming amount of information and provide readers with tools to protect themselves from Forex Trading Scams.
It is easy to find angry comments from disgruntled traders, but determining whether a claim is legitimate can be a daunting task. Many of these traders may be exasperated by the risks of the market itself.
Some traders enter Forex with little information and take losses that have nothing to do with the broker. Therefore, figuring out when a broker is scamming its traders or simply attracting too many inexperienced traders is intimidating.
Feeling like the market shifts as soon as you place a trade or always feeling like slippage occurs against you are common situations that all traders face. Often this is not the broker's fault. Nevertheless traders will vent their frustrations on their brokers.
New traders are especially prone to making mistakes and following common tendencies that veteran traders can take advantage of. This type of market dynamic can leave traders feeling discouraged and ready to blame anyone including their broker.
There are situations where losses are the broker's fault. Most of the time it involves stacking trading commissions at the client's expense. Brokers that subjectively alter quoted rates in order to trigger stop orders.
However, brokers make more money with high trade volume and it is in their interest to keep long term clients. So as a trader remember that in general a broker is looking out for your interests.
Another problem may occur with slippage. Slippage occurs when sharp movements in the market cause buy or sell orders to execute at the wrong price. Some brokers have guarantees that guard against slippage, but many do not.
In volatile exchange markets it is hard for the broker to ensure that all orders execute at the preferred price. Even in markets that are more transparent than forex, slippage can occur. Thus, what appears to be a forex trading scams may just be trader inexperience.
Problem occurs most often when communication between broker and client slows or stops entirely. If a trader is not getting timely email responses or the responses they do receive are vague and unhelpful, this is a sign the broker may not be looking out for trader interests.
A good broker should always be available to their clients. They should be helpful and concerned for any problem the trader is having. The worst case scenario is a situation where the trader cannot remove funds from their account.
First and foremost, check for complaints about not being able to withdraw funds. If you can, contact the complainant and ask them about their experience.
Secondly, read the fine print! Sometimes, up front incentives can later be charged against the trader. This is particularly important with regards to losing money. If a trader receives a bonus upon account creation and then the account loses money, the broker may say the bonus cannot be removed and hold the entire trader's money hostage. Try to understand all the contingencies related to withdrawals, specifically whether bonuses affect withdrawals.
Thirdly, you can search for the reviews of the broker. Pay attention to the details of each complaint and hold it against the mistakes mentioned above. Then also search for any pending legal action against the broker.
Finally, once you choose a broker, start with a mini account. Use only a small amount of capital and trade it for a month or two. Then try to withdraw your funds. If there are no problems it should be safe to deposit more funds. If there are problems, discuss them with the broker before posting a detailed account of the incident so others can learn from your experience.
The 2008-2009 financial crises showed us that no firm no matter how big or popular is completely safe. There is always risk involved with trading. Big brokers often get that way by providing a certain standard of service, but no broker is 100% secure.
Once again, read the fine print! If you missed something or did not do this step before signing you will probably have only yourself to blame.
Be stern, do not be rude. Explain what course of action you will take if your questions are not properly answered or a withdrawal authorized.
Some action you can take includes posting comments or marking them as a scam on a Forex reviews site. If you really believe they are in the wrong then you can report the broker to the regulatory body.
Sometimes a Forex Trading scams is nothing more than an inexperienced trader blaming their broker for losses. But, Forex Trading scams do happen and every trader whether new or veteran must fully research a broker before they open an account. Then start small with new brokers and make sure you can withdraw funds after trading.
If you are already having problems, try to work with your broker and confirm they are doing something illegal before reporting them to the regulatory authority.