While there are plenty of reputable online forex brokers to choose as your preferred trading platform, you can also run into brokers that are little more than a moneymaking scam.
These scam brokers generate profits by luring in traders under the guise of guaranteed earnings only to charge them excessive fees, profit off of their trading activity, and skim money from their accounts until traders wise up and cash out.
If you’re looking for the right forex broker online or are suspicious of your current brokerage platform, here are some of the top signs your forex broker may be running a scam.
Promises of Guaranteed Profits
Any moneymaking proposition in forex comes with risk. But some unsavory forex brokers will try to tell you that their brokerage can help you turn guaranteed profits when you use their platform.
If you’re drawn to a forex broker because their platform makes big promises of generating wealth through forex, there’s a good chance this platform is trying to lure you in only to generate profits off of traders who are none the wiser. It’s possible this broker is a fake operation that isn’t regulated and isn’t bound by the laws enforced by local authorities. The broker may also charge exorbitant fees to skim profits off of traders even if they do offer a virtual platform that supports forex trading.
Lack of Disclaimers Stating Inherent Risk
Not only is risk always present in a forex trade, but it should also be acknowledged by your forex broker. Reputable brokers will make sure new traders understand that trading on the platform could cause them to lose money rather than grow their income.
Reputable forex brokers have nothing to lose by making sure their online users understand the risks of their activity. Whether you win or lose as a forex trader, the important thing is that you understand the risk involved in any trading activity. Scam forex brokers don’t want to keep you informed of these risks. They’re only interested in attracting as much trading activity as possible in an effort to maximize their profits.
Every brokerage sets its own fee schedule, but forex broker scam operations will be more aggressive with these fees and try to bleed traders of additional money through hidden fees and other cheap tactics.
If you’re new to forex trading, you might be completely unaware that the fees charged by a broker exceed what other competing platforms may charge. For this reason, it’s important to always compare prices among forex trading platforms before you choose the platform you want to use.
While they might seem small when evaluated on a fee sheet, high fees will eat away at your profits over time. Scam brokers will exploit new or inexperienced traders and drain their accounts with high fees, taking as much profit as they can before those traders wise up.
Trades That Look like Churning
Some brokers receive commissions for buying and selling assets on behalf of their traders. While this isn’t inherently bad, some traders will execute buys and sells repeatedly across their client base to generate fraudulent earnings from those commissions.
If you see trades and/or trading patterns on your account that don’t align with your trading strategy, this could be a sign of churning. If in doubt, it’s smart to halt all trading and/or pull your money from that platform until you can fully evaluate why this trading activity was happening and whether or not it was legitimate.
Lack of Funds Safety and Security Measures
Reputable, regulated forex brokers are required to take certain security measures when it comes to protecting your funds. In addition, many brokers will also take additional steps to ensure fund safety and build trust among their existing and prospective investors.
One way to verify this security is to look up the registered number in the country where that broker claims to be regulated. A verified registration number will provide confirmation that the business is regulated by local agencies.
You can also validate the reputation of these institutions by evaluating their existing relationships with other known, established financial institutions and by reviewing their policies when it comes to segregating investment funds and providing clients with a fully encrypted platform to manage their forex accounts.
Poor Communication and Customer Service
When you have a customer service request, is it hard to get in touch with a representative? Is the broker eager to address your concerns, or do you get the runaround and/or the cold shoulder?
Sometimes, this poor communication is simply a sign of bad customer service. But it may also serve as proof that your broker is only concerned with generating profits off of you. Scam brokers don’t want to spend any resources on making sure you’re satisfied with your customer experience. Legitimate traders, on the other hand, value you as a client and will be proactive in addressing any concerns or questions you may have.When you’re searching for the right forex broker, sometimes it’s easiest to test the waters slowly to make sure it’s a good fit. Explore the benefits of using Valutrades as your forex broker. Open a demo account today.
The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.