How to avoid scams when choosing a Forex broker
Whenever you’re looking to make an investment, you are always careful to avoid any potential scams. The same care should be taken when choosing a Forex broker since it’s also a form of investment. Perhaps you should even take more care because the Forex market is decentralized, which would make it easier to fall into a scam, but let’s leave that for another day. For now, let’s focus on the steps to take when choosing a Forex broker that keep you away from scams, of which there are many.
Ensure the broker is regulated
Every country should have financial regulators who keep the financial service providers in check and ensure the financial security of their clients. The Forex market, too, has got financial regulators for this same purpose, and every Forex broker is required to be registered and licensed by one of these regulators.
Check whether the broker you’re looking at is regulated, and this information should be on their website. Further confirm this information on the regulator’s website by searching their license code/number. There have been cases of brokers claiming to be regulated when, in fact, they weren’t; confirming from the regulator’s website should help you avoid a scam.
Find out what others are saying
There’s still no better resource than your fellow traders when confirming if a broker is running a scam, and thankfully the internet can help with that. Several online Forex broker reviews can be found where visitors can comment on their experience with a certain broker, such as on forexfraud.com or topbrokers.com, where you can also find a list of top rated forex brokerage companies. These sites let you know if a broker can be trusted as people will talk about the various aspects of the broker’s services.
Read through all the reviews on these websites regarding the broker you are looking at, and find out what others have to say. Just remember that there will always some negative reviews, and it is impossible to please all clients, but the best brokers still receive mainly positive reviews.
When it’s too good to be true…
Forex brokers will always offer bonuses for deposits and other enticing offers to lure in clients. This is what happens when there’s competition, but some offers should give you pause. Imagine if you found a broker that offered huge bonuses, unusually high leverage – everything nice, all the while promising huge returns and no risk. Anyone who has ever been conned will recognize all the signs, and it’s important to remember that the brokers are not running a charity, so they must be making money some other way.
Perform your own comparison
At the end of the day, you will have to make the jump, even after taking all the measures above, and this means putting your money on the line. It’s going to be frightening at first, but if you have been meticulous in your search, you will quickly get into it and become comfortable.
The perfect way to dip your toe in Forex trading waters would be through the use of a demo account, which is free, but you can only learn so much. Compare several brokers’ services on the demo accounts and see which one’s more reliable. Then make a small deposit and use this to trade, and only after you’re convinced of the broker’s reliability should you deposit more.