6 signs of a shady Forex broker
Dear Traders,
Unfortunately many people incorrectly associate Forex trading with scams.
The problem is the increasing number of unscrupulous companies marketing false info.
The number of Forex-related scams has significantly increased over the last few years, so it's important for you to be able to identify a hoax.
After all, Forex trading should be a potentially profitable experience rather than a robbery.
Privacy violation
When traders register with a particular broker, they expect their personal info to be protected i.e not passed to third parties.
When someone you don't know rings your personal phone number for example, the entity that gave your information to them - has violated your privacy.
Why?
Because you haven't enabled your data to be publicly available.
Some brokers even buy stolen trader database's, so they can contact the listed people worldwide.
Unfair competition and withdrawal refusal
Some scammy brokers will refuse to proceed with withdrawals.
And you'll know they are not intending to pay:
...because they won't be responding to your calls or email requests.
This is typical behavioural in Forex trading scams.
We traders, call these scammy brokers bucket shops.
The term originates from the book Reminiscences of a stock operator, where Its main character was kicked out of a bucket shop because he was making too much money.
Bucket shops serve you a redirected price, into a set of charts that they give you for free.
The catch is that the feeds bringing those prices into your charts, are often manipulated by brokers.
But there's more.
Bucket shop brokers can also cover their risk in the market by:
...operating a dealing desk and trading against you...
...while manipulating chart feeds and giving you false price fluctuations.
Even if you make money somehow, you probably won't see it.
Unauthorised trading
Has your broker ever made a purchase for your account, that you didn't agree to in advance?
There are only two conditions under which a broker can transact on your behalf, including:.
- If he has granted discretionary authority
- when you give him expressed and detailed permission.
Anything less is possibly investment fraud.
When you apply to trade with a broker, you are given a lengthy application form and a voluminous agreement booklet with clauses in small print.
Read it all.
Very few investors have the patience to go through the fine print or the ability to decipher the legal jargon:
...and the broker's relationship manager will helpfully put crosses at the places you need to sign on the agreement.
If you sign these papers or any other broker agreements without reading them first - you are taking a major risk.
Not regulated
When choosing a broker, always ask if they are regulated with a relevant authority.
Simply put:
...if a broker is not regulated, your money is not safe.
Every broker should abide by the rules of a financial authority.
In the context of defending citizens from fraud, many countries have established private or state organisations to regulate the Forex market.
Generally speaking, these organisations are actively supported by the government.
The top three countries with the most rigorous regulators are:
- USA (CFTC, NFA)
- Japan (FSA Japan)
- UK (FCA).
Empty promises
Promises of high profits, often signal a Forex scam.
Nobody can guarantee your Forex profits or losses.
If a broker says they can - walk the other way.
The phantom broker
Broker who?
This kind of Forex Broker doesn't even exist.
It's merely a flashy website, that doesn't have proper regulations and does not show you the people behind it.
Usually the only contact information a phantom broker gives, is a fake phone number and email address.
Checking this type of broker's license, usually informs that they are unknown in the Forex industry.
Want to know more about how to spot Forex scammers?
No problem - the Commodity Futures Trading Commission (CFTC) has compiled a short guide.
I hope you got some insight in this post, as Forex scammers are no joke.
If you have questions or want to give feedback, please do so in the comments section below.
Cheers and safe trading,
Nenad
