How to Avoid Forex Trading Scams in 2022.
Forex markets trade trillions of dollars a day. Traders around the globe are always looking for the best broker to trade forex, CFDs, binary options, stocks, cryptocurrencies, etc. With new forex brokers popping up constantly, determining the legitimacy of a broker can be a real challenge. As a consumer, it is vital to research a company before depositing money to trade. At ForexBrokers.com, it’s our mission to assist you as much as possible with that research.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 65% and 82% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Most Trusted Forex Brokers Comparison.
Taken from our forex broker comparison tool, here’s a comparison of the must trusted forex brokers.
Feature IG Visit Site Swissquote CMC Markets Trust Score 99 99 99 Year Founded 1974 1996 1989 Publicly Traded (Listed) Yes Yes Yes Bank Yes Yes No Tier-1 Licenses 6 4 4 Tier-2 Licenses 3 1 2 Tier-3 Licenses 1 0 0 Authorised in the European Union Yes Yes Yes.
Questions to ask to avoid a forex trading scam.
Is the broker regulated? If regulated, how trustworthy is the regulatory body? Is the broker offering profits or rewards for opening an account? Is the broker offering a cash bonus for opening an account? Is the broker offering automatic trades or signals to guarantee profits? Is any credible information about the company included on its website, such as company history, financials, headquarters’ address, or similar? If awards are cited, can I verify their authenticity? If a big corporate sponsorship is promoted (e.g. athlete sponsorship), am I doing my due dilligence to ensure the company can be trusted?
1) Is the broker regulated?
Unregulated brokers do not have to report to a governing body. This means that if they scam you in any way, whether it be “glitches” or “malfunctions” causing sever slippage in their system, or you go to make a withdrawal and they don’t process it (steal your money), you are out of luck. Beyond posting a bad review online, there is little you can do because these brokers have no legal authority to answer to.
How do I check if a broker is regulated? The easiest way to check a broker’s registration is to look for it at the bottom of the website. The picture below is the bottom of 12Trader, a broker we recommend avoiding. You’ll notice that nowhere in this picture is a regulatory body mentioned. The “about us” pages on the site link to an account login prompt. Nowhere on the site is there any mention of regulation or company history. All of these warning signs should make you cautious.
Now let’s look at the bottom of the homepage of City Index, a trusted and regulated broker.
You will notice 1) the company specifically warns of the risks involved in trading CFDs, 2) the company is registered in England and Wales and has posted an address, and 3) the company is authorized and regulated by the Financial Conduct Authority, and has posted a registration number.
Conclusion: A regulated broker is required to include proper risk disclaimers and regulatory information at the bottom of all their website pages. To make it easy for investors, ForexBrokers.com includes a Trust Score for each broker, which assesses overall trustworthiness based on where the broker is regulated and its history as a firm.
2) If regulated, how trustworthy is the regulatory body?
Some scam brokers claim to be regulated and registered by a governing body that does not monitor or regulate forex companies.
For example, let’s look at Evolve Markets.
The disclosures at the bottom of the homepage give the appearance of a regulated broker. There is a warning of the risks of trading CFDs, and there is a legal section. Upon further examination of the legal section, you’ll notice that while the firm is registered as an international broker company in St. Vincent & the Grenadines, it is not regulated.
This statement from St. Vincent & the Grenadines shows there is a warning against false claims of registration or license.
How do I know what regulatory bodies are legitimate?
Forex brokers that are regulated in a major hub are always more trustworthy. Brokers in emerging hubs can also be trustworthy, but caution is warranted. Based on our annual study of regulatory trustworthiness, here is a list of the regulatory bodies we track and how trustworthy each one is:
FCA Regulated – Financial Conduct Authority – United Kingdom – (Great) CySEC Regulated – Cyprus Securities & Exchange Commission – Cyprus (OK) ASIC Regulated – Australian Securities & Investment Commission – Australia (Good) SFC Authorized – Securities Futures Commission – Hong Kong (Good) MAS Authorized – Monetary Authority of Singapore – Singapore (Good) FSA Authorized – Financial Services Agency – Japan (Good) IIROC Authorized – Investment Industry Regulatory Organization of Canada – Canada (Good) FINMA Authorized – Swiss Financial Market Supervisory Authority – Switzerland (Good) FMA Authorized – Financial Markets Authority – New Zealand (OK)
Conclusion: Double check the authority of the governing body that regulates the broker you are looking at. You can go to the website of the governing body to search for the registration number and verify its legitimacy. To help investors find a trusted broker where they live, we have created country-specific forex broker guides.
3) Is the broker offering profits or rewards for opening an account?
Scam brokers often make claims such as “make $50 a day from a $250 investment” or “make 80% returns on profit signals” or “96% success rate.” These claims are a scam, regardless of whether they are being made for forex, CFDs, or binary options. Forex brokers should not promise returns at all, small or large. Simply put, if a broker is promising to make you money, it is a scam. Other common scam practices include advertising pictures of expensive cars that are given away to lucky investors.
This Wikipedia page on binary options does a great job of summarizing risks related to binary options:
“Many binary option “brokers” have been exposed as fraudulent operations. In those cases, there is no real brokerage ; the customer is betting against the broker, who is acting as a bucket shop . Manipulation of price data to cause customers to lose is common. Withdrawals are regularly stalled or refused by such operations; if a client has good reason to expect payment, the operator will simply stop taking their phone calls. Though binary options sometimes trade on a regulated exchange, they are generally unregulated, trading on the Internet, and prone to fraud.”
Conclusion: If a binary options or forex broker promises you big returns on your money, this is a clear sign of a scam. You will not make $100,000 on a mega-trade; you will not make a 96% profit in 30 seconds; and you will not win a $40,000 car by depositing $2,000. Save your money and STAY AWAY.
4) Is the broker offering a cash bonus for opening an account?
When a broker offers an abnormally high cash bonus, is not regulated, and does not show offer details for the bonus, then you are likely dealing with a scam broker. For example, 1000Extra hints at a bonus of $1,000 with their vague promotional offer. If you click around trying to gather more information you are redirected to sign up for an account.
1000Extra is not regulated, has minimal information about the company, and has scam reports across the web.
Conclusion: In most regulated regions around the world, promotional bonuses for opening a new account are not allowed. The two exceptions are the United States, which is for US citizens only, and Asia.
5) Is the broker offering automatic trades or signals to guarantee profits?
Trading CFDs, FX, and cryptocurrencies involves a high degree of risk. All providers have a percentage of retail investor accounts that lose money when trading CFDs with their company. You should consider whether you can afford to take the high risk of losing your money and whether you understand how CFDs, FX, and cryptocurrencies work. All data was obtained from a published website as of 01/10/2022 and is believed to be accurate, but is not guaranteed. The ForexBrokers.com staff is constantly working with its online broker representatives to obtain the latest data. If you believe any data listed above is inaccurate, please contact us using the “Contact” link at the bottom of this page.
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IG – 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.