Legit forex trading

If you feel you are being scammed, contact the U.S. Commodity futures trading commission.

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Exploring Scams Involved With Forex Trading, legit forex trading.

Forex is a legitimate endeavor. You can engage in forex trading as a real business and make real profits, but you must treat it as such. Don't look at forex trading as a get-rich-overnight business, no matter what you may read in hyped-up forex trading guides.

Exploring scams involved with forex trading

While foreign exchange (forex) investing is a legitimate endeavor and not a scam, plenty of scams have been associated with trading forex. As with many industries, plenty of predators exist out there, looking to take advantage of newcomers. Regulators have put protections in place over the years and the market has improved significantly, making such scams increasingly rare.

Foreign exchange trading involves the trading of pairs of currencies. for example, someone might exchange euros for U.S. Dollars. In september of 2019, 1 euro ranged in value from about $1.09 to about $1.12. So, a trader who exchanged 100 euros for $112 when the value of the dollar is high could profit by exchanging those $112 for euros when the value of the dollar drops back to $1.09 per euro. Such a transaction would result in a net profit of less than 3%, which likely would be wiped out by the broker's commission.

Exchange rates are volatile and can go up or down unpredictably. When accounting for commissions brokers take from transactions, making money requires significant changes in exchange rates in favor of the trader. High profits are possible, but it's not a market where anyone should expect quick and easy cash.

What makes a scam?

Forex trading first became available to retail traders in the late 1990s. the first handful of years was wrought with overnight brokers that seemed to pop up and then close down shop without notice.

The common denominator was that these brokers were based in nonregulated countries. While some did take place in the united states, the majority seemed to originate overseas where the only requirement to set up a brokerage was a few thousand dollars in fees.

A distinct difference exists between a poorly-run brokerage, which isn't necessarily a scam, and a fraudulent one. Even a poorly run brokerage can run for a long time before something takes it out of the game.

Some common examples of scams investors should look for include churning and brokers who simply underestimate risk. Churning involves brokers who execute unnecessary trades for the sole purpose of generating commissions.

Additionally, some brokers often overestimate the ability of investors to make a lot of money quickly and easily through the forex market. They typically prey on new investors who don't understand that forex trading is what is known as a zero-sum game. When a currency's value against another currency gets stronger, the other currency must get proportionally weaker.

How to avoid being scammed

The first step to take is to check the location of the brokerage's headquarters and research how long it has been in business and where they are regulated. The more the better.

If you feel you are being scammed, contact the U.S. Commodity futures trading commission.

The simple act of finding out who you should call if you feel that you've been scammed, before investing with a brokerage, can save you a lot of potential heartache down the road. If you can't find someone to call because the brokerage is located in a non-regulated jurisdiction, this is usually a red flag and a sign that it's best to find more regulated alternatives.

How to avoid forex trading scams

The foreign exchange (forex) market is huge, with an average daily trading volume of more than $5 trillion, including currency futures and options. it's also not very well regulated. That means the opportunity still exists for many forex scams that promise quick fortunes through "secret trading formulas," algorithm-based "proprietary" trading methodologies, or "forex robots" that do the trading for you.

Before getting involved in forex trading, perform your due diligence. Visit the background affiliation status information center (BASIC) website created by the national futures association (NFA) to learn how to choose a reputable broker and avoid scams. The NFA is the futures and options industry's self-regulatory organization.

Before dealing with the public, every company or person who wants to conduct off-exchange forex business is required to become a member of the NFA and to register with the commodity futures trading commission (CFTC). the CFTC is the government agency that oversees futures and options trading. You can search BASIC to find out what regulatory actions, if any, have been taken against a particular individual or firm.

Signal sellers

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One of the challenges a rookie forex investor faces is determining which operators to trust in the forex market and which to avoid. Signal sellers are one group of operators to consider carefully.

A signal seller offers a system that purports to identify favorable times for buying or selling a currency pair. The system may be manual, in which case the user must enter trading info, or it may be automated to put through a trade when a signal occurs.

Some systems rely on technical analysis, others rely on breaking news, and many employ some combination of the two. But they all purport to provide information that leads to favorable trading opportunities. Signal sellers usually charge a daily, weekly, or monthly fee for their services.

A frequent criticism of signal sellers is that if it were possible to use their system to beat the market, why would the individual or firm that has this information make it widely available? Wouldn't it make more sense to use this incredible signaling system to make huge profits for themselves?

Other analysts distinguish between known scammers and more reputable sources of market information that offer a well-thought-out signaling service.

Behind these opposing views lies a larger difference of opinion about whether anyone can predict the next move in a trading market. This fundamental disagreement won't be settled any time soon.

Nobel prize-winning economist eugene fama proposes in his well-regarded efficient market hypothesis that finding these kinds of momentary market advantages isn't possible.

His economist colleague robert shiller, who's also a nobel prize winner, believes differently, citing evidence that investor sentiment creates booms and busts that can provide trading opportunities.

The best way to determine if a signal seller can benefit you is to open a trading account with one of the better-known forex brokers and enter practice trades that don't involve real money based on the signals. Be patient, and with time, you'll determine whether predictive signaling works for you or doesn't.

Forex trading scams

Find out how unauthorised forex trading and brokerage firms work, how to avoid scams and what to do if you are scammed.

UK consumers are being increasingly targeted by unauthorised forex trading and brokerage firms offering the chance to trade in foreign exchange, contracts for difference, binary options, cryptoassets and other commodities.

They promise very high returns and guaranteed profits, either through a managed account where the firm makes trades on the investor’s behalf or by trading using the firm’s trading platform.

We are aware that scammers are targeting consumers searching for investments online, in particular through search engines like google and bing. Although some scammers offer high returns to tempt you into investing, they may also offer realistic returns to make their offer appear more legitimate. Those offering or promoting products or investment opportunities found through search engines are not necessarily authorised or regulated by the FCA. You can check the FCA warning list for firms to avoid.

How forex (FX) trading and brokerage scams work

Most consumers report they have initially received some returns from the firm to give the impression that their trading has been a success.

They will then be encouraged to invest more money but at this stage or soon after the returns stop, their account is suspended and there’s no further contact with the firm.

Many scam firms claim to be based in the UK and even claim to be FCA authorised.

Beware of clone firms

Many bogus trading and brokerage firms will use the name, ‘firm registration number’ (FRN) and address of firms and individuals who are FCA authorised. This is called a ‘clone firm’.

The scammers then give their own phone number, address and website details, sometimes claiming that a firm's contact details on the register are out of date.

Scammers might also claim to be an overseas firm, which don’t always have their full contact and website details listed on the register.

Scammers may even copy the website of an authorised firm, making subtle changes such as the phone number.

How to protect yourself

You should check the FCA register of authorised firms before dealing with any firm. If they’re not authorised by us, it’s probably a scam. You can also check our warning list of firms to avoid.

If the firm’s contact details aren’t on the register or the firm claims they’re out of date, call our consumer helpline on 0800 111 6768.

You should check the firm isn’t a clone firm by asking for their firm reference number (FRN) and contact details and then calling them back on the switchboard number on our register – never use a link in an email or website from the firm offering you an investment.

Always be wary if you’re contacted out of the blue, pressured to invest quickly or promised returns that sound too good to be true.

You should seriously consider seeking financial advice or guidance before investing. You should make sure that any firm you deal with is regulated by us and never take investment advice from the company that contacted you, as this may be part of the scam.

The money advice service has information on investing and about how to find a financial adviser. Alternatively, you could get further information from a group that represents advisers such as PIMFA.

If you have been scammed

You can report the firm or scam to us by contacting our consumer helpline on 0800 111 6768 or using our reporting form.

If you’ve invested with a firm that’s not authorised by the FCA, your investment is not protected by the UK’s financial services complaints and compensation scheme.

If you have already invested in a scam, fraudsters are likely to target you again or sell your details to other criminals.

The follow-up scam may be completely separate or related to the previous fraud, such as an offer to get your money back or to buy back the investment after you pay a fee.

If you have any concerns at all about a potential scam, contact us immediately.

Is your forex broker a scam?

If you do an internet search on forex broker scams, the number of results is staggering. While the forex market is slowly becoming more regulated, there are many unscrupulous brokers who should not be in business.

When you're looking to trade forex, it's important to identify brokers who are reliable and viable, and to avoid the ones that are not. In order to sort out the strong brokers from the weak and the reputable ones from those with shady dealings, we must go through a series of steps before depositing a large amount of capital with a broker.

Trading is hard enough in itself, but when a broker implements practices that work against the trader, making a profit can be nearly impossible.

Key takeaways

If your broker does not respond to you, it may be a red flag that he or she is not looking out for your best interests.

To make sure you're not being duped by a shady broker, do your research, make sure there are no complaints, and read through all the fine print on documents.

Try opening a mini account with a small balance first, and make trades for a month before attempting a withdrawal.

If you see buy and sell trades for securities that don't fit your objectives, your broker may be churning.

If you are stuck with a bad broker, review all your documents and discuss your course of action before taking more drastic measures.

Separating forex fact from fiction

When researching a potential forex broker, traders must learn to separate fact from fiction. For instance, faced with all sorts of forums posts, articles, and disgruntled comments about a broker, we could assume that all traders fail and never make a profit. The traders that fail to make profits then post content online that blames the broker (or some other outside influence) for their own failed strategies.

One common complaint from traders is that a broker was intentionally trying to cause a loss in the form of statements such as, "as soon as I placed the trade, the direction of the market reversed" or "the broker stop hunted my positions," and "I always had slippage on my orders, and never in my favor." these types of experiences are common among traders and it is quite possible that the broker is not at fault.

Rookie traders

It is also entirely possible that new forex traders fail to trade with a tested strategy or trading plan. Instead, they make trades based on psychology (e.G., if a trader feels the market has to move in one direction or the other) and there is essentially a 50% chance they will be correct.

When the rookie trader enters a position, they are often entering when their emotions are waning. Experienced traders are aware of these junior tendencies and step in, taking the trade the other way. This befuddles new traders and leaves them feeling that the market—or their brokers—are out to get them and take their individual profits. Most of the time, this is not the case. It is simply a failure by the trader to understand market dynamics.

Broker failures

On occasion, losses are the broker's fault. This can occur when a broker attempts to rack up trading commissions at the client's expense. There have been reports of brokers arbitrarily moving quoted rates to trigger stop orders when other brokers' rates have not moved to that price.

Luckily for traders, this type of situation is an outlier and not likely to occur. One must remember that trading is usually not a zero-sum game, and brokers primarily make commissions with increased trading volumes. Overall, it is in the best interest of brokers to have long-term clients who trade regularly and thus, sustain capital or make a profit.

Behavioral trading

The slippage issue can often be attributed to behavioral economics. It is common practice for inexperienced traders to panic. They fear missing a move, so they hit their buy key, or they fear losing more and they hit the sell key.

In volatile exchange rate environments, the broker cannot ensure an order will be executed at the desired price. This results in sharp movements and slippage. The same is true for stop or limit orders. Some brokers guarantee stop and limit order fills, while others do not.

Even in more transparent markets, slippage happens, markets move, and we don't always get the price we want.

Communication is key

Real problems can begin to develop when communication between a trader and a broker begins to break down. If a trader does not receive responses from their broker or the broker provides vague answers to a trader's questions, these are common red flags that a broker may not be looking out for the client's best interest.

Issues of this nature should be resolved and explained to the trader, and the broker should also be helpful and display good customer relations. One of the most detrimental issues that may arise between a broker and a trader is the trader's inability to withdraw money from an account.

Broker research protects you

Protecting yourself from unscrupulous brokers in the first place is ideal. The following steps should help:

Do an online search for reviews of the broker. A generic internet search can provide insights into whether negative comments could just be a disgruntled trader or something more serious. A good supplement to this type of search is brokercheck from the financial industry regulatory authority (FINRA), which indicates whether there are outstanding legal actions against the broker. And if appropriate, gain a clearer understanding of the U.S. Regulations for forex brokers.

Make sure there are no complaints about not being able to withdraw funds. If there are, contact the user if possible and ask them about their experience.

Read through all the fine print of the documents when opening an account. Incentives to open an account can often be used against the trader when attempting to withdraw funds. For instance, if a trader deposits $10,000 and gets a $2,000 bonus, and then the trader loses money and attempts to withdraw some remaining funds, the broker may say they cannot withdraw the bonus funds. Reading the fine print will help make sure you understand all contingencies in these types of instances.

If you are satisfied with your research on a particular broker, open a mini account or an account with a small amount of capital. Trade it for a month or more, and then attempt to make a withdrawal. If everything has gone well, it should be relatively safe to deposit more funds. If you have problems, attempt to discuss them with the broker. If that fails, move on and post a detailed account of your experience online so others can learn from your experience.

It should be pointed out that a broker's size cannot be used to determine the level of risk involved. While larger brokers grow by providing a certain standard of service, the 2008-2009 financial crisis taught us that a big or popular firm isn't always safe.

The temptation to churn

Brokers or planners who are paid commissions for buying and selling securities can sometimes succumb to the temptation to effect transactions simply for the purpose of generating a commission. Those who do this excessively can be found guilty of churning—a term coined by the securities and exchange commission (SEC) that denotes when a broker places trades for a purpose other than to benefit the client. those who are found guilty of this can face fines, reprimands, suspension, dismissal, disbarment, or even criminal sanctions in some cases.

SEC defines churning

The SEC defines churning in the following manner:

The key to remember here is that the trades that are placed are not increasing your account value. If you have given your broker trading authority over your account, then the possibility of churning can only exist if they are trading your account heavily, and your balance either remains the same or decreases in value over time.

Of course, it is possible that your broker may be genuinely attempting to grow your assets, but you need to find out exactly what they are doing and why. If you are calling the shots and the broker is following your instructions, then that cannot be classified as churning.

Evaluate your trades

One of the clearest signs of churning can be when you see buy and sell trades for securities that don’t fit your investment objectives. For example, if your objective is to generate a current stable income, then you should not be seeing buy and sell trades on your statements for small-cap equity or technology stocks or funds.

Churning with derivatives such as put and call options can be even harder to spot, as these instruments can be used to accomplish a variety of objectives. But buying and selling puts and calls should, in most cases, only be happening if you have a high-risk tolerance. Selling calls and puts can generate current income as long as it is done prudently.

How regulators evaluate churning

An arbitration panel will consider several factors when they conduct hearings to determine whether a broker has been churning an account. They will examine the trades that were placed in light of the client’s level of education, experience, and sophistication as well as the nature of the client’s relationship with the broker. They will also weigh the number of solicited versus unsolicited trades and the dollar amount of commissions that have been generated as compared to the client’s gains or losses as a result of these trades.

There are times when it may seem like your broker may be churning your account, but this may not necessarily be the case. If you have questions about this and feel uneasy about what your advisor is doing with your money, then don’t hesitate to consult a securities attorney or file a complaint on the SEC's website.

Already stuck with a bad broker?

Unfortunately, options are very limited at this stage. However, there are a few things you can do. First, read through all documents to make sure your broker is actually in the wrong. If you have missed something or failed to read the documents you signed, you may have to assume the blame.

Next, discuss the course of action you will take if the broker does not adequately answer your questions or provide a withdrawal. Steps may include posting comments online or reporting the broker to FINRA or the appropriate regulatory body in your country.

The bottom line

While traders may blame brokers for their losses, there are times when brokers really are at fault. A trader needs to be thorough and conduct research on a broker before opening an account and if the research turns up positive for the broker, then a small deposit should be made, followed by a few trades and then a withdrawal. If this goes well, then a larger deposit can be made.

However, if you are already in a problematic situation, you should verify that the broker is conducting illegal activity (such as churning), attempt to have your questions answered, and if all else fails, and/or report the person to the SEC, FINRA, or another regulatory body that could enforce action against them.

Forex trading scams: how to spot and avoid them

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Forex trading involves buying and selling currency pairs based on the exchange rate. The exchange rate can be volatile and so buying and selling currency is unpredictable.

Currency trading has roots in ancient times, where goods and services were exchanged for coins – and coins were exchanged depending on their worth (usually related to the amount of gold/silver each coin was made from).

In the late 1990s, forex trading became open to retail traders – and with the equivalent of $5 trillion traded every day – 24 hours a day, 5 days a week, it is the most traded asset class in the world.

With a lack of regulation and so much money trading daily, traders can be targeted by scammers offering ways to make vast sums of money with little or no risk.

But how can you spot and avoid these scams? Find out below.

Why is forex susceptible to trading scams?

Forex is not very well regulated – in fact, the system relies on brokers to register themselves with self-regulatory bodies like the national futures association (NFA) or the commodity futures trading commission (CFTC).

The very nature of the volatile exchange rate makes it ripe for get-rich-quick scammers, offering 100% profit based on a ‘secret formula’.

Hedge fund managers, banks and investment management companies that have deep pockets to pay for phd-qualified professional forex traders are often seen to make consistent money from their trades.

Inexperienced traders entering into the market might look for a reputable source of education, seeking to learn the secrets of the business so that they can emulate the large returns promised by ‘successful forex traders’.

Whether through ineptitude, poor information or trusting the ‘snake oil’ merchants, new traders need to remember that forex trading is not a source of overnight riches and that it is a zero-sum game – for someone to profit on a trade, someone else must make a loss.

What types of forex scams are there?

Point-spread manipulation

One of the ‘original’ scams, point-spread scams were computer manipulations of the bid-ask spread in the favour of the broker.

By increasing the spread between the bid and sell price to 7 or 8 pips (the smallest denomination of a currency, usually to 4 decimal places) instead of the more usual 2 to 3, the broker is able to make more money.

This practice has largely been clamped down on in the US, but offshore brokers might still operate these scams.

Automated trading programs (robots/expert advisors)

Automated trading is aimed at newcomers to the forex trading market and is commonly referred to as robot trading or expert advisors.

These robots can undertake trades without human intervention, are easy to use and usually sell for only a few hundred dollars.

These systems have often not been submitted for any form of formal review or independent testing, and although they can be demonstrated on historical data, there is some suggestion that many robots may have been over-optimised or created to fit the data.

When looking at robots with an attractive win rate, be aware of scalping – multiple trades for tiny profits that make it look like the robot is wildly successful, but any good size loss would wipe out profits quickly.

Without knowledge of the algorithms used, traders cannot be sure that the robot is not just sending random buy/sell signals, making it difficult to trust.

Signal sellers

In a similar way to eas and robots, signal sellers offer a system to identify when to buy and sell currency pairs to make the most money.

Signal sellers can be retail traders, pooled asset managers, investment account companies or individuals. They normally offer long-term trading experience and successful trading abilities, convincing testimonials and promises of big profits to tempt the average trader.

Signal sellers offer tips in exchange for a daily, weekly or monthly fee. This process can be manual or automatic, based on technical analysis, breaking news or a combination of both.

Signal sellers can offer trading tips when you sign up with a specific broker, receiving a commission from the broker.

Of course, scam signal sellers will either take your money and disappear or offer you a few good tips before never being heard from again.

Fake/unscrupulous brokers

Unsuccessful brokers are not necessarily scammers; sometimes failure in a broker/trader relationship is down to the trader – either being too emotionally invested, not having a trading strategy or not understanding the market.

Of course, sometimes the broker is incompetent rather than unscrupulous – making mistakes rather than scamming traders.

Fake brokers, or those that are out to make money from traders without offering anything in return, usually fall into the following categories:

Price slippage – in trading terms, price slippage is when the expected price of a trade is different from the actual price at the time it is sold. Sometimes this is a good result for the trader, other times it loses money. When a broker makes a trade, it offsets another position in the market to mitigate its risk, making the trade when the offset position is known. If the offset position is worse, the trader price is worse. However, if the offset position is better, the price for the trader should be better – but a scam broker will not pass this difference on to the trader.

Liquidity – when the broker does not have enough capital to cover trades. This is not a scam as such, but it is a sure-fire way for a trader to lose money. This leads to an increased risk of bankruptcy, risking the investment of the trader. Inept brokers might not have enough liquidity to run their business effectively, and this could be a problem for multiple withdrawals.

Churning – individual brokers are often paid on commission, based on the number of trades that they make. This leads to unnecessary buy/sell actions to make more commission – known as churning. Churning negatively affects the trader and could lead to legal action being taken against the broker if it is regulated.

Commingling of accounts – when accounts are managed, and control of money is taken from the trader, there is a risk that accounts will be commingled. In practice, this means that a trader will not be able to track the activity and performance of their funds as they will be combined with others – an ideal scenario allowing scamming brokers to ‘skim’ funds for their own purposes.

Unable to withdraw – having immediate access to any funds that are being looked after by a broker is important. Traders should make sure they know where their money is at all times. Not being able to access your money when you want to should be a big red flag – it could mean that the brokerage is not as liquid as it claims, or that the accounts have been commingled.

Investment management funds

Investors can be tempted to deposit sums of money so that their trades can be managed by ‘highly-skilled’ traders in exchange for a share of the profits.

In these funds, control of the money is handed to the fund managers – and then they can use the investor money for their own purposes.

High-yield investment program (HYIP)/percent allocation management module (PAMM)

Here, in a similar way to management funds, investors are invited to place a small initial investment in a high-yield program that promises huge pay-outs.

In typical ponzi-scheme fashion, initial investors are paid using current investors, and the system relies on the constant stream of new investors to keep the money flowing.

Usually, in these schemes, little to no actual forex trading is done – but when there are no new investors, huge losses are recorded and the HYIP owner simply disappears with the remaining funds.

New and inexperienced traders might look for mentor-like relationships with successful traders – and some platforms allow traders to set up trading accounts that others follow and copy their trades.

Outsourcing trading to someone else takes away the responsibility and some of the emotion, allowing new traders to follow a knowledgeable and successful trader with little or no manual effort or monitoring.

The copied trader earns a commission on each completed trade, and the platform also makes money. In an ideal scenario, everyone will win – the trader will make a profit, the platform or broker will, and so will the copied trader.

When the platform reports on performance, it will only consider the performance of the copied trader, not how well the copiers do – it doesn’t inform on commission or lag experiences that negatively impact the performance of the copiers.

The inexperienced trader will be drawn to the highest short-term gains. To earn more, the copied traders will engage in riskier trading behaviour, making long-term success much more unlikely. It won’t matter to the copied trader, because they are operating accounts that either use small amounts of money or are just demo accounts.

This ultimately means that when the inevitable downturn happens (trades can’t win all the time), the inexperienced trader will switch to another (more successful appearing) trader, with long term losses the only possible endpoint.

How to spot a forex scam

The biggest and most obvious way to spot a scam is if any forex investment opportunity or broker promises that what it is offering is a guaranteed way to make money.

Forex is a valid trading choice and can make money – but it is not a reliable source of overnight millions – and it should never be touted as such.

If any broker, EA or trader tries to sell you something that is 100% guaranteed to make you a millionaire, it is a scam.

Below are some of the things to look out for when forex trading:

Red flag checklist

Outrageous profit claims

Performance based solely on historical data – no live trading data

No prior performance information

No named contact in the brokerage – or you can't get hold of a named contact

Asking for large sums of money

Ridiculously high win/loss ratio

Poor (independent) reviews

‘secret formula’ claims

Offshore HQ – not regulated

Under regulatory disciplinary action – check with the regulatory bodies listed below.

How to protect yourself from forex scams

Due diligence

This is a bit of a catch-all term for doing your research, but you are looking for the following information:

User reviews – bearing in mind that every trader makes losses, disgruntled customers of brokers and eas might complain that they did not make money as promised. However, looking out for claims about slippage, not being able to withdraw money and other scam actions is a good indicator of the truth.

Location – offshore brokers, or robots that have been created by unnamed entities, are not likely to be regulated. This means that they are likely to be hard to get hold of if you need support with a technical issue – and if they are scams, you are even less likely to receive your money back. Make sure a broker has a named location for its HQ, and it is in an area that is covered by one of the regulatory bodies.

US regulators: CFTC – the community futures trading commission (CTFC) is an independent US government agency created in 1974 that deals with forex trading, as well as other options. The CTFC operates under the commodity exchange act to ensure regulation of the markets and prevent fraudulent conduct.

US regulators: NFA – as part of the CTFC, the national futures association (NFA) was created to self-regulate the futures trading industry in america. The national futures association is the self-regulatory organisation in the USA that deals with forex trading. This body identifies best practice and mandates them for the entire industry and takes disciplinary measures where necessary.

US regulators: BASIC – the background affiliation status information checker (BASIC) is a free tool provided by the NFA that allows investors to research specific companies and persons when entering into a business agreement – so it is the best place to check for scams. You can register with the NFA to use this search facility and it will let you find out if a broker or individual is registered with the NFA, and if it is currently under investigation.

UK regulators: FCA – the financial conduct authority (FCA) is the consumer watchdog agency that is funded by all the companies that supply financial services in the UK. It regulates and licenses forex trading entities, working closely with the bank of england to ensure a healthy trading environment. A broker must prove that it follows FCA guidelines to be licensed, with disciplinary action taken if it is found to be acting immorally. The FCA has a searchable database which lists all the activities that a business or individual is licensed to provide.

Other regulatory bodies – there is no international body that regulates forex traders; instead, each country has its own system. When you are looking into a broker or an individual, check that it is registered to provide forex trading services in your country – and its own – before deciding.

Too good to be true?

This is often the easiest way to identify a scam – and sometimes the easiest to ignore. Who doesn’t want to take advantage of an opportunity to make millions of dollars without any effort?

If any product sounds too good to be true – whether it is an expert advisor, a trading robot or even a signal seller – it probably is.

Forex trading can be profitable, but it is also risky – there are no guarantees of high profits, no such thing as a ‘secret formula’ and no algorithm that can predict the future of the market.

Unfortunately, the ‘snake oil’ scammers offer these too good to be true ideas – and the new trader with no experience, jumps in with both feet.

Broker location

In general terms, it is much safer to choose brokers, platforms and traders that are based in your country.

Offshore traders aren’t always scamming, but with the different regulatory bodies, there are no mandatory international rules to be followed.

Proof of claims

This is a difficult one to check. Usually, relying on the information presented to you in a slick marketing email or on the website of the individual won’t give you the full picture.

You need to do some sleuthing to find out exactly what other people think of the broker, robot or individual – and that can take some time and effort.

Wading through the reviews where people lost money because of the market to find the reviews from people who lost money to scammy behaviour is time-consuming, but worth it.

Beware, especially, the forex traders that make bold claims but provide no evidence at all.

Education

The best way to ensure that you don’t fall foul of these forex trading scams is to learn how to trade yourself.

Take on as much education of the markets, currency behaviours and the effect news reports can have on currency as you can, and become your own expert advisor.

By learning the trading business and performing trades based on your knowledge and expertise, you can avoid all the big, bold claims.

Final thoughts

Forex trading is not a scam. It is a good way to make profits – if it is undertaken in the right way.

Unfortunately, because it is so unregulated, forex trading is a breeding ground for new and interesting scams which seek to take advantage of the new and inexperienced trader.

To best protect yourself, and your money, from forex trading scams, don’t fall for the outrageous claims; you won’t suddenly become a millionaire overnight without some prior knowledge, experience and losses.

Due diligence on brokers, individuals and even robots can prevent you from making a costly mistake – and, in some cases, losing money forever.

Checking relevant regulatory bodies for registration and membership, finding genuine customer reviews and ensuring that you read all the fine print before investing will help you avoid a potential scam.

Although international regulation of forex trading leaves something to be desired, where possible, use only registered brokers and individuals.

Don’t invest money you can’t afford to lose, don’t trust the ‘snake oil’ claims and make sure that you learn all you can about forex trading before you begin.

Wikijob does not provide tax, investment or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

Forex brokers to avoid

If you trade forex, you need to make sure that your brokers are legitimate and above board – and that you can trust them to help you out. While most forex brokers are decent and honest, not all are. It pays to be able to defend yourself against less scrupulous brokers. Avoiding broker fraud ought to be a priority for people who trade foreign exchange pairs, then – and that’s where we can help. Below is a list of brokers who we have deemed to not be trustworthy for a variety of reasons. And if you are concerned about a particular broker, contact us with details to alert us with the potential broker fraud going on. From there, we can go ahead and research and review the broker in question and help prevent other users from falling victim to any dodgy practices. And we’ll use this information to keep the list as updated as possible – so check back here for all the latest updates when you can.

Investigated brokers

The sad reality of the foreign exchange trading world is that there are people who are out to make a fraudulent buck from innocent traders trying to build their portfolios. Whether it’s insider trading or some other manipulation of the international markets, trading fraud can take many guises – and it can even have links to the wider stock markets as well. As a result, it’s wise to keep yourself fully informed about what the brokers you are considering are up to – and make decisions to avoid those who don’t offer the level of safety and security you require.

Below is an up to date list of the brokers which we strongly advise traders to choose to avoid. There are plenty of other brokers out there who are trustworthy – and with these traders below exhibiting behaviours like copying websites of others, receiving warnings from regulators and more, it’s well worth avoiding them as you choose your own preferred provider.

Various global institutions have criticised the range of brokers included on this list. Whether it’s the australian securities and investments commission or the regulators of nations such as cyprus, there are organisations on here which have faced the wrath of some of the world’s leading oversight bodies. But, we’ve gone even further and responded to intelligence from our users in order to bring you an up to date list of brokers which, in our opinion, ought to be avoided. (see the full list at the bottom of this page).

Latest added forex brokers to avoid

OT capital. They have gotten a warning from ASIC.

EU capital. They ask you to deposit over and over again. They even try to get you to log in to your bank account over a shared screen.

Multiplymarket is a clone of trading technologies.

Bluetrading has an FCA warning for claiming to be FCA regulated when they, in fact, are not.

Facebook group investment/profits, FBO trading signals & bitcoin investments – they don’t allow withdrawals and block you as soon as you ask for a withdrawal.

ECN capital. They claim to be cysec regulated but are not.

GBCFX – unregulated broker having issues handling withdrawals.

Forex365options – they make you pay fees that aren’t even in any terms and conditions. Website hardly works either.

Toptrades.Co – not regulated so should be avoided.

Fx-premium. They are copying the website of JFD brokers so should be avoided!

Most trusted forex brokers

But despite the fact that there are clearly some untrustworthy web brokers out there in the forex world, it’s also the case that some brokers are more worthy of your trust. Many legitimate forex brokers have taken steps to gain the trust of their users, whether that’s by implementing rules against money laundering or simply by segregating client funds away from the operational funds of the broker’s business.

It’s not always possible to identify the legitimate foreign exchange brokers from first glance – but that’s where we can help. The list below is based on reviews which assess everything from the apps offered by particular forex brokers to the reputations they have among users for fairness.

To see a full list of our trusted foreign exchange brokers, why not check out this table?

Online trading scams

Find out how online trading scams work, how to avoid scams and what to do if you are scammed.

UK consumers are being increasingly targeted by investment scams carried out via online trading platforms where fraudsters offer trades in foreign exchange, contracts for difference and cryptoassets such as bitcoin.

Video: online trading scams

How online trading platform scams work

Investment scams using online trading platforms are often promoted online and via social media channels. Fraudsters typically promise high returns and use fake celebrity endorsements and images of luxury items to entice people to invest in their scams. The ads then link to professional-looking websites where consumers are persuaded to invest, either through a managed account where the firm makes trades on their behalf, or by trading themselves using the firm’s platform.

Most consumers report initially receiving some returns from the firm to give the impression that their trading has been a success. They will then be encouraged to invest more money or introduce a friend or family member to invest. However, eventually the returns stop, the customer’s account is suspended and there’s no further contact with the firm.

Many scam firms claim to be based in the UK and even claim to be FCA authorised.

How to protect yourself

Be wary of adverts online and on social media promising high returns from investing online.

Always be wary if you are contacted out of the blue, pressured to invest quickly or promised returns that sound too good to be true.

Always do your own further research on the product you are considering and the firm you are considering investing with.

Check the FCA register of authorised firms. If you use an unauthorised firm, you won’t have access to the financial ombudsman service or financial services compensation scheme (FSCS), so you’re unlikely to get your money back if things go wrong. However, not all investments are regulated by the FCA. For example, we don’t regulate most cryptoassets, but we do regulate certain cryptoasset derivatives (such as futures contracts, cfds and options). Read more about cryptoassets and forex scams.

Check they are not a clone – a common scam is to pretend to be a genuine FCA-authorised firm (called a ‘clone firm’). Always use the contact details on our register, not the details the firm gives you.

Check the FCA warning list – use our tool to check the risks of a potential pension or investment opportunity. You can also search to see if the firm is known to be operating without our authorisation.

Check with companies house to see if the firm is registered as a UK company and for directors' names. To see if others have posted any concerns, search online for the firm's name, directors' names and the product you are considering.

Seriously consider getting independent financial advice or guidance before investing. You should make sure that any firm you deal with is regulated by us and never take investment advice from the company that contacted you, as this may be part of the scam. The money advice service has information on investing and about how to find a financial adviser.

If you have been scammed

You can report the firm or scam to us by contacting our consumer helpline on 0800 111 6768 or using our reporting form.

If you have already invested in a scam, fraudsters are likely to target you again or sell your details to other criminals.

The follow-up scam may be completely separate or related to the previous fraud, such as an offer to get your money back or to buy back the investment after you pay a fee.

If you have any concerns at all about a potential scam, contact us immediately.

If you’re suspicious, report it

You can report the firm or scam to us by contacting our consumer helpline on 0800 111 6768 or using our reporting form.

If you’ve given your bank account details to a firm you think may be operating a scam, tell your bank immediately.

Forex scams

Top 7 forex scams to avoid today

As forex markets promise to give you an incredible return on investment, they became trendy in the last few years. However, often forex traders don’t have a great understanding of how forex markets work and what a forex broker does exactly, which leaves the latter a lot of room to scam the trader. Whether it is about proposals on instagram or simply fake investment advice, beware.

It’s a complicated industry, and even experienced people fall victim to intricate trading schemes. There are quite a few variations of the forex fraud. Let’s take a look at a few of them. Feel free to add names of questionable forex platforms in the comments section, at the bottom of the article.

Forex trading strategies – scam 1: the whole package

According to the specialists at investorguide.Com, this might come your way by crooks “creating false customer accounts for the purpose of generating commissions, selling software that is supposed to garner large profits for the customer, false claims of customers making huge money, the theft of a customer’s account and phony marketing.

Forex scams draw customers in with sophisticated advertisements placed in the newspaper, heard on the radio, or seen on internet websites.

Forex trading strategies – scam 2: computer manipulation of bid/ask spreads

How does this scam work? According to dailyforex.Com (a great team of analysts and researchers who watch the market throughout the day to provide unique perspectives and helpful analysis on forex trading), “the point spread between the bid and ask basically reflects the commission of a back and forth transaction processed through a broker. The point spreads differ widely among brokers and differ between currency pairs.

Since brokers don’t usually offer the normal two- to three-point spread in the EUR/USD, for example, but go for spreads of seven pips or more, any potential gains resulting from a good investment were eaten away by commissions. These commissions found themselves in the broker’s pocket.

Forex strategies – scam 3: commingling funds

In law, commingling is a breach of trust in which a fiduciary mixes funds that he holds in the care of a client with his own funds, making it difficult to determine which funds belong to the fiduciary and which belong to the client.

When it comes to the forex scam, the same team at dailyforex.Com explains: “commingling funds gives forex brokers the opportunity to pocket much of an investor’s money without the client ever noticing any discrepancy. The broker benefits financially during the trading and eventually disappears with a customer’s money.”

“if a forex trader looks carefully and states vigilant he/she can pick up are certain warning signs which can alert him/her when all is not on the straight and narrow. If a broker won’t allow the withdrawal of monies from investor accounts or if problems exist within the trading station, the trader should take immediate notice.

Additionally, guarantees of high performance levels-some much higher than those offered by other forex brokers-should be viewed with considerable skepticism.”

Forex strategies – scam 4: robots/automated systems

Surprised? Don’t be. This is an increasing scam especially with the advancement of the technology. Questionable brokers sell automatic trading systems which claim to generate automatic trades even when the trader is sleeping.

Some shady companies sell their special “packages” for thousands of dollars, only to find out that some of these you can find on the internet for free.

“most of these robots have not been tested by an independent source for formal review. Their trading system’s parameters and optimization codes are usually invalid and at the end of the day, the system generates totally random buy and sell signals”, concludes dailyforex.Com.

Forex strategies – scam 5: fake investments funds

All kinds of HYIP funds have been notoriously showing up everywhere. Simply because they work; for the scammers! The high yield investment program funds ‘guarantee’ you a great level of return for temporary use of your money in their forex fund.

The concept that sells this ponzi scheme is that the investors of yesterday get paid back by the investors of tomorrow. How the scam works is that once the fund runs out of prospects, it closes down and takes whatever money it has with it.

Must read: online college course scam

Forex strategies – scam 6: signal seller membership

Just like the robots, certain ‘signal sellers’ claim to sell you information on which trades you should make in order to get rich. The trick is – they charge a weekly or monthly fee for their service (‘signals’).

Little do you know that not only you are lose your money, but they do not even offer you anything that will help improve your trading!

Forex on instagram – scam 7: fake accounts

With the advancement of technology, there are many well-run online scams on social media when it comes to forex. Some have over a thousand ‘followers’ losing money as the fraud is advertised as a get rich quick scheme.

People are signed up to a trading platform through so-called ‘companies’ and are asked to deposit their hard-earned money to deposit $400 (or EURO). Ultimately, they lose it all through investment advice from kids who earn a kickback when clients give money to the platform used to sign up.

These questionable forex platforms have recruited and paid multiple young adults from ages 18-21 to promote their scheme online. They get paid for luring new people into the system. They also use well known social media influencers to promote them and tell lies about the service.

How to avoid the forex scams:

There are many red flags you should be aware of. The first one would be when you are guaranteed a profit. There are no guarantee profits in forex. Use your computer and search reviews featuring the broker, or the system, or the signal seller.

Make sure the testimonials are genuine and do not come from their own websites. Check all the forex forums and google the name of the broker followed by the word ‘scam’.

Check their website very carefully. If they don’t have a legitimate contact page with phone numbers and emails, that’s another red flag.

Last but not least, keep in mind that there is no ‘miracle’ software that will figure out the forex market for you. If anybody would own that, why would they sell it?

How to report **the forex strategies scams:**

Make your family and friends aware of this scam by sharing it on social media using the buttons provided. You can also officially report the scammers to the federal trade commission using the link below:

How to protect yourself more:

If you want to be the first to find out the most notorious scams every week, feel free to subscribe to the scam detector newsletter here. You’ll receive periodical emails and we promise not to spam. Last but not least, use the comments section below to expose other scammers.

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Legit forex trading

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The foreign exchange (forex) market is huge, with an average daily trading volume of more than $5 trillion, including currency futures and options.

That means the chance still exists for many forex scams that promise quick wealth through "secret trading formulas," or "forex robots" that do the trading for you.

Before getting involved in forex trading, perform your own due diligence by visiting the background affiliation status information center (BASIC) website created by the national futures association (NFA), the futures and options industry's self-regulatory organization, to learn how to choose a reputable broker and avoid scams.

Before dealing with the public, every company or someone who wants to lead an off-exchange forex business is needed to become a member of the NFA and to file with the commodity futures trading commission.

The government office that oversees futures and options trading.

You can search BASIC to find out what regulatory actions, if any, have been brought against a particular person or firm.

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Signal sellers

One of the challenges a rookie forex investor faces is finding out which operators to trust in the forex market and which to avoid.

Signal sellers are one group of operators to observe carefully.

A signal seller basically offers a system that purports to identify appropriate times for buying or selling a currency pair.

The system may be manual, in which case the user must enter trading info, or it may be automated to put through a trade when a signal takes place.

Some systems depend on technical analysis, others depend on breaking news, and many use a combination of the two.

Signal sellers usually charge a fee for their services.

The signal sellers' frequent criticism is that if it were really possible to use their system to beat the market, why would the individual or firm that has this information make it widely available? Wouldn't it make more sense to use this incredible signaling system to make huge profits for themselves?

Other analysts distinguish between known scammers and more respectable sources of market information that offer a well-thought-out signaling service.

There is a larger difference of opinion about whether anyone can predict the next move in a trading market behind these opposing views lies.

This fundamental disagreement won't be settled any time soon.

Eugene fama (economist, nobel prize-winning) proposes in his well-regarded efficient market hypothesis that finding these kinds of momentary market advantages really isn't possible.

Robert shiller (economist, nobel prize-winning) believes differently, citing evidence that investor sentiment creates booms and busts that can provide trading opportunities.

The best way to determine if a signal seller can benefit you is to open a trading account with one of the trusting forex brokers and enter practice trades that

Be patient, and with time, you'll determine whether predictive signaling works for you or doesn't.

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Forex investment management funds

In the last few years, forex management funds have proliferated. Most of these are scams.

They offer investors the "opportunity" to have their forex trades carried out by highly-skilled forex traders who can offer outstanding market returns in exchange for a share of the profits.

The problem is, this "management" offer requires the investors to give up control over their money and to hand it over to someone they know little about other than the hyped-up and often a completely false record of success available on the scammers' website and brochures.

Investors often end up with nothing, while the scammers use investors' funds to live high on the hog.

A good rule of thumb in the forex market, as with other areas of investment, is that if it sounds too good to be true, such as annual returns of more than 100 percent, for example, it's almost certainly a scam.

Dishonest brokers

Although the forex market is not fully regulated, it has no single central regulatory authority.

However, the spot forex market, which accounts for the majority of trades, is completely unregulated.

This gives the opportunity for some forex brokers to deceive their clients and do not deal with them fairly.

Find an online forex broker - find the best broker for your trading

Any trader can avoid a bad broker by dealing with trading companies approved and licensed by the securities and exchange commission (SEC) and the financial industry regulatory authority (FINRA).

Although forex trading itself may be unsupervised, the SEC and FINRA broker may not risk licensing other securities by fraudulent forex clients.

So, let's see, what we have: many have heard of the scams that took place in the early days of the forex market. Things have improved, but it still pays to be aware of new scams. At legit forex trading