HIGH RISKS, No Regulation. Why are Forex Scam Brokers Successfully Working In Developed Countries?
Forex traders with little experience can be knowingly targeted by unregulated brokers attempting to fraudulently obtain their money.
Regulation of this industry has continued to improve, providing traders with peace of mind. However, there will always be shady operators.
How the Regulators Evaluate Churning
An arbitration panel will take several factors into account when they carry out hearings to decide whether a broker has been churning an account.
If you have questions about this, then don’t hesitate to file a complaint on the SEC’s website.
Different Types Of Scam Brokers That You Can Find Even In Developed Nations
Fake / Unregulated Brokers
Fake, unregulated brokers can entice traders with promises of guaranteed profits or other unrealistic offers. Since FX trading are now done online, it is easy for fraudulent companies to put together a high-tech web presence that looks completely credible. So, perform stringent checks on the broker before entering into any trading agreement.
Check for the company address and verify it; check the website Whois information and make sure it is registered in the company’s name.
The regulatory status should be declared on the broker’s website as it’s an important indicator of whether or not a firm can be trusted.
Brokers To Avoid
Notorious unregulated brokers can be discovered with an internet search. Firms publicly highlighted by the FCA as being unauthorized include:
- AMFX (www.amfx.com)
- Banco FX or Banko FX (www.bancofx.com)
- TFX Traders (www.tfxtraders.com)
- Golden Green FX Limited (https://www.ggfonline.com, https://www.goldengreenforex.com)
A couple of reputable alternatives include AvaTrade and eToro.
Clone Broker Firms
Some firms may appear to be regulated at first glance because they are registered on the regulator website and are able to provide a registration number. But further investigation shows that they are merely similar to a genuine, regulated broker. They use a slightly different spelling of the registered broker’s name. That is why you should carry out detailed checks before entering into an agreement with a broker.
Clone Regulator Websites
Fake brokers can publish their regulatory status on their website and link it through to the regulator web page where their entry appears to convince a trader that they are legitimate. Except that it isn’t the regulator website at all, it’s actually a clone that they have intentionally set up to look authentic.
To avoid this trap, go to the real regulator website and search the register for the broker, rather than trusting a link from the broker’s site.
Signal sellers can be companies claiming they can identify the best trading opportunities, and if they are a sham, they often promise quick profits.
They usually claim to have extensive experience and remarkable technical analysis abilities, and these statements are often backed up by glowing testimonials from numerous traders. If you want to go ahead and use a signal seller, you are responsible for vetting their reliability before proceeding with the transaction.
Fraudulent Fund Managers
When investors start to receive additional demands for money since markets did not go as predicted and the fund manager needs to correct the position, this is certainly a bad sign.
Manipulation of Bid /Ask Spreads
The naivety of the trader is what this kind of scam relies on, as it believes that they are going to be more focused on checking market movements than the commission being taken by the broker through their bid and ask point spread. The larger the spread, the more money is being stolen by the broker, and this reduces any potential profits for the trader.
Stop Loss Hunting
Deceitful brokers have been known to manually close a position before reaching the stop loss set by traders in order to gain additional trading commissions.
While traders may blame brokers for their losses, there are times when brokers 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 it goes well, then another deposit can be made.