Choosing a forex broker, although much easier than it was in the nineties, is a still a daunting task. Technology has changed everything in such a way that anyone with criminal intent on their mind can easily set up a virtual website, appear to be the most creditable broker known to man, and then scam its victims outside the long reach of the law. The Internet, unfortunately, is the greatest enabler of our time for both good and evil, but it requires a keen eye and a skeptical mind to weave through the maze of ads that can excite, manipulate, and ultimately fleece you of your hard earned cash.
At Forexfraud.com, we continually preach to all, who visit out website: “Don’t be a victim!” It happens, far too frequently, even in today’s modern world. Regulators have gone out of their way, especially in our developed economies, to police the retail forex trading space. These agencies are your friends. They are there to protect your interests. Forex fraud is, however, global. As security professionals have warned, fraud is like a balloon. If you squeeze it in one place, it will pop out somewhere else.
Forex brokers bent on fraud have been able to move quickly about the globe. When “squeezed” in one jurisdiction, they immediately move to a more receptive locale, where local regulators are either nonexistent or are so lax that their presence is not of significance. The U.S., the EU, and the UK have come down hard on the forex industry in recent years, driven by a mountain of consumer complaints of unfair business practices that border on outright fraud or were always intended to be scams.
The industry is in the midst of reacting and responding to these new rules that are changing how legitimate companies compete in the marketplace, but the fraudsters are thriving on this new environment by tempting retail forex traders to consider what has always been a nightmare waiting to happen – dealing with an offshore broker that promises high levels of leverage, enormous bonuses for just signing on the dotted line, and whatever else it takes, in some cases managed funds that offer unheard of returns, to attract your to their website and make a sizable deposit.
So how do you protect yourself in this “New Normal” of retail forex trading?
We can detail how fraudulent brokers operate, the types of scams that are prevalent in today’s market, and what red flags are there to be seen, but until you walk through the actual process of choosing a forex broker, either because you are a beginner or someone that needs to change from an untenable situation, you may not be able to assimilate the warning signs that we discuss when needed.
So let’s walk through a potential selection process and tiptoe through the morass of obstacles that may be thrown in your path to push you towards a bad decision, step by step. Let’s also presume that you are not inclined to deal with big brand names, where you may only be an account number. You want an “outlier” that can propel you forward rapidly on your path to riches…
Step #1: You respond to a tempting ad on social media or in an unsolicited email
The website is “glitzy”, visually appealing, with pictures of happy people enjoying the good life, obviously having been enriched by working with this broker. The normal tabs are displayed. You select “About Us” and find many platitudes of how quickly you can be like the people shown in the pictures… BUT, there are no names shown, no brief bios shown for your review, and no letter from the president that ensures that you have found the right place, backed by experienced personnel with track records of success.
What if names are shown? Do you believe what you read? It is wise to validate the names through Google searches or searches conducted on LinkedIn or Facebook. Crooks often copy over entire resumes and management team names, assuming that you will never check them out. What locations are given? Have you Googled those location addresses to see if they are valid? Many fraudulent brokers claim to have several offices, especially one with a prestigious London address that brings immediate credibility to anyone that accepts on faith what they read on an Internet website.
Are phone numbers given? Is their Live Chat? Check them out. You can Google a phone number, too, and you might be surprised at what comes up as having the very same phone number. Experiment with the Live Chat service. Will they divulge the names of the management team? Where is the Live Chat person actually physically located? How long have they worked for the firm and how old is the company? Do any of these answers jive with what is presented on the website? Can the customer service representative speak knowledgably about the various services offered, trading platforms supported, and number of currency pairs that can be accessed?
Step #2: Is this broker regulated, who is it, and where is the regulator located?
Once you get past the “flash”, it is time to get to the most important question – Is this broker regulated? It is also very easy to claim to be regulated or licensed or what ever it takes to win you over, but having to comply with a reputable regulator with a strict reputation is a good thing. Fraudulent brokers will do their best to disguise themselves or wrap themselves in a cloak that appears to have “regulated” written all over it, but you must verify their regulatory credentials. Do not believe what you read. Go to the regulatory source, ask questions, and perform your due diligence.
If the locale is some far off exotic destination, you might want to step back and do a bit of research on the country in question. Independent of the broker, you will need, in this case, to do a spot check on the regulator and its reputation in the industry. Many of these destination countries are enclaves for casinos and gambling. Do you want the professionals running your broker back office to be more acquainted with financial markets and how they operate or with how gambling houses make their profits? Agencies that oversea gambling operations are generally more concerned with verifying the government’s cut of the profits than with protecting your rights as a trader and a foreign one at that.
Step #3: What does everyone else think?
If you want to have your eyes opened wide, search for a few websites that specialize in listing fraudulent forex brokers. There are several out there, but you will be amazed at how many “bad guys” there are and counting. Several of these sites, however, are “customer driven”, in that the site does not proactively search out and list shady brokers. They instead allow customers to post whatever they wish to say about a broker. Accept for a moment that forex trading is not easy. Casualty rates are high, and as a result, there are a lot of angry ex-traders out there that would prefer to blame a broker for their lack of success, rather than take responsibility for their own lack of preparation.
Whether on the broker website or one that purports to review brokers, you may also find quite a few testimonials. Many of these may be planted, fake advertising spread about by the fraudsters as bait to attract you. You will find both positive and negative ones, but after allowing for the angry ones discussed above, you are best served by a “cumulative” feeling that you perceive after reading several of these so-called testimonials. How many times have you taken the time to write a good reference for someone? We suspect not often. The negative ones, perhaps, carry more grains of truth, but your personal judgment will be tested here.
You will want, however, to visit sites that primarily review brokers and check out what they have to say. Yes, many of these sites collect fees from the brokers for forwarding business their way, but if you do not find the broker you are considering listed on several sites in a “Top Ten” or even “Top 20”, then that tells you something. Just because your chosen broker claims to have won all manner of awards for best this and that, the mere fact that they received any award would have required a number of sites to review them.
One reason for not finding them reviewed may be because they are relatively new. Retail forex brokerages are in a very competitive space, where turnover is frequent due to high casualty rates. Sales and marketing must always be seeking out new customers, but new brokerage firms have a difficult time early on building a client base that stays. It might be better to wait a bit before jumping for the latest new arrival, even if they claim to be cutting edge. Examine the management team. If they are ahead of the game, they will want to impress you with their bios and trading experience and expertise.
It is not the “Wild, Wild West” today in the retail forex trading arena, as it was back in the nineties, but there are still many shady operators across the globe that are eager to take your money and run. Offshore brokers continue to be the major source of fraud in this industry, but there are legitimate firms in overseas markets, too. Today’s technology allows the crook to clone respectable sites, move about the world to escape law enforcement, and dazzle you with a host of marketing tricks, designed to gain your trust. Your job is to bypass the glitz and find if there are true “diamonds” inside.
If you do decide to go with an “outlier”, so to speak, start out slow. There is no reason to jump in with both feet. Try the broker out with small amounts first. See if the trading platform is to your liking and that spreads and fees are as expected. After a month or two, request a withdrawal and see what happens. Actions always speak louder than words or website copy. Let your broker earn your trust and prove that it is reliable and viable before increasing your initial deposit. After all, the broker is your business partner.