When looking for a Forex broker, there is always a chance to come across a fraud. There are some traits that all scams have in common. In this article, we would like to draw your attention to 3 main signs of the Forex scam.
Offshore Location & Absence of regulation
Untrusted Forex broker would probably be hiding in the so-called tax havens. If you see that the broker is located somewhere like the British Virgin Islands or the Republic of Dominica, it will most probably turn out to be the fraud. You will not be able to visit the office of the company if there is a necessity.
In the majority of cases, FX frauds are not regulated, which has a lot to do with the offshore location chosen by the broker. Scams usually avoid regions with a high degree of regulation. Therefore, you will not find any legal information on the scam broker’s website.
Highs costs & poor platform performance
Scams do not struggle to deliver exciting trading features. Most often, they will offer poor trading conditions. What exactly?
Forex scams utilize high spreads on the trading instruments. For instance, EUR/USD spread is usually 1/2/3 pips, whilst FX frauds will ask you to pay the spreads much higher than this. Additionally, such spreads are most likely to be of the floating type. We do not say that variable spreads are unfavorable for traders, however they give more space for scams to make you pay more. Similarly, scams may request extra commissions for processing the orders or can charge a fee for depositing and withdrawing funds.
Instead of having all Forex brokers analyzed, you can clearly define the scam if the platform offered has poor performance. Different broker reviews usually describe the real experience of trading on the platform, though you can check the trading platform on your own with the help of a demo account. The delayed order execution, platform bugs, limited functionality and scarce charting package are just some of the factors that define the bad trading platform. Another common issue here is the slippage, which increases the costs of trading.
Negative online reputation
Online reputation is a key factor that can assist in determining the scam broker. If negative reviews of the broker are prevailing, what are the reasons for this? This is pretty self-explanatory.
Many clients were fooled by the scams, since they believed the empty promises about 100% payouts, zero commissions, tight spreads and other things. Adverse online reputation is also caused by unfair practices like withdrawal refusal, hidden commissions or unauthorized trading. Hence, we recommend you to read user testimonials on forums and broker reviews on the independent websites in order to be safe.
The Bottom Line
Forex scams hunt for the hard-earned money of clients and they do not bother to serve traders well. By using these 3 signs of Forex frauds, you will certainly distinguish the great broker from the scam one.