There are a few ways you can spot a scam Forex broker. These include: trading without a license, working with well-placed criminals, lack of regulation, and unverified results. To avoid being a victim of a scam Forex broker, you should always ask the broker for documentation of their trading results and trading system.
Trading without a license
It is crucial to check out the credentials of the forex broker you intend to deal with. Some brokers claim to be regulated but aren’t. They try to fool prospective investors by making false promises about their profits. Moreover, these brokers may use client money to bolster their operations. If you are dealing with such a broker, you must avoid it at all costs.
While it is true that the Forex market is crowded and fast-moving, it is not as safe as some people think. This is because the Forex industry attracts criminals. Security cameras and law enforcement agencies often fail to notice such activity. In 2013 alone, the FBI arrested 47 Forex scammers.
Forex scams can be classified as one of three types. One is the signal seller Forex scam. These brokers will attract investors by promising a fixed amount of profits every time they buy or sell currency. These scammers use a “robot” or signal seller to trick investors into investing in their system. Such scammers also use misleading information and make empty promises. They can also make it difficult for their customers to withdraw their funds. Moreover, their platforms are often inefficient and their orders do not execute properly.
Working with well-placed criminal partners
There are many ways to identify scam Forex brokers. They may use cold calling or other unscrupulous practices to approach you and make you sign up for their signal services. Their aim is to earn a large commission from your trading activity, and this is illegal under SEC Rule 15c1-7.
The most common warning signs of Forex scam brokers are: promises of high returns on small deposits. Such brokers are often not legitimate, and most likely are individual players posing themselves as real brokerage companies. The owners of such websites usually lack licensing and regulation, and are able to fabricate false information to convince you to invest with them. In addition, the scammers often do not respond to requests to cease contact.
To further convince you to invest in Forex, scammers may offer a demo account that lets you practice trading using fake money. Despite the fact that trading on Forex is not a pyramid scheme, scammers will often use the registration number and name of an authorised broker to trick you into believing that you are investing with them. Some will even set up websites that look identical to the real thing.
Forex scammers will try to sway you into investing in their funds by promising high returns on investment. However, most people who send money to such scammers never see it again. In addition, they will often deny receiving any funds. This is because scammers will often open unregulated broker accounts and do not offer money back guarantees.
There are other signs that a broker is a scam, such as persistent unsolicited marketing. These brokers will constantly pressure you into buying something, and they may even be using your information to steal your identity. Therefore, you should avoid any broker that makes such claims. It’s best to stick to your common sense and avoid any broker that makes unrealistic claims.
To avoid falling victim to scams, you should read up on common scam tactics. Most of these scams mimic reputable investment firms and brokers. These brokers will contact you by phone, email, mail, or referral. Always make sure to check the background of the broker before investing.
Lack of regulation
The lack of regulation among scam forex brokers is one of the biggest concerns for forex traders. The vast majority of forex brokers listed on the blacklist are not regulated. However, there are legitimate reasons for this lack of regulation, such as Forex bucket shops and pyramid schemes. Because of this, it is important to check the registration of your broker. A regulated broker offers traders assurance that the broker is reliable, honest, and places orders on the interbank market. This helps traders avoid the risk of being scammed.
Another common scam is the signal-seller scam. This type of scam operates by inviting forex traders to subscribe to a signal service and generate large brokerage commissions. This practice is a violation of SEC Rule 15c1-7, which specifically prohibits churning. If your forex broker is not regulated, you should not trade with them.
Another common scam involves unregulated brokers. These unregulated brokers do not have to report to any regulatory body. As a result, you cannot be held liable for any scams or malpractices they commit. Moreover, they are not held accountable for any system glitches, failure to process withdrawals, and theft of money.