If you are starting out in online trading, finding the right Forex broker can be challenging. Of course, you want to be sure that you are choosing a reputable and reliable broker, however if you carry out an internet search, you will no doubt be shocked to discover a surprisingly large amount of Forex broker scams. Although the Forex industry is being subject to increasing amounts of regulation, there are still a number of scam Forex brokers who should not be trusted. Luckily, over time, they tend to get discovered and removed, however when participating in Forex trading, it is essential to find out which brokers are considered to be trustworthy and which are not. To determine which ones you can rely on to execute your trades responsibly, you need to make sure that you have taken all of the necessary steps to check the reliability of your broker before you deposit any funds. One way to do this is to check sites that have reviews about Forex brokers compared in-depth, as this will enable you to find the opinions of experts and other clients.
Separating Fact from Fiction
It is important when looking at reviews, articles and posts on forums about the various brokers out there to be realistic and to take everything with a pinch of salt. If a trader fails to make a profit with a particular broker, they may place the blame on their services and post disgruntled comments which may not necessarily hold true for every client. Therefore, separating fact from fiction is key, remembering that the broker is not always to blame. Experienced traders are aware of how the market works and are more likely to make a profitable trade while the new trader may well have no tried and tested trading plan or strategy, and be simply trading based on “a hunch”. When this tactic fails, they sometimes feel that the broker has scammed them even though this is not the case. Sometimes, however, the loss may be the fault of the broker, for example when they have tried to rack up their trading commissions at the expense of the client. A few unscrupulous brokers, for example, move their quoted rate to trigger a stop order when the rates of other brokers have not reached that price. However this is not very common, as the majority of brokers realise that it is in their interest to build up a base of loyal long term clients.
The Real Problem
Traders sometimes begin to experience real problems when the communication between themselves and their broker breaks down. When an investor no longer receives responses to their emails from their broker, when they can no longer be contacted by telephone or when their responses to queries are vague and unhelpful, the trader would be right in thinking that their broker may not have their best interests at heart. One of the biggest problems that may be encountered is a difficulty in withdrawing funds from an account – a broker should always resolve issues like this promptly, providing helpful and efficient customer service. If they fail to adhere to this obligation, the broker may well be untrustworthy.
The best way to protect yourself from an unscrupulous broker is to avoid registering with one in the first place. Follow these steps to avoid being scammed:
- Search for online broker reviews and read them carefully, looking for evidence of legal action against the broker. Remember that some negative comments may well be from disgruntled investors.
- Check for complaints about withdrawal of funds. If there are any, attempt to contact the user, asking them about what happened.
- When registering for an account, take the time to read the small print, especially relating to the terms and conditions surrounding bonuses and withdrawals.
- If you are happy with the results of your research about your chosen broker, open an account that allows you to only deposit a small sum of money initially. Try trading for around a month and then withdraw your funds. If all goes well, you can deposit a larger amount. Alternatively, if you encounter problems, try discussing issues with your broker. If this does not produce a satisfactory result, make sure to review your experience on online forums to help other traders.
- Remember that the size of a broker is not a useful indicator of risk. Even large and popular firms are not always risk-free as we saw in 2012 when Worldspreads went into administration for failing to segregate client funds.
What If You’re Already Stuck With a Bad Broker?
If you have already opened a trading account with a broker that has turned out to be unreliable, your options are somewhat limited, however there are some actions that you can take.
Make sure to read all of the paperwork carefully to ensure that the broker is definitely in the wrong. You may have failed to properly read the documentation that you signed or missed key clauses which would place the blame at your own door.
Avoid being rude to your broker, but take a stern tone. You should inform them that you will be forced to take action if they fail to allow you to withdraw your funds from your account or if they cannot give you an adequate response to your queries. Outline the steps that you will take, which may be posting negative online comments on review forums, making a report about the broker to its regulatory authority or contacting Forex “policing” sites like ForexPeaceArmy.com, informing them that they are a scam Forex broker.
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