The FOREX market is the biggest market in the world; transactions are round the clock, 24h a day, five days a week. Owing to its vast size and having no certain geographic location, it is possible to trade from any part of the world as most of it is done online. Any person with a computer and a stable internet connection can trade and become a player in the market. With banking and cash transfers between countries also possible almost instantly, the FOREX market is rife with scams. The FOREX market is slowly becoming more and more regulated, but until that is complete, it should go without saying that it is better to be safe and be aware of the scam artists.
Here are five ways to spot a fake broker:
Never deposit without checking
If your broker is willing to accept large amounts of money from you right away without performing any checks or if the broker requires you to transfer a big bit of money right away to his account, it is most probably a scam. Never deposit money into an account unless you are 100% sure of what you are doing.
Read and research
Research about the firm or the broker, find out the firm's reputation before even considering it. Thanks to the internet, doing research about a person or company is not that hard. Look up news articles about the firm and its trading practices. There are many scam firms that look, feel and even present themselves as part of or plainly impersonate big firms. Even their logos may match, so you have to be careful. Look up complaint boards, they are a big source of information on most things. What you should look for is complaints on withdrawal. If people are not able to withdraw their cash immediately when they want to, it is a major red flag.
It is often said that the devil is in the details and it is true with most FOREX traders. Before committing to a firm, read through their contract. Read every single word of it, if you are not sure of what you read, ask the company representative. Pay special attention to the parts about contingencies and safety of your investments and other policies regarding withdrawal and exit. They should explain it to you, if they are not sure of what they are saying or are intentionally vague, move away from them.
Test the waters
If you feel like they can be trusted, open an account for trading, deposit a small amount of money, an amount that will not hurt you too much if you lose a portion of. Test the firm to see if they keep their word. Also check for how well they listen and more importantly how well they are able to take instruction and keep you in the loop. Trade for a month and then without warning, attempt to withdraw a good sum of money, see how well or badly they respond.
If you are not satisfied with the results, or if you are able to identify a clear case of fraud, report them to the authorities or watchdog organizations.
While there are a number of scams out there, you have to remember that not all of them are so, a lot of disgruntled investors and traders may just lay their frustrations out on a firm calling them a scam if they make losses. Most FOREX traders face losses as making consistently strong profits is almost impossible here, so be subjective in your analysis before you dismiss a firm.