Brokers are an essential part of retail forex trading but selecting a legitimate one is not that straightforward. Fortunately, traders can use a mix of online tools and research to find brokers that are legitimate and to spot scams before they are exploited by them. Here is the best forex trading platforms for beginners
Regulation matters
The high liquidity and scale and scope of forex make market regulation very important; however, there is not a single, centralised governing body. Forex is regulated by a range of different supervisory authorities that set specific standards such as registration and licensing, audits and robust requirements that brokers under their jurisdiction must comply with. The supervisory body based in the UK is called the Financial Conduct Authority (FCA).
Regulation should be the first factor you look out for when selecting a trader as this will act as a layer of insurance. You will be able to get in touch with somebody if there are problems and issues. A company without any apparent regulation is more than likely to be a scam.
How to find a reputable broker
There are lots of forex scams, but the most common tactics that malicious third parties deploy to dupe unsuspecting victims include signal seller scams, robot scams, Ponzi schemes and fake broker scams. The latter two are the most pressing concern for new traders as purchasing currency pairs often requires a large upfront sum of capital.
Fortunately, you can filter out bad actors by conducting due diligence before you start trading. Perhaps the best way to find out whether a broker is genuine is to open a demo account and use it for a short time. You can also read forex broker reviews from reputable sources online and use search engines to find general information about a broker.
Visiting a few of the forex forums scattered across the web will also provide real opinions and views from traders who are already using platforms every day. Try to use a variety of sources for your research to get a balanced overview of brokers and what they can potentially offer you. As noted earlier, regulation and licensing should also play a significant part in your decision.
Potential red flags
Forex scammers will use a variety of digital and offline touchpoints to find potential victims. The most common methods include traditional telephone and mail channels and internet-based advertisements and referrals. Scammers can be persuasive in their attempts to bring people on board and will use expectations of large profits, low-risk investment and urgent decisions as methods to push things forward.
In addition to general research for brokers, you can address potential scammers directly by asking whether they would be willing to explain the investment proposal to an advisor, banker or accountant in writing. If your broker does not respond to any queries, it may be a sign that they are not acting in your best interests. Remember to check the licence expiry date for a broker and also read the fine print on the website.
While fraudulent third parties are operating in forex, with an investigative mindset and knowledge of the most popular scams, you can navigate your way to selecting a broker that is right for you.
