SPOTTING A FOREX BROKER SCAMMER
Search forex broker scams in the internet, and you will be surprised with numerous results you will see online. Even though the forex market is becoming more regulated, there are still many unscrupulous brokers everywhere. But before concluding whether a forex broker is a scammer or not, let us first find out whether a given trading situation is a sign of forex scam or merely a trader’s mistake.
The first thing traders must learn when looking for a potential broker is to separate fact from fiction. They should determine whether a trading discrepancy is entirely their fault or the broker’s shortcoming. Frequently, new forex traders fail to trade using a tried and tested strategy or trading plan. Instead, they trade when psychology dictates they should. Experienced traders are aware of these tendencies and do not give in, taking their trade the other way. Some trades fail because the trader did not understand market dynamics most of the time.
But there are times brokers bring such losses, occurring when a broker tries to gain commissions at their client’s expense. Certain brokers modify quoted rates to ignite stop orders when other rates have not touched that price, but such incident won’t possibly occur to traders. Trading is not a zero-sum game, and brokers earn commissions through raised trading volumes. So it is best for brokers to have long-term clients that regularly trade and sustain capital or generate profit.
Slippage is the other issue that can be accounted for psychological phenomenon. If traders feel they might miss a move, they hit the buy key. If they feel they might lose more, they press the sell key. In volatile exchange rate movements, the broker cannot assure a particular order will be executed at the desired price. Same thing with stop or limit orders. Not all brokers can guarantee stop and order fills. Slippage happens even in transparent markets because the market fluctuates.
Therefore, what we perceive as a scam is not always a scam.
However, real problems begin to emerge when the communication between a trader and his broker stalls. If a broker cannot respond to the trader’s queries via email or phone, or if he gives evasive answers, these may be red flags a broker may not be looking after the trader’s best interest. A good broker must deal with such problems and explain any arising issues to the client. He must also be helpful and show good customer relations. One of the most perennial problems between a broker and a trader is the latter cannot take out money from his trading account.
Scammers are everywhere. So traders should be more vigilant in protecting themselves against unscrupulous brokers. The following steps should help:
- Search for online reviews of the broker. Get all of the reviews and filter it based on what was mentioned in the first portion, as well as any outstanding legal actions against the broker.
- Look for any complaints about not being able to withdraw funds. If there is, contact the user and ask the person about his experience.
- When opening an account, read through all the fine print of the documents. For example, incentives to open account may be used against the trader when trying to withdraw funds. Make sure to understand all the stipulations on withdrawals and whether incentives affect withdrawals.
- If satisfied with research on a specific broker, open a mini account or any account with a minimum amount of capital. Trade that account for at least a month and try to withdraw money from it. If everything goes smoothly, it is safe to deposit more funds. If there are any problems, talk through it with a broker. If the problem is not resolved, open an account to another broker. Post a detailed account of your experience online so others can learn from that. Just be more careful next time.
If Stuck with a Bad Broker…
That’s a tough situation. Although options are very limited at this moment, there are few things traders can do:
- Read through all the documents to make sure the broker is actually wrong. If you find out you missed something or failed to understand the documents you signed, you have no one to blame but yourself.
- Be stern – not rude – with your broker. Voice your problems to your broker. And if he did not take necessary actions to deal with it, point out the course of action you will take. Measures include writing comments online in a forum or other available platforms, reporting the broker to the regulatory body, or marking them as a scam on forex policing sites such as forexpeacearmy.com.
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