Although the field of online trading had been making a lot of progress over the past several years, scam brokers have not yet completely disappeared. This should be a great concern for traders looking to benefit from enhanced trading conditions by choosing to work with a questionable broker.
The regulation currently in place in Europe or North America was specifically designed to prevent a CFD or forex scam from conducting illicit activities. However, if you want to know some of the common warning signs suggesting that you’re dealing with a scam broker, we hope this material will help you.
# Not regulated by any major financial entity
A professional online trader will always take a first look at the regulatory background of the broker. In case it is not regulated by any well-known financial agency (Financial Conduct Authority in the UK, CySEC in Cyprus, ASIC in Australia, BaFIN in Germany, etc.) that means there is no government agency making sure the broker is working in line with the highest trading standards.
At the same time, it would be an important bonus if your broker is registered within your country of residence. That would mean you can get personalized customer support and at the same time, the broker is compliant with local regulation.
A broker that’s not regulated by any financial regulator should be avoided, considering the high risks associated. No matter how tempting the trading offer might be, it is crucial to not make any concessions when it comes to this matter.
# Limited or confusing information about the trading services
When it comes to the trading services provided, all the information should be available on the broker’s website as clear as possible. Scam brokers don’t bother optimizing their official websites and many times you will find confusing or incomplete details. Grammar errors, wrong pages, and false claims are common among any forex scams.
If the broker is committed to the highest trading standards, the information available on the website will be clear as water and even a beginner will manage to understand the details. Before signing up for an account, it is highly important to go over the website and read carefully all the details.
Most scam brokers provide limited information on the website and keep all the important details in the Terms & Conditions section. We know all this is part of the boring side of trading, but at the end of the day, you are going to trust the broker with your hard-earned money and personal data.
# Poor customer support
Sometimes you may encounter problems. Technical issues with the trading software or difficulties in passing the verification process are common among retail traders. As a result, a reliable broker will have an efficient customer support service, ideally personalized for clients depending on their country of residence.
Scam brokers are not interested in providing high-quality trading services and as a result, they will have poor customer support services. It generally takes days or even weeks until someone replies to emails and the answers are very superficial. This should act as an alarm bell and keep you as away as possible from such companies.
A company that does not have a customer-oriented approach is not one that you should be working for. Especially now when financial markets are extremely volatile, the customer support service will ensure smooth operations for all customers, no matter their country of residence or account size.
# High initial deposit required to open an account
The main goal of scam brokers is to persuade customers into depositing as much money as possible. As a result, they design a very complex trading offer, with multiple trading functionalities that seem very attractive at first glance. In reality, once you open an account you see that most of the benefits were just false promises. Even after making a large deposit, the actual services are well below expectations.
This is how a CFD or forex scam operates to get its hands on your hard-earned money and each time you see a broker demanding a large initial deposit, you should walk away. Now that there are so many trusted brands allowing customers to open trading accounts with a low initial deposit, there is no point in taking risks with a questionable broker.
# Long processing time for withdrawal requests
Most of the traders will very likely acknowledge they want to have access to the funds in their trading accounts easily. However, scam brokers can keep on this promise. As a result, they set long periods for processing withdrawal requests. Most scam reserve the right to process them within several business days or sometimes even weeks.
On top of that, they even charge a hefty withdrawal fee. That should not be the case. If there is a solid team of professionals working for the broker, any withdrawal request should be processed within a maximum of 48 hours.
Depending on the payment method selected and country of residence, it could take more until the money ends up in your account, but the broker’s responsibility should be done fast.
# Brokers operating offshore
Lastly, one of the biggest signals for a forex scam is represented by the address of the mother company. All brokers operating offshore should be considered as potential scams.
The regulation for online trading is very loose and as a result, no one could sue them in case of bad practices. Make sure your broker operates from a well-known country that has solid regulation for financial services providers.
Only by taking this measure, you won’t end up having a real account with a broker that can do what it wants, without facing penalties. Also, read the terms & conditions of the broker to see what its governing laws are. Even though scam brokers don’t show their operating address on the website, this detail will show more insight into whether you’re working with an offshore broker.
Any broker that has at least some of the warning signs we’ve talked about should be treated with caution. As a result, we advise all traders to avoid them and work only with the brands that have an already-established reputation.