There are a bewildering number of forex brokers online, some of them unscrupulous. How does a novice trader choose a reputable broker and avoid falling victim to a scam? Mr. Michael Konnaris of easy-forex, a pioneer online currency trading group, provides some answers.
A: The definition is wide-ranging. Wikipedia describes a forex scam as "any trading scheme used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market." In practice, a scam can be failure to return money owed to traders (such as when you wish to withdraw funds or terminate an account), a lack of transparency in the pricing and execution of transactions, unresponsiveness to customer complaints, and the targeting of vulnerable individuals.
A: Here is a checklist which can help for easy reference.
Promises of high profits are often a sign of a forex scam. easy-forex always reminds their traders of the risks involved in forex trading.
Is the broker regulated with the relevant authority in your region? If not, there is a good chance you are not adequately protected. Easy Forex Trading Ltd is regulated by Cyprus Securities and Investments Commission and its licence is passported to all EU member states (including Norway, Iceland and Lichtenstein). In Australia Easy Forex Pty Ltd is regulated by the Australian Securities and Investment Commission which covers many countries within the Asia Pacific region.
If you are a novice, it is absolutely essential to equip yourself with knowledge before you start trading. How educational is the broker? Is the trading method easy to understand from the website? What tools and resources are available to help you learn? For example, is there a comprehensive library? What is the market information like and does the broker use world-class newsfeeds such as Reuters?
Does the broker disclose all relevant fees? Are the spreads for currency pairs fixed and clearly stated? Brokers that offer low or no spread can be seen to be forex scams as their spreads may widen when the market is volatile. easy-forex guarantees fixed spreads, no matter what the market is doing.
Your relationship with your broker is a two-way street. Is the broker flexible enough for you to start off small with low leverage and grow more sophisticated in your trading when you are ready? For example, does it offer tiered accounts? A good broker will ensure that you are supported by a personal account service manager who acts as a guide as you take your first steps in forex trading. Once you are more confident in your trading you will have the opportunity to have your own personal dealer to support you in your trading and to better understand the forex market.
Do not use a broker that does not have well-known Internet and payment security systems. Ask if the site is secured by the likes of VeriSign or SSL. And ask how credit card clearing is handled.
Do not forget this. Although a broker may be online, do the people "act real"? Do they have physical office locations around the world? Can you contact your broker and get one-on-one service from a human being? Are they the sort of people you can deal with? Ask them what systems they have for complaints and see how easily they answer that.
With the rise of social media it has become even easier to find out how genuine a broker is. Does your broker participate in open communication with their clients through any of the more established networks like Facebook, Linked In or Twitter?