Forex markets are among the most active trading markets in the world, with participants ranging from large banks, to multinational corporations, to governments, to speculators and even to a small fraction of individual professional traders. The instability foreign currency prices can result in heavy losses for an investor. However, this is not the only risk that investors have to consider. Investors also need to be aware of forex scams designed to rip them off.
The definition is wide-ranging. Forex scam can be described 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 forex 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.
When you are looking to trade forex, it is important to know which brokers are reliable and viable, and to avoid the ones that aren't. In order to sort out the strong brokers from the weak, and the reputable ones from those with shady dealings, we must go through a series of steps before depositing a large amount of capital with a broker. Trading is hard enough in itself, but when a broker is implementing practices that work against the trader, making a profit can be nearly impossible.
Protecting yourself from unscrupulous brokers in the first place is ideal. The following steps should help: Do an online search for reviews of the broker. In the same search, find if there are outstanding legal actions against the broker. Read through all the fine print of the documents when opening an account. If you are satisfied with your research on a particular broker, open a mini account or an account with a small amount of capital. Trade it for a month or more and then attempt a withdrawal. If everything has gone well, it should be relatively safe to deposit more funds.
When faced with all sorts of forums posts, articles and disgruntled comments about a broker, we must remember that many traders fail and never make a profit. Many of these disgruntled traders then post content online that blames the broker (or some other outside influence) for their own failed trading strategies. Thus, when researching a potential forex broker, traders must learn to separate fact from fiction.