Forex trading has become very widespread of late. Along with its popularity, there has been an increase in the amount of scams and frauds in the Forex markets.
Relatively new on the financial scene, Forex is full of the unknown and Forex brokers can tell new traders everything they want to hear. This creates a situation where Forex brokers function under a cloud of suspicion and the Forex trader is placed in a vulnerable position.
Forex is not an easy concept to understand and Forex trading is more complicated than one thinks. It is easy to lose money within a very short time and in fact, only about 10 percent of traders come out ahead.
When choosing a Forex broker, the first step should be to check out the track record which should be readily available through the brokerage website. Of course records can be made up and edited to look good so a trader cannot depend on this as a bona fide representation. See more on Forex brokers review.
A more important requirement for any Forex trader is that the Forex broker be licensed and regulated by at least one recognized Forex regulatory agency. If such a regulator is not listed on the site, stay away from that broker. The broker can abscond with your money at any time leaving you with no recourse whatsoever.
Don’t be taken in by the standard disclaimer that appears on every broker website. It reads something like this:
“HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ……… NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOW”
There are many types of broker scams but the most prevalent one is the vendor closing down his site overnight and disappearing with whatever funds he has amassed. Other brokers report profits that are way off the actual numbers. Some promise you a fixed return of some sort and then don’t deliver.
Of course, not every broker is a swindler. Some are satisfied to make money off the spread of your trades while others take a small commission for housing your account.
With thousands of Forex brokers to choose from, it behooves you to ask around before opening a trading account. Speak to friends and family that have been trading Forex for a while and get a feel for what brokers are offering and what you should be expecting in return for your money.
Don’t be taken in by promises that sound too good to be true. They probably are.