If you search for Forex scam brokers on the Internet, the number of results is staggering. Although the foreign exchange market is slowly becoming more regulated, many unethical brokers still exist that should not conduct business.
When you want to conduct forex trading, it is essential to identify reliable and viable brokers. To distinguish the strong from the weak, we must go through a series of steps before depositing any funds into the broker.
The transaction itself is complex enough, but it is almost impossible to profit when the broker implements harmful practices to the trader.
What could result in the money loss with scam brokers?
Novice Trader
New foreign exchange traders may not be able to trade using tested strategies or trading plans. Instead, they trade based on psychology, and they have a 50% chance of being correct.
Experienced traders are aware of these primary trends and intervene to trade in their own, another way. However, understanding the market dynamics often confuse the newcomer traders and they usually follow the broker’s advice.
Broker’s failure
Sometimes, the loss is the broker’s fault. This happens when brokers try to increase trading commissions at the expense of customers. When the price of other brokers does not reach this price, the broker will arbitrarily adjust the quotation to trigger a stop-loss order.
Fortunately for traders, this situation is an outlier and is unlikely to happen. Traders must remember that trading is usually not a zero-sum game. Brokers mainly earn commissions by increasing trading volume. In general, it is in the best interest of brokers to allow long-term clients to trade regularly and therefore maintain capital or profit.
Behavioural trading
The slippage problem can usually be attributed to behavioural economics. Panic is a common practice for inexperienced traders. They are afraid of missing an action, so they press the buy button or are scared of losing more, and they push the sell button.
In a fluctuating exchange rate environment, brokers cannot ensure that orders will be executed at the required price. This can cause strenuous exercise and sliding. The same is true for stop-loss or limit orders. Some brokers guarantee the execution of stop-loss and limit orders, while others do not.
Even in a more transparent market, slippage and market changes will occur, and we may not always get the price we want.
How can we stay away from scam brokers?
It is ideal for protecting yourself from unscrupulous brokers in the first place. The following steps should help:
- Search online broker reviews. General Internet searches can provide insights about whether negative reviews are just disgruntled traders or something more serious.
- Ensure that there are no complaints about the inability to withdraw funds. If so, please get in touch with users as much as possible and ask about their experience.
- Read through the rules of all documents when opening an account. When trying to withdraw funds, traders can usually be provided with account opening incentives. For example, if a trader deposits $10,000 and receives a $2,000 bonus, the trader loses money and tries to withdraw some of the remaining funds.
- The broker might say that they cannot proceed with withdrawing the bonus funds. Reading the fine print will help ensure that you understand all emergencies in these types of instances.
- If your research on a particular broker looks satisfying, please open a small account or small capital account. Trade for a month or more, and then try to withdraw money.
If all goes well, depositing more funds should be relatively safe. In case of questions, please try to discuss them with the broker.
If your trade was unsuccessful, go ahead and post a detailed description of your experience online so that others can learn from your experience.
The discussed steps will help you survive in the wild forex industry, full of shady brokers and scammers.
However, it would help if you kept in mind that even choosing the right broker does not guarantee your profit as the forex industry highly fluctuates and moves. You should measure all the risks before stepping into this field or seek professional financial advice before making decisions.
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