How Do I Know if a Forex Broker is a Scam?
Before you begin trading in forex you might like to find a broker. It is important to shop around for a broker before you settle on one and while doing this, you must keep in mind that not all brokers are legitimate. So, how do you differentiate between legitimate brokers and scams? You can begin by reading broker reviews and reading information about brokers that is posted on forums; however there may be hidden agendas in these reviews so it is worthwhile to try a more objective approach.
Visit the site
Forex news sites may have reviews on brokers, but if this is prominent and on the homepage, you can probably be skeptical of the reviews as the site most likely makes its money from affiliates. In addition, you should look out for affiliate links, leading from the review page to the broker’s site as this indicates that the person who posted the review will be getting paid for that review if you follow the link. This is legitimate if the affiliation is clear to the reader, so make sure the site is upfront about its affiliation.
Check the forums
Check out any posters on forums that are promoting a specific broker. It could be that the poster is legitimate, but if you look back and find that they only promote a single broker, they are most likely associated with that broker and you should take what they say with a pinch of salt. You might like to see if your comments are posted within forums. If a forum or site is simply promoting specific brokers the moderator may not post your comment or may delete it later on. These sites and their recommendations should be viewed with some skepticism.
Look for negative reviews of the broker
You want to get a broad picture on any broker so if you find positive reviews, look around for negative reviews as well. Adding in the word ‘sucks’ can help you find these. One person’s bad experience does not mean you will necessarily have a bad experience, but at least you will have a more complete picture.
Look out for complaints about not being able to withdraw funds
This is an indicator of a scam, but before you judge, contact the user directly to ask about their experience.
Read all the fine print before you open an account
Particularly, make sure you understand all the details about incentives and withdrawals and make sure they will not work against you.
Try out the broker
It is worthwhile to take a month to try out the broker with a small amount of capital for one month and then try to make a withdrawal. If there are any issues, you can discuss it with the broker and if all goes well, you can deposit more money into your account and keep trading.
While there are scams out there, there are plenty of great Forex brokers and it is important to find them before you make deposits and start trading.
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