In the present world, Forex trading plays a vital role in contributing to the world economy. Almost 6.6trillion dollars are circulated in the Forex trading platform on an everyday basis.
Every year, the Forex trading platform attracts newcomers and traders, further integrating the economy. However, as big a role is played by the Forex platform in regulating foreign trade exchange, it can be a volatile place with risks of online scams and fraudulent Forex brokers.
The exchange of foreign trade in the Forex platform is mostly carried over the counter, leaving ample opportunities for scammers to lure newcomers with lucrative, too-good-to-be-true offers.
Though the Commodity Futures Trading Commission (CFTC) has taken preventive measures and enforcement actions to curb online scamming in Forex platforms, newcomers to Forex must be aware of prevailing risks and scams while dealing in the Forex trading platform.
One of the primary risks associated with Forex trade is the Forex broker stealing your money.
Can a Forex broker steal your money?
Forex brokers, also known as FX brokers, serve as middlemen who buy and sell currencies and orders on behalf of their clients in exchange for a commission for their services. Since Forex trading is mostly done over a digital medium, there exists a lack of accountability which an unscrupulous Forex broker can take advantage of. Hence, in essence, a Forex broker can steal your money.
Though the instances of Forex brokers stealing money is rare, stockbroker fraud is a common malpractice witnessed in the Forex trading platform. Forex stockbrokers can steal from the investment fund, leading to fraudulent violations of the FINRA rules, which can lead to heavy losses on the part of the investor. Investment losses can also be a result of deceptive advice and misconduct from stockbrokers as well as brokerage firms.
What are the ways in which Forex brokers can steal from you?
Though not all Forex brokers are dishonest and adopt malpractices to make money, being aware of these ways in which Forex brokers can steal your money will allow you to choose your Forex broker wisely and steer clear of fraud risks and violation FINRA rules:
- Charging extra overnight interest rates
As one of the easiest ways of deceiving clients, Forex brokers can levy unnecessarily high rates of interest to steal from their clients. Forex breakers can take advantage of the changing gap of the interest rates on currency pairs, asking for disproportionate interest rates, charging more than is necessary. Based on short-term interest rates and currency pairs, clients can be scammed into paying more interest than is charged by central banks.
- Spread widening
Spread widening is a common Forex scam during volatile market situations. Forex brokers can apply a wider spread or quote a higher price to make a profit from the trader.
Leverage is an important tool in the Forex platform to drive a higher profit and is often used by Forex traders to influence the traders’ psychology. Forex traders can persuade or lure amateur traders and encourage over-leveraging to make a profit.
Though leveraging is not illegal, it can be used as a strategy by brokers to trick traders into investing more. However, with a higher than usual leverage, a trader may undergo considerable losses if the venture fails.
- Offering software technologies and online solutions:
The online domain is a slippery place with active scamming risks. Online Forex brokers can steal your money by offering fraudulent applications or digital software under the pretext of helping you in Forex.
How to prevent your money from getting stolen by Forex brokers?
Now that you know how you might be getting scammed by Forex brokers, here are some ways of avoiding such occurrences:
- It is always recommended to choose a licensed Forex broker. Brokers without a license do not offer you accountability to the services they provide and can trick you into unnecessary spending.
- Avoid sharing your trading rights with Forex brokers, as they can be misused for unauthorized transactions.
- You can get a background check on the Forex broker of your choice by visiting the Background Affiliation Status Information Center (BASIC), registered under the NFA.
- Staying aware of existing and newer scams in the Forex trading platform and consulting an expert on how to avoid them. Scammers usually use unbelievably rewarding offers to lure newcomers, and it is better to steer clear of offers that promise exceptionally high returns.
With these points in mind, you can navigate the Forex trading platform and keep away from dishonest Forex brokers. Forex trading is an ever-expansive platform, and you can win it big by investing in Forex with the help of genuine Forex brokers.