To trade Forex, an investor must first open a trading account with a Forex broker.
The broker in Forex is an intermediary that offers access to the currency market to private traders. His role is instrumental in facilitating trading, as he connects currency purchasers and sellers.
It earns its income through commissions or spreads on trades.
There are many online Forex brokers, each with its own rules and peculiarities.
Once an account is opened, the trader can access a trading platform where he can trade currencies.
The Forex market is one of the largest and most liquid in the world, with daily trading volume exceeding $6 trillion. It goes without saying that to seize the opportunities in such a market, one must also know how to recognize possible forex scams.
That is why it is important to choose the right Forex broker.
Most Forex brokers also offer customer support services and a variety of trading tools, including risk management tools, automated trading services, beginner courses …
Forex brokers are regulated by financial regulators such as Consob, in Italy; SEC (Securities and Exchange Commission), in the US; AMF (Financial Market Authority), in France; FCA (Financial Conduct Authority), in England; and CySEC (Cyprus Securities and Exchange Commission), in Cyprus.
All regulators require specific requirements that Forex brokers must meet in order to be licensed to provide financial services.
Not all brokers operate online; traditional brokers, which can be defined as “offline”, are generally independent brokers offering trading services.
How to verify whether the Forex broker is reliable?
The presence of so many brokers on the market from which to choose results in the risk of turning to a less-than-serious one, so one should take time to conduct checks aimed at finding reliable Forex brokers before putting one’s money in the hands of strangers.
Checks could be done in the following way:
First step: check the license number on the broker’s official website.
The graphic location should be at the bottom of the page, and the number should be accompanied by the logo of the regulatory authority that issued it.
Step Two: Once you have retrieved the license number, you can counter-check it on the regulator’s website and see if it appears.
Obviously, the broker may report to a company with a different name, which is what will appear on the Authority’s site, but they should be easily associated.
Step three: If the broker is real, a plausible address will be found. To verify that the addresses are credible, you can check them through online maps. In case, one comes across unlikely locations probably the trader will also be unreliable.
If the broker’s head office is located in a non-European country with no legislative constraints governing the Forex industry, this will result in the inability to file an international lawsuit if the broker engages in unethical behavior.
Conversely, if your forex broker’s office is located in a country with well-articulated financial regulation, this can often help you recover funds in the event of a problem.
Fourth step: look up the broker’s name on a search engine to make sure it doesn’t have too many negative reviews (a few may fit, you can’t please everyone, but the type of allegation should still set off alarm bells).
False positive or negative reviews are commonplace, unfortunately, but if you find a huge number of comments complaining about difficulties in withdrawing funds or clearly pointing out improprieties on the part of the forex broker you want to invest in, you’d better change brokers.
How to choose the best Forex broker?
Once you have made sure that the Forex broker is operating with a regular license, you can analyze the type of offerings it has to offer.
Based on the experiences of our clients, we could summarize the ideal characteristics of the best Forex broker to look for in order to ensure a positive trading experience:
1. Regulation: the broker is regulated by a financial authority;
2. Financial soundness: try to do checks on the broker’s financial soundness. Your forex investment will always be safer in the hands of a forex broker with solid financial strength. This kind of information can be found on the broker’s official website on tabs such as “About Us” or “Press Releases,” but also with targeted online searches.
3. Commissions and Spreads: by comparing the spreads and commissions offered by various brokers, one can ascertain whether the terms offered are convenient;
4. Trading Tools: check whether the broker offers a wide range of trading tools, including beginner courses, charts, indicators, and news;
5. Trading platform: verify that the trading platform is user-friendly, i.e., intuitive and easy to use, and offers all the tools and information you need to perform your analysis;
6. Customer support: verify that customer support is attentive, knowledgeable, and available 24 hours a day. Stay away from brokers who offer only call-back support, that is, to contact them you type in a message online, and someone will call you back. Reputable forex brokers do not work that way. You should have direct telephone assistance whenever the markets are open.
7. Bonuses and levers: pay particular attention to the type of bonus offered at account opening or at first deposit. Often terms and conditions for redeeming the bonus prove counterproductive for the customer. The same applies to levers, abuse of which could lead to immediate loss of all invested capital.
Forex scams are often carried out by teams of people who open makeshift offices called “boiler rooms.”
To convince people that the Forex company exists, they refer you to the company’s website, which looks very professional. They also pitch you a toll-free number and a credible address to make the company look good.
However, the company does not exist. Everything on the website is fake, and the office is just a post office box or temporary office. In time one realizes that one has lost money, while the scammer will have already closed up store and moved on to prepare another scam.
In such a case, the watchword is to denounce the fraudulent Trading companies, because this is the only way to recover the money lost in Trading. In addition, in case compensation schemes are activated, informants can directly claim the amounts seized from the fraudsters.
The Forex Litigation Department of Boccadutri International Law Firm deals extensively with criminal and civil litigation related to this particular type of market.
If you have suffered losses due to an investment in the Forex market and if you doubt that the forex broker has violated certain contractual clauses, contact our law firm for an initial consultation to assess whether you can recover what you have lost.
Complete the form to request a legal consultation. Our experts will evaluate your case and suggest the best solution.