A massive volume of trade takes place in the forex market every single day. This means that a large number of brokers and traders are engaging the market. And with such a large number of traders engaging the market comes the possibility of some of these traders scheming to scam unsuspecting investors.
The scams perpetrated by these broker firms and individual traders effect the victims to incur huge financial losses. And no one is more prone to falling victim than a beginner trader.
However, newbie traders can save themselves from some of these schemes by learning how to spot them.
Are you promised huge profits with minimal risk?
Nothing genuinely big and profitable goes for nothing. Big gains come with some level of risk that matches the potential gain. Therefore, when you find a bag of carrot dangling before your eyes, screaming “Large profits at minimal or no risks!”, then rest assured that you are about to get hoodwinked.
The forex market is not a place to find guaranteed profits. There is no such thing as that in forex trading. The market is a progressive risk-return atmosphere. Meaning that the greater the risk, the larger the returns that can be expected. Pick up your shoes and make a run for it when you are being led to believe that there is little or no risk attached to a trade offer promising mouth-watering gain. When an offer or promise sounds too good to be true, it most likely is.
Is the platform used regulated or unregulated?
The first thing a beginner trader coming into the market needs to verify is the legal status of the broker. Someone who is considering working with one of the popular MT4 brokers like Pepperstone should be asking “ is Pepperstone regulated?” Doing business with a regulated broker is one of the most important decisions a beginner investor should make.
One wrong assumption novice traders make is that all broker companies are monitored by regulators. Some inexperienced investors even think that it doesn’t matter if a broker is regulated or not, so long as profits come in as promised. There are great dangers posed by unregulated brokers. You can lose large amounts of money, even your life savings to them and in most cases, they could be untraceable and unreachable after the damage is done.
Broker fails to provide background information
A scrupulous broker will never hesitate to make its background information as open as possible. Any broker that fails or hesitates to provide this is a potential scam company. Background information about a broker helps to expose their legitimacy or otherwise. A dubious broker will most likely not want to leave a trace when your investment is lost.
A trader can be lured by a shady broker into accepting its recommendations on when to buy a security. These brokers make traders believe that the time they recommend is the best if they (the traders) want to reap juicy profits. Beware! It’s most likely a scam.
On the whole, a new trader should have wide-opened eyes to spot these warning signals. More so, traders should also be sensitive to their instincts.