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Unregulated Forex Brokers – Are They Scams?

The Forex market, as one of the most liquid financial markets in the world, offers tremendous opportunities to anyone wanting to start trading currencies. That makes it more and more popular among ordinary people and not just initiated and seasoned traders. Unfortunately, many people mistakenly associate Forex trading with frauds. The problem is, there are more and more unscrupulous companies selling fake information. The number of Forex-related trading scams has increased dramatically over the past few years, so you need to be able to identify an attempt of fraud. Unregulated Forex brokers are not completely untrustworthy. But the fact is that the risk you take can sometimes lead to fatal consequences.

When starting your trading journey, choosing the right brokerage company is one of the most important decisions to make. Therefore, compliance with regulations, leverage opportunities, historical performance are the things to look into when searching for the best Forex trading platform.

Difference Between Regulated and Unregulated Brokers

  • Regulated Forex Brokers

Regulated brokers strictly follow the guidelines prescribed by the financial regulatory bodies to be whitelisted and able to operate trading activities. These regulatory bodies are in charge of overwatching trading operations to prevent any fraudulent activity and shield the users from losing their funds. Going for a regulated Forex broker ensures you are not worried that someone will take your money and disappear.

Regulated brokers are transparent. Their transparency is verified by the regular financial report regularly submitted to regulatory bodies
Regulated brokers are transparent. Their transparency is verified by the regular financial report regularly submitted to regulatory bodies.

Regulated brokers are transparent. Their transparency is verified by the regular financial report regularly submitted to regulatory bodies. They are also transparent when it comes to fees and commissions that should be clearly featured in their terms and conditions and conveyed to you as their client.

The availability in case of any issues and disputes is essential for all honest and regulated Forex brokers. In case of any concern, clients should be able to get in touch with customer support at any time via email, chat, or phone.

When traders register with a regulated online broker, they should expect that their personal data will be safe (i.e. not passed on to third parties).

  • Unregulated Forex Brokers

There are many unregulated brokers on the Forex market. The truth is they are very active, and many people take risks with them. Obviously, they bring something valuable to the table, something worthwhile to their customers, and they succeed to get them onboard. They do this by offering large leverage, or just promising overnight success.

Still, it’s only a matter of time when the customer becomes a victim of their churning techniques and malversations.

But what keeps unregulated brokers from getting a license? Some of them are simply fraudulent companies or individuals that don’t have the intention of running a legal business. But very often the cost of getting the license is counted to millions and this represents the barrier during the process of setting up a brand new brokerage service.

Also, an unregulated brokerage company can offer much more trading products and services which they wouldn’t be in a position to provide as regulated companies. The bigger range of trading products might seem like an opportunity. Still, it usually serves to attract investors and engage them in risky business to take advantage and cause many adversities to the client. Once fallen in a trap, a client has little or any recourse.

What Risks Involve Choosing Unregulated Forex Brokers?

A trader who takes risks by going for an unregulated Forex broker is in big trouble. They are not safe from dishonest treatment and cannot benefit from the financial compensations in case the company goes bankrupt. Most often, the traders cannot reach anyone to answer the questions when there is room for suspicions regarding money management.

How to Recognize a Forex Scammer?

Some online Forex trading sites make you believe that after a few days of training, you will become a trader and make a lot of money quickly. The vast majority of people who have invested in Forex have lost their entire stake and more. Let’s see the ways Forex scammers operate.

Some companies offer investments in “atypical” or “alternative” investments such as precious material or renewable energy. These investments should allegedly bring high returns, but also high risks not always announced. Again, frauds are hiding behind these investments.

beware of fake financial professionals, fake law firms, and people supposedly appointed by an authority
Beware of fake financial professionals, fake law firms, and people supposedly appointed by an authority.

Also, beware of fake financial professionals, fake law firms, and people supposedly appointed by an authority. In return for payment, they are offering funds to recover to people who have lost money on trading sites. That’s also an attempt of fraud.

Be careful of so-called independent advisor managers. They usually convince people to make a deposit just to misuse their money to pay false returns to other clients who advertise the business around them. That type of fraud is popular under the name of a “Ponzi scheme.” When the fraudster can no longer reimburse those who want their money back, he or she disappears.

How to Avoid a Forex Scam

Nevertheless, many investors and retail traders fall into the trap of scammers. They either neglect the importance of the regulated broker or too low fees and unrealistic promises seduce them. Low fees are welcome. But you always have to check the reviews regarding the brokerage company’s business. Always verify the information such as location, trading experience, contact details, and so on.

Don’t fall for the phishing emails requiring your personal details offering you trading signals in return which are nothing but a way to steal your details and make you deposit your money to suspicious accounts.

Also, you need to check if the company offers to trade on a demo. Dishonest Forex brokers won’t give you the opportunity for training. Keeping you inexperienced and unknowledgeable is part of their success.



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