The world is getting smaller by the day and now more than ever, you have a chance to call yourself a global citizen. You could be spending much of your time in the U.S., Great Britain, Switzerland, Australia, Japan or any other place you call home. Wherever you are, getting your hands on the local currency is a walk in the park, thanks to forex. Foreign exchange, or forex, allows you to trade between different currencies in a matter of minutes and make a profit at the same time.
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Simply Put: Is Forex a Scam?
Although this sounds too good to be true, you can rest assured that forex is not a scam. If you’ve ever stumbled upon FOREX.com or any other forex trading platform, you must have noticed that the currencies are usually listed in pairs. That’s because when you trade forex, you buy one currency and sell another simultaneously.
Previously Identified Scams
How can you be certain that forex isn’t a scam? For one thing, the foreign exchange market makes the biggest turnover of $6.6 trillion per day. Unfortunately, the opportunity to create such massive wealth in short durations comes with its risks. When large sums of money are doing the rounds, there are bound to be a few culprits that purposely want to mislead you and cheat you out of your money. Here’s a rundown of common forex fraudsters and scams you should avoid.
Forex traders from all over the world are always on the lookout for the best brokers. Traders want to get the most returns on their investment, just as you do. But beware of forex brokers who take their clients for a ride.
Novice forex traders often complain about signing up with brokers that have outright declined withdrawals from accounts. Be sure to do your research about brokers and their reputations. A good place to start is the footer of the broker’s website. If the footer has no information about regulatory bodies or any other disclaimers along with their corporate address, you cannot trust them.
However, if the broker has a Securities and Exchange Commission (SEC) regulations listed, it’s a good indication of a trustworthy broker. You can also do a quick check on forexfraud.com for brokers with a history of negligence and fraud. Remember, the brokers must have your best interest and their trading strategies must reflect that.
Signal Seller Scams
Forex brokers rely on signals or paid information to predict the movement of currencies and their value. This information can be purchased from firms, asset managers or seasoned traders called signal sellers.
You can subscribe to signal sellers on a weekly or monthly basis for a fee. Often, you will hear brokers citing these sources to convince you about a trade. In such cases, ask your broker to give you a historical performance chart of their signals to assess the authenticity of their claims. Since most signal sellers have a mixed record of good and bad tips, you can have a tough time making a firm decision.
Brokers will leverage such grey areas to give them the benefit of the doubt while swaying you to trade in a particular way. And if the trade doesn’t go as planned, brokers will blame the signal sellers for the losses incurred without taking responsibility.
The point-spread scam is one of the oldest tricks in the book. Since forex trading started, brokers have been using computer-manipulated bid and ask spreads to deceive the trader. Typically, forex currency pairs are projected with 4 decimal points. Crooked brokers will manually input a specific bid and ask spread with a large difference in the 4th decimal point for higher commissions, taking a huge cut from your profits without your knowledge.
In recent years, the point-spread scam has been curbed but has not entirely gone out of practice. Comparing bid and ask spreads from other brokers will give you an immediate insight into point-spread scams.
The latest trend in forex trading is the use of automated algorithms or “expert advisors.” These robotic systems scan the data of various currencies and their past performances to determine and set profitable enter and exit trades in advance for you. From stellar websites to fake testimonials, many such bot-based organizations go a long way to persuade you to think you can create wealth on autopilot without logging into your account for days and nights at a time.
The tech boom is so prevalent that several bots have lured forex beginners who wish to make money while they sleep, only to realize too late that their money is all gone. However, there are tried and tested bots in the market that have proved to be very successful in their trades.
Best Forex Brokers
Forex trading takes place 24 hours a day, 5 days a week. But unlike the stock trading market, which has a multitude of stock options to buy and sell, you only have a limited number of currency pairs in forex to invest in. Since there isn’t an on-ground marketplace for forex, an online platform is essential for active trading.
Signing up with an online forex trading platform gives you access to plenty of research tools and international currency-related news that can make or break your trade. Out of the hundreds of forex trading platforms available online, Benzinga has hand-picked the best ones to get you started.
Established in 1999, FOREX.com has been a frontrunner for foreign exchange trades for over 2 decades. You can open an account with a minimum deposit of $100 or 100 units of your base currency. Its advanced interface offers fast and accurate trading that you can make on-the-fly on desktop, web or mobile application. Based on your trading style, you can customize the platform to your liking. It is authorized and regulated by the Cayman Islands Monetary Authority. You’ll find plenty of online FOREX.com reviews that praise the platform for its robust research tools.
Research tools provided by FOREX.com:
- Market insights: The global research team at FOREX.com constantly provides actionable ideas on New York, London and Asia trading sessions throughout the day.
- Fundamental analysis: Current economic events are used to predict price movements in the forex market.
- Technical analysis: Compares historical price movements of international currencies to identify patterns and forecasts.
- Live trading sessions: You can participate in live trading sessions and webinars for real-time insights into the forex markets.
Having dominated the foreign exchange markets for over 40 years, IG is one of the most trusted online platforms for forex trading. Its expertise is complemented with an easy-to-use platform that allows you to trade with up to 93 currency pairs.
You can open an account on IG with a $0 minimum deposit.
Most recently, IG won the FX Weeks e-FX 2019 Award for Best Retail FX Platform of the Year. The spreads and commissions IG offers are among the lowest in the industry.
It is regulated by the Commodities Futures Trading Commission and is a member of the National Futures Association.
3. TD Ameritrade
TD Ameritrade is among the most popular online forex trading platforms in the U.S. As one of the earliest implementers of commission-free trading, TD Ameritrade allows you to open an account with $0 minimum deposits and trading minimums. You can take advantage of the wide range of charting tools it provides to compare multiple currencies side by side.
Although it has a fully digital platform for trading, it does not allow credit/debit cards or electronic wallets to transfer money. It also has a dedicated Twitter feed to keep you up to date with the latest financial buzz. TD Ameritrade is regulated by the SEC and Financial Industry Regulatory Authority (FINRA).
Take the World in Your Hands
Forex is a transparent and open trading market built for dedicated investors. As an active forex trader, you have a front-row seat to events that shape global economies. Be wise with your investments and you can influence the value of international currencies from the palm of your hands.
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