Wherever you are, getting your hands on the local currency is simple 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.
Online brokers make trading forex market easier than ever. Forex is not a scam. Take a look at our guide to learn more about trading forex.
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Simply Put: Is Forex a Scam?
Forex is not a scam. FOREX.com and other forex trading platforms list currencies in pairs. When you trade forex, you buy 1 currency and sell another simultaneously.
Previously Identified Scams
How can you be certain that forex isn’t a scam? The foreign exchange market makes the biggest turnover of $6.6 trillion per day. And the opportunity to create these profits in a short time comes with its risks.
Large sums of money on the table mean there are likely brokers 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 are always on the lookout for the best brokers. Everyone wants the most return on their investment. But it’s important to beware of forex brokers that could take you for a ride.
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, don’t go forward.
The broker should list the Securities and Exchange Commission (SEC) regulations. You can also do a quick check on forexfraud.com for brokers with a history of negligence and fraud. Remember, your broker must have your best interest at heart and its 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. You might 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 1 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. This takes a huge cut from your profits without your knowledge.
In recent years, the point-spread scam has been curbed but it’s not entirely 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, these bot-based organizations try to persuade you to think you can create wealth on autopilot without logging into your account regularly.
The tech boom means bots have lured forex beginners who later realize too late their money is all gone. But there are some tried and tested bots in the market that have proved 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 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 via desktop, web or mobile. 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 include:
- 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 1 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.
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’s 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 1 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 trading platform, it doesn’t allow credit and debit cards or electronic wallets to transfer money.
But there is 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).
eToro’s online platform already offers many of the world’s most popular currencies. You’ll also enjoy additional benefits, such as real-time execution of market orders and unlimited daily withdrawals.
View real-time data, access in-depth analysis tools, and be the 1st to catch the trends wherever you are. You can also try out eToro’s many innovative features completely risk-free with a $100,000 virtual portfolio.
You can also get customized notifications on your watchlist, and access real-time, relevant market data any time.
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. Avoid and the scams and get started in forex with our recommended online brokers.
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