Qualities of Online Forex Brokers to Avoid

Qualities of Online Forex Brokers to Avoid

So far in our series of articles and guides to choose an online forex broker, we have only discussed the positive qualities that you should look for in a trustworthy broker. However, it is also useful to know the qualities of a scammy forex broker. These qualities — which may look positive at first while in fact it is the exact opposite — are hidden in plain sight. Our goal in this article is to expose them so that you will not make an expensive mistake.

1. “Regulated” without legal proof

The most common way for a broker to capture new victims is through an elaborate set of false validity signals. They would claim that the broker is regulated, use a fake seal of approval with a unique but invalid registration code, and have one or more ‘clone firms’ to refer to this primary broker as a legitimate broker, and may even be supported by a corrupt lawyer.

On the surface, the broker may look inviting. People would talk about the broker on social media for months and years. Other brokers would legitimately recognize this broker to be a budding success. It takes at least one person’s huge financial loss for this broker to remove its masquerading mask and transfer the victim’s earnings to an offshore bank account. Always be vigilant and skeptical, and do not follow the faceless crowd — research registration numbers and validate them yourself. 

2. Clone firms

Mentioned in the last point is what are called clone firms. A real charity organization, Step Change, describes it beautifully:

“Clone firms are fake websites that imitate real, trustworthy companies or charities. They … trick you into giving your personal data or even your money.” 

It is unfortunate that firm cloning is so common that scammers hide under a mask of charity to trick the most well-meaning of people. If this can happen to charities, it can definitely happen to forex trading, where money is exchanged on a regular basis. 

To avoid clone firms, look for reviews. Double check that the official links on the review site do in fact link back to the domain of the firm which referred you. If there are no reviews at all, consider it to be a clone firm. Clone firms are quick to set up, but unlike the first case, they can’t gain enough traction to have any reputation at all.

3. Forex Ponzi

Ponzi schemes, also known as pyramid schemes, work like this: 1) You are invited to an exclusive meeting to learn the “testimonies” of how a group of struggling individuals became wealthy and wildly successful by following a program, 2) you are told to purchase a forex product (most likely a management service), and 3) you are then told that you can multiply your earning potential by a high number, if you invite someone else to join the program.

There is no guarantee that your money will be managed well, if at all, and failing to invite members will make you lose money. This is not what forex is about. Avoid Ponzi schemes by being extra cautious to claims such as ‘high-yield-low-risk” programs, premium membership statuses, and extravagant display of wealth. 

About FBS

FBS is a licensed international online forex trading company. Their platform is completely online, with some optional offline coaching programs that you can participate in, should you choose. Follow FBS news on Twitter and Instagram, and see that forex is not all glitters and gold — otherwise, it would’ve been a scam.

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