Forex Trading is Legal However, Some Brokers are Scams

In an industry that has been established and forged by the most legal actions towards unity and uniformity, there are still those who go beyond these laws and try to sabotage the dream of others of a successful trading experience.

Today’s foreign exchange or forex trading encompasses all possible legalities, yet some still commit heinous tactics to fool others. Let’s learn more about this topic.

What is Forex Trading, and How Does It Work?

Forex or foreign exchange trading is one legitimate option for having an extra income. Forex. Simply put, it is the practice of currency exchange from one party for another. Trading currencies is essential for economic aspects, such as international travel, conducting business internationally, and foreign trade.

However, its increasing popularity and following have also caused the rise of forex trading scams.

That’s why it is essential and worth knowing how one can identify if forex scams are already taking place. Before even deciding to engage in trading, it is crucial to see this information first.

Forex trading happens around the Foreign Exchange Market or Forex (FX). In this platform, traders seek to trade foreign currencies for a realistic profit. But this market is primarily unregulated, has over-the-counter deals, and is not tied to formal “exchanges” regardless of the word exchange being present in its name.

Although it may sound so simple, forex trading is quite complex, to be honest. Different factors come into play when talking about the value of currencies and, ultimately, the exchange rates.

It is primarily leverage in forex trading that makes it attractive to retail traders to speculate on foreign exchange rates and shady brokers thrive off of novice traders that have a poor understanding of this high-risk asset.

Other factors include specific inflation rates of countries, the interest rates present, whether or not the economic and political aspects are stable, the country’s national debt, and many more.

Are Forex Brokers a Scam?

Superficially, forex trading is legal. But because of the looming presence of many potential bad actors on this platform, the prime atmosphere becomes rampant with spoofing, ghosting, and front-running.

These bad tactics resulted from the rise of internet-based trading platforms. Because of these prevalent irregularities, the risks only got more exacerbated, creating a lot more opportunities for negative implications like fraudulent promotional schemes, overstatement of returns, and the failure of paying out wins to become more and more possible for potential victims to fall into when they step into the world of forex trading.

The main issue here is that forex trading lacks transparency and is unclear of regulatory structures due to insufficiency of oversight.

Fortunately, there are still forex products listed on exchanges possessing regulatory oversight. On this premise, there are also a lot of legitimate forex traders who thrive and are doing well in this industry through all legal means possible.

How to Recognize and Avoid Forex Scams?

To help you recognize potential forex scams, especially during their infancy, here are some of the most common examples of what to watch out for in terms of forex scams:

Front-running – this example happens when brokers, knowing potential clients will be placing big orders, put a different order towards the broker’s account way before the client’s account.
Robot scams – this forex scam promises to make automated forex trades with the help of a trading program, often termed in this industry as a “robot.”
Signal sellers – these forex scams involve firms or traders who promise to identify buy or sell signals that indicate whether or not it is an excellent time to make a trade, often in exchange for a certain fee.
Spoofing – also known as ghosting, is a forex scam that happens when traders manipulate the market using a significant order placement towards another trader who has no plans to execute said order, creating the impression that the latter has an interest in particular positions.

You can avoid scam forex brokers by taking the most crucial action of doing research on some underlying brokers before doing business with them. This additional stretch may be a hassle, but it can save you from any potential financial pitfalls from forex scams in the long run.

How to Choose a Reliable Forex Broker?

Although considered safe, forex trading works well when you correctly choose legit brokerage accounts and firms. Here are some tips you can follow:

Test brokers by placing money in, then taking it out to gauge whether or not you can access it. It becomes a legitimate concern if you cannot reach your broker and if you’re unable to speak to any representative.
Consider country affiliations and the location of the firm. More developed countries have better regulations. Choose brokerage firms in the United States, Canada, Europe, or other Asian countries. Everywhere else, however, should be part of your concerns.
Registration is also vital. The easiest way for protection is to have due diligence in ensuring the forex trading you’re dealing with is on a regulated U.S. exchange. This instance lets you quickly verify broker registrations, view jobs, and see disciplinary history through reliable sources such as BrokerCheck, or Background Affiliation Status Information Center.
It is also suggested to ask forex brokers about existing policies and procedures they effectively use for placing trades. Reputable brokers utilize the help of third parties in auditing their trading. This essential measure ensures everyone is getting fair rates on exchanges.

What to Do If I Have Been Scammed?

Although this information might be a bit too late, especially if you’d realized you’ve already been scammed. Maybe withdrawals and other fraudulent transactions have already been made to your account. So, what options do you have in getting your money back?

You should know who to contact. Getting your money back can become very complicated. But you can start by contacting CFTC or the Commodity Futures Trading Commission.

You can also begin by getting your funds back after a scam transaction through this commission. They have helpful guidelines that include how to get your bank so you can reverse the transferred funds and ask for appropriate refunds