Written by Foreign exchange, also known as FX, and forex, is one of the most popular financial markets that beginners and professional traders choose to trade. One of the reasons for this is that forex is the most liquid financial market and traders can make a profit from it.
However, due to its popularity, the rise of scam brokers has been increasing. So, before choosing a forex trading broker, it’s essential to know them first by doing thorough research and confirmation of their brand.
In this article, we’ll discuss the ways you can check the legitimacy of a forex trading broker.
1. Check Regulatory Compliance
One of the ways to tell whether a forex trading broker is legitimate or not is by checking if they’re being regulated by a financial authority. The recognised regulatory bodies verify the requirements submitted by the forex trading broker and approve their registration.
So, the first thing you should do when looking for a forex trading broker is to verify whether their name is on the list of approved brokers from the website of the regulatory body. The regulatory body varies depending on where the broker is based. For instance, if it’s in the US, you can check the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC). On the other hand, the Financial Conduct Authority (FCA) is what you should look at when the broker is in the UK.
But you should also double-check as there are fake websites that may copy the layout of the authorised regulatory bodies.
2. Look for Customer Reviews
No matter what you’re looking at online, it’s common to see reviews. This includes the reviews you can find on the website of your potential forex trading broker. However, although some reviews can be genuine, some are also fake and manipulated.
If you read the reviews carefully, you can identify if the are similarities in how the comments are written. In some cases, they just copy and paste the same reviews to help increase the amount of feedback.
So if you take a look at forums and other social media groups, concerned traders may mention manipulated reviews from various fake trading brokers.
3. Transparency of Operations
A legitimate broker presents detailed information about their fees, modes of payment, and how they operate. Before opening an account from any forex trading broker, you should know how to trade forex, so that you have an idea of how the operation usually happens.
Meanwhile, when checking for transparency, there should always be a written document that states their process as a broker. This includes the commissions and fees, conditions, and fund security. Without the written document, you won’t be able to file lawsuits in case you encounter a problem along the way.
4. Testing Customer Support
Since trading is a type of investment, the forex trading broker should provide proper customer service. Before committing to anything, you should try using and evaluating their customer service. Most of the fake trading brokers usually have a bot chatting with the clients.
So, when trying their chat support, don’t forget to ask specific questions that usually don’t have a general answer. You can create a certain scenario that doesn’t often happen to forex traders. This is why you should know how to trade forex before looking for the right broker.
5. Try the Trading Platform Quality
A legitimate forex trading broker offers a fast, high-quality platform that allows traders to buy and sell underlying assets without the fear of losing their capital. This means that the platform should be able to execute trades at the right time, using the setting determined by the trader.
You may be aware of the popular forex trading platforms, like MetaTrader 4, so if the broker offers a platform you haven’t heard of or can be difficult to find online, that’s a relevant sign that it’s a scam.
6. Verify Physical Address
Does the forex trading broker have a physical office address? Although a company may be working solely online, as a beginner, you should choose a broker that also has a physical office. This allows you to feel at ease whenever you trade.
So, if the broker has a listed physical address, you should verify their existence by using online maps, or cheque the place out if they’re not too far from your location.
7. Beware of Unrealistic Promises
Scammers often make promises they can’t keep, and you should be able to tell what’s realistic and what isn’t. So, before you get excited with the sign-in promos, and guaranteed high profit, you should take a step back, and think about whether it’s too good to be true. Besides, most of the time, it is.
As you know, trading is complicated, and it may take a few months or years before you get to establish a reliable training strategy. So if a broker promises you of fast, high profit, it’s time to look for other options.
Final Thoughts
Choosing the right forex trading broker is a daunting task. By implementing these various ways of checking legitimacy, you can find the right broker that can guide you with your trading needs. Keep in mind that due diligence is the key to avoiding getting scammed, and protecting your trading profile.
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