If You Are into Currency Trading, You Have to be Ever-mindful of Forex Fraud

Forex trading has come of age, as its popularity has soared over the past decade, but that does mean that we can turn a blind eye to the possibility of fraud, especially if it disguised within a cloak of bad business practices. The Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA) are the “policemen”, if you will, in this investment arena, providing regulatory oversight and administering a host of programs to protect and educate the average consumer/investor.

Retail forex trading is now a safer environment, indeed, due to the tireless work of these two organizations, but, despite many arrests and convictions, there will always be a criminal element within our society that attempts to prey on the unwary. As any security professional will tell you, your first line of defense against these thieves is awareness. Once you understand how you could be possibly duped, then it is up to you to be skeptical and ever mindful of where danger may be lurking. Listen to your gut, then be prepared to walk the other way.

A vast majority of the participants in the forex industry, however, are legitimate, but the Internet has lulled us into a false sense of security when dealing with the “unseen” business partner on the web, allowing our trust to be obtained rather easily. When you add greed to the equation, the fraudster can ply his various schemes with ease.

Your primary focus will be on your broker, but you must also be wary of fund managers, software and signal providers, and just about anyone with a clever marketing pitch that promises high rewards with very little risk. Here are a few tips to guide your protective efforts:

  • Overseas Forex Brokers: There are plenty of them, and many got their start in London, the financial center of foreign exchange. Look for longevity, as a rule, and validate that they are in compliance with a good regulatory agency. Rules are not as strict as in the U.S., and a few brokers may cross the line occasionally. A safe broker will always segregate your deposits in a Tier-1 bank, far away from their operating offices. The favored fraud scheme is to promise large sign-up bonuses to get your initial deposit, but when it comes time to withdraw, you run may into a stonewall. Just remember that trying to exert your legal rights in a foreign jurisdiction is fraught with peril.
  • Domestic Forex Brokers: Be careful here, too. Check with the CFTC for registration credentials and that they maintain the proper level of net capital. Experience counts, but review testimonials to validate claims made.
  • High-Yield Investment Programs (HYIP): Beware any program that promises an easy path to riches or high returns with little risk. This tip applies to both brokers and all marketing types that wish for you to buy their management expertise, trading robot, system, or signal service. If it were so easy, why aren’t they off making millions instead of pressuring you for a few bucks? If it sounds too good to be true, it most definitely is in the forex world.
  • Re-quotes, Slippage, and Stop-Loss Hunting: Market makers, as opposed to ECN/STP brokers, can be tempted to manipulate the bid/ask spreads offered. Good brokers do not do this, but if you notice a high prevalence of questionable executions of your orders, then it may be time for a change.

These are a few tips to help get you started, but the CTC website can help broaden your awareness, the key to fraud prevention.

To find a trusted forex broker for you, visit http://www.forextraders.com/forex-brokers.html