In order to avoid falling victim to broker scams, you need to know how to identify these fake forex brokers. It is these fake forex brokers that defraud unsuspecting clients of their funds.
The foreign exchange market is riddled with scam artists. Identification of fake forex brokers requires knowing their characteristics. This will be explained shortly.
Characteristics of Fake Forex Brokers
Lack of regulation
Fake forex brokers lack regulation by a regulatory body. Regulatory bodies hold forex brokers to a high standard. Some in return give the clients insurance in the case of a fold up. Because fake brokers cannot live up to the standards set by regulatory bodies, they skip it altogether.
Popular regulatory authorities are FCA, CySec, ASIC etc.
To learn more about brokers and regulation click here.
Charging huge spread
Fake forex brokers try to make windfalls off of their clients. And a way to do just that is to charge exorbitant spreads.
Poor customer service
Since these fake brokers are out to swindle people and not serve them, they have bad customer support. The customer service is always inaccessible and poor. This is to prevent clients from being able to reach them while they can claim to have a customer service.
Fake brokers usually run the market making model of brokerage. This causes them to be in direct conflict with the client. When the client loses, they make a profit. They also engage in practices such as stop hunting to make sure the client loses.
In conclusion, if you spot a broker with the above characteristics, it is better to do away with them.
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