How To Avoid Forex Trading Scams in %year%

There are a large number of Forex trading scams that you might have heard of and even more of them that you don't know about. In this article, you will learn how to identify and avoid being scammed in the world of Forex trading.


Many people who are potentially interested in trading and investing in financial markets are captivated by the mistake that it is impossible to get stable income on Forex, that brokers simply do not allow their traders to earn money and take all the profit from trusting clients. This stereotype is constantly reinforced by the cries of "cheated financial tycoons" who, barely having entered the market, began to trade immediately on a real account, without any system, and safely lost their deposits. Naturally, 99% of such "traders" blame the broker for everything, and the Forex market seems like a giant scam for them. However, in practice, everything is not that simple.

Is it profitable for Forex brokers to let traders get profit?

In fact, it all depends on the kind of broker. If you look at the market in a simplified way, then all Forex brokers can be divided into two categories: ECN (STP) brokers that display customer transactions on the interbank market, and "bucket shops" in which trading is conducted internally, and the trader in the best scenario concludes transactions with other clients and in the worst – trades against the dealing center (DC) itself.

Everything is clear with ECN brokers – it is beneficial for them to have the trader conclude as many transactions as possible in order to earn commissions, and the trader who merges the deposit will not be able to conclude transactions. Therefore, it is beneficial for them to have the client trade at least not at a loss.

With the bucket shops, in fact, everything is also not so bad: there are many brokers who work on the market for 10-20 years and have not been noticed in obvious scam and discharge of customers' accounts. When a novice trader constantly makes mistakes by himself, such brokers don't even need to merge the client, he will lose money by himself, making unprofitable transactions. And on Forex, the majority, as a rule, is mistaken. But the bucket shop's attitude to traders who trade profitably is somewhat more complicated. Large companies may well turn a blind eye to the stable, but small earnings of a particular client and allow him to withdraw his money. Eventually, reputation is more important. Especially since you can do good PR on this and attract hundreds of newcomers, who will eventually lose much more money.

But if the company understands that one of its clients is not only stable trading profitably, but also constantly increasing volumes, taking more and more out of the brokerage pocket, it won't allow this to happen so easily. Moreover, in most cases, the broker deprives the client of all these funds and blocks access to the account, without formally breaking the law. We will return to the question of how the broker succeeds in this, but in the meantime, you should pay attention to the most popular ways to get earnings on Forex.

Where does a stable profit on the Forex market come from?

First of Forex traders can be divided into two categories:

Manual Forex Trading

The first one is experienced stockbrokers and currency traders, who, of course, have a strategy (or rather, a set of certain rules), but decisions are made based on their own experience, and sometimes even by intuition. Such specialists are far from closing every month in profit, and they can fail for a long time, but experience and professionalism allow them to get out of the pit over and over again, to compensate for all the losses, and to be on horseback again.

Such traders, as a rule, trade in large volumes, therefore they usually go to ECN brokers without risking contacting other types of brokers. As a result, the broker stably receives his commission, and the trader is confident that he will not be deprived of honestly earned profit.

Automated Forex Trading

The second category of Forex traders that make a profit is those who use any kind of automated trading systems or do algorithmic trading. In this case, the trader doesn't need to be an experienced, stockbroker, and currency trader. They just need to understand the basics of the market and to be able to control their emotions. And part of those traders do not have exchange experience, but they are knowledgeable in programming and calculating probabilities. Based on market analysis, such specialists can write a Forex robot that will bring stable profit under certain conditions. But the trading using automated systems has one problem: they require instant execution of orders. An ECN broker cannot provide such a condition because. It only allows a trader to conclude a deal when the system finds a counterparty for him. And in force-majeure situations (for example when trading on the news), there are some delays in the execution of orders, as well as slippage when a transaction is opened at a price a couple of dozen points higher/lower than planned.

That is why most algorithmic traders have to apply for the services of so-called "bucket shops", since only they can provide instant execution of orders. And the broker, noticing such an uncomfortable client, begins to look for ways to merge it with minimal risk for his reputation.

How the brokers legally withdraw money from successful clients?

It should be understood that a bucket shop broker, especially one who has been working on the market for several years, preliminarily calculates the probability of the appearance of traders who, in one way or another, could be able to reach a steady income and so the broker takes certain measures to avoid this. The easiest way to protect themselves from overly successful customers is to insert a few small and seemingly harmless points into the client agreement. This may be a time limit for the transaction (which is critical for scalpers), a limit on the maximum profit in the transaction, or the maximum amount of withdrawal of money. If a trader even accidentally captures more profit than provided for in the agreement, he can be formally recognized as a violator and to be refused to continue servicing by freezing the account (which means taking the money left on the deposit).

There are even simpler solutions – to submit to the contract a point providing the right of the broker to refuse to provide the client with further services at any time without giving reasons. Funny as it may seem, but a trader accepting such conditions assigns the broker the right to simply withdraw his deposit, without allowing a single transaction to be completed.

Of course, there is also a reputation factor, and in most cases, it is even more serious than the legitimacy of the broker (for the most part, they still have offshore registration). A large company will not steal clients' money insolently – after all, this threatens much greater losses due to the fact that newcomers will prefer competitors with a better reputation. 

That is why, before choosing a broker, you need to not only carefully (point by point) read the client agreement with all the additions, but also study the reviews about this company on the Internet. And often seeing the real picture is not easy because, on the one hand, a large number of reviews paid by DC itself, and on the other hand, from the black PR of competitors and simply offended losers who easily denigrate honest company, just to avoid facing their own mistakes.

Some nuances of working with Forex brokers

In addition to ECN companies and so-called bucket shop brokers, there are brokers working on a hybrid basis. This means that they display large transactions on the interbank market, and orders executed by fractional lot are traded inside the company. Brokers do this in order not to refuse to provide services to small clients, which can subsequently become serious investors. However, it is not advisable to withdraw transactions to the interbank volume of 0.01 lots, therefore, the broker executes them independently.

In practice, this is fraught with the following situations: customer transactions are executed instantly and at the stated price, while he is trading in a small lot. If a trader conducts systematic trading and his deposit grows, he begins to increase volumes. As soon as the volume of transactions reaches 1 lot, orders are displayed on the interbank, delays in execution and slippage appear. The trader begins to think that the broker intentionally puts a spoke in his wheel, and in fact, he only brings the trader to the real interbank market.

However, regardless of the motivation of the company, such a scenario is unacceptable for a systematic trader. Therefore, before starting a cooperation with the broker, it is necessary to clarify all the nuances of execution. If a trader decides to cooperate with such a company, it is necessary to limit the volume of transactions.

How to avoid becoming a victim of scammers?

Before signing a cooperation agreement and opening an account with a company, you need to study the history of work, reviews on thematic sites/forums, to make sure you have licenses and documents. To trade Forex or binary options, choose regulated brokers – the company must be registered, have a license to carry out a financial activity in the market (and not permission for gambling). Only in this case will it be possible to file a complaint in case of a scam. The company has to have all the rights and licenses in accordance with applicable law. It is also worth noting the most authoritative licenses:

  • NFA (National Futures Association);
  • CFTC (Commodity Futures Trading Committee);
  • FSA of Great Britain (The Financial Services Authority);
  • CySEC (Cyprus Securities and Exchange Commission);
  • Swiss FINMA (Swiss Financial Industry Protection Corporation);
  • USA – FINRA (Financial Industry Regulatory Authority);
  • SIPC (Securities Investor Protection Corporation) etc.

To avoid scams, intending to cooperate with a broker you need to check all the documentation. Having found a license or certificate, it is advisable to check the authorities that issued them, as companies often post documents of non-existent organizations with big names on websites. In order not to fall into a dishonest brokerage company, it is best to choose a broker who works in the country of residence of the trader (you can sue them) or a well-known and reliable foreign company that values its reputation. Be sure to read reviews and comments, study the features of working in the market to understand how the scam is carried out on Forex.

The presence of minimum commissions and a low spread but the promises of "golden mountains" and bonuses from a company whose website was created on a free engine (such as WordPress) should be at least alerted. To be able to seek help from the defense authorities, the trader must also register his activities, carefully fill out, and execute all the documents, pay taxes. A variety of ratings can help you to choose a reliable broker, where thousands of traders vote and the really best companies come first.

Despite the possibility of publishing paid reviews, there are always more real customers and their opinions, as a rule, are completely true. Therefore, it is better to cooperate with serious brokers who provide excellent support and have been working on the market for a long time, even if their commissions and offers are not as attractive as advertisings from unknown companies. As a result, all this will pay off with the opportunity to work honestly and effectively.


In order to basically avoid such troubles in relation to your broker, it is recommended to simply cooperate with trusted ECN companies with which the client is guaranteed to have no conflict of interest. If the entire success of the trader depends on the instant execution of orders accurately and every point has value, you will have to conduct research to find the most loyal bucket shop broker, and then constantly protect the profits from your broker by regular withdrawals. And just in case, it is better to have a couple of spare options.