Understanding Foreign Exchange Broker Fraud
It is a well-established fact that a lot of forex brokers out there simply just want get you to invest with them and the rest is history. Quite a lot of forex brokerage firms out there run legitimate business and the scammers get caught quite quickly, yet care should be taken if you must remain in this business for long.
It’s always possible to get online brokers who deceive their clients and can get away with it for some time, since they offer to provide services that seem to be as reliable as those of legitimate brokers. However, this is not the case as these brokers scam their clients by lying to them, changing spreads and making them different or more expensive to those stated on their website.
In this light, legitimate brokers offer spreads that ranges between 2-3 pips, while the average fraudulent broker will deceive you into trading with 7-8 pips spread. It is important to be worried about your broker, if they are really telling the truth. It might seem normal for you to have 7-8 pips spread broker, however this could add up in the long run and if your broker is lying to you about something as simple as spread, then you should also wonder what else they could be lying to you about.
Online brokerage firms that deceive their clients make a considerable amount of money off them. Some might refuse to offer high spreads as these is easily noticeable. This group of firms could decide to charge moderate spreads, which are a bit higher than the normal ones and they would make money off the cumulative strength of the clients that trade with them.
Other currency trading brokers would scam their clients by hunting their stops. This is because brokers are aware that clients employ stops during trading and if they can manipulate these, investors would have their positions closed unduly.
There’s hope for investor, as some countries have in place firm regulatory bodies. The United States for instance, have agencies like CFTC (Commodity Futures Trading Commission) and the NFA (National Futures Association), who are saddled with the responsibility of cracking down on such online brokerage scams.
Endeavor to stay away from brokers that are not regulated. If you are looking for a brokerage firm located in the United States, then you should confirm that they are an FCM (Futures Commission Merchant) with CFTC and a member of NFA. It should be a thing of grave concern, when your broker is neither registered with CFTC or NFA, I’ll recommend that you stay away from such broker.
