Everybody wants a piece of the forex pie, but there are numerous best practices to be aware of, to steer clear of scams, says Justin Grossbard, founder, CompareForexBrokers.com.
That’s because forex markets had a daily turnover of $7.5 trillion dollars in April 2022, up from $6.6 trillion in 2019, and it’s only greater now. It makes sense that such numbers would attract the attention of novice investors and traders worldwide. On the flip side however, it also attracts the attention of scammers that are on the prowl. It is worth noting that fraudulent acts in forex are few and far between. That being said, forex, as with any other endeavor, can be profitable so long as it is approached with caution and due diligence.
There are numerous best practices to be aware of, to steer clear of scams, which include the likes of Ponzi schemes, signal services, fake investment opportunities, and fake brokers. Here are some of the most essential tips to follow:
Turn to Regulated Brokers for Assistance
All brokers are not created equal. While narrowing down their choices, traders should opt for brokers that are regulated by a financial authority that is well known and trusted. This includes the likes of the Financial Conduct Authority (FCA) in the UK, the National Futures Association (NFA) in the US, or the Australian Securities and Investments Commission (ASIC) in Australia. By working with a regulated broker, one can rest easy knowing their broker operates legally within strict guidelines and adhere to industry standards.
Conduct Due Diligence
This ties into my previous point, but extends far beyond choosing brokers. Due diligence would need to be conducted in the form of research and credential verification of all service providers to understand their regulatory status, reputation, and track record. This similarly applies to researching other traders as well, by looking into their reviews and testimonials to get a better understanding of their experiences. On that one, one may want to stay away from aggressive traders that present unsolicited offers or apply high-pressure sales tactics. Those behaviors can be seen as a red flag, especially when there are promises of guaranteed profits or unrealistic returns. Scammers often create a sense of urgency to push traders into making hasty decisions. If it sounds too good to be true, it is. An informed trader is less likely to fall victim to scams and is better equipped to make informed trading decisions.
Use Trusted Sources for Forex Education
Novice traders would naturally want to pick up on profitable trading strategies to get a good head start on their forex investment journey, but they would need to be cautious when purchasing education or signal services, and ensure that they are coming from reputable sources. The best route to go would be turning to established educational institutions or reputable forex websites with an excellent track record.
Apply Safe Money Management Practices
While it may sound obvious that proper money management is key, there are certain tricks to the trade worth knowing. For instance, in addition to creating a clear trading plan, traders should set realistic trading capital, avoid overleveraging their accounts, and use stop-loss orders to limit potential losses. For absolute beginners, it is highly recommended to start with a demo account to practice trading strategies and gain experience in a risk-free environment.
At the end of the day, if a novice trader is unsure about proceeding with any aspect of forex trading, they best seek professional advice from qualified financial advisors or forex experts—after conducting due diligence on them. A qualified professional would be able to provide valuable insights and guidance on navigating the forex market safely, so the trader can efficiently reap the benefits.
To learn more about Justin Grossbard, please visit CompareForexBrokers.com.