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Forex Reviews  - Avoid Scam Forex Brokers

If you do an internet search on forex broker scams, the number of results returned is staggering. While the forex market is slowly becoming more regulated, there are many unscrupulous brokers who should not be in business. Fortunately, they eventually get weaned out.

However, when you're looking to trade forex, it's important to know which brokers are reliable and viable, and to avoid the ones that aren't. In order to sort out the strong brokers from the weak, and the reputable ones from those with shady dealings, we must go through a series of steps before depositing a large amount of capital with a broker. Trading is hard enough in itself, but when a broker is implementing practices that work against the trader, making a profit can be nearly impossible. (For forex trading tips, check out Top 4 Things Successful Forex Traders Do.)

Separating Fact from Fiction When faced with all sorts of forums posts, articles and disgruntled comments about a broker, we must remember that many traders fail and never make a profit. Many of these disgruntled traders then post content online that blames the broker (or some other outside influence) for their own failed trading strategies. Thus, when researching a potential forex broker, traders must learn to separate fact from fiction.

In many cases, it may seem to a trader that a broker was intentionally trying to cause a loss. Complaints such as: "As soon as I placed the trade, the direction of the market reversed;" "The broker stop hunted my positions;" or "I always had slippage on my orders, and never in my favor" are not uncommon. These types of experiences are common to all traders, and it is quite possible that the broker is not at fault.

New forex traders often fail to trade with a tested strategy or trading plan. Instead, they make trades when psychology dictates they should. If a trader feels the market has to move in one direction or the other, there is a 50% chance he or she will be correct. When the rookie trader enters a position, often he or she is entering right at a time when their emotions are waning; experienced traders are aware of these junior tendencies and step in, taking the trade the other way. This befuddles new traders and leaves them feeling that the market - or their brokers - are out to get them and take their individual profits. Most of the time this is not the case, it is simply a failure by the trader to understand market dynamics.

On occasion, losses are the broker's fault. This can occur when a broker attempts to rack up trading commissions at the client's expense. There have been reports of brokers arbitrarily moving quoted rates to trigger stop orders when other brokers' rates have not gone to that price. Luckily for traders, this is not likely to occur. One must remember that trading is usually not a zero-sum game, and brokers primarily make commissions with increased trading volumes. Overall, it is in the best interest of brokers to have long-term clients who trade regularly and thus sustain capital or make a profit.

The slippage issue can often be attributed to a psychological phenomenon. It is common practice for inexperienced traders to panic; they fear missing a move, so they hit their buy key; or they fear losing more and so they hit the sell key. In volatile exchange rate environments, the broker cannot ensure that an order will be executed at the desired price. This results in sharp movements and often slippage. The same is true for stop or limit orders. Some brokers guarantee stop and limit order fills, while others do not. Even in more transparent markets, slippage occurs, markets move and we don't always get the price we want. (Learn about different forex trading strategies in Place Forex Orders Properly.)

Therefore, often what is perceived as a scam is just the trader not understanding the market he or she is trading.

The Real Problem - Scam FX Brokers

Real problems can begin to develop when communication between a trader and his or her broker begins to break down. If a trader does not get email responses from his or her broker, the broker fails to answer the phone, or provides vague answers to a trader's questions, these are red flags that a broker may not be looking out for the client's best interest.

Any arising issues should be resolved and explained to the trader and the broker should also be helpful and display good customer relations. One of the most detrimental issues that may arise between a broker and a trader in this case is the trader's inability to withdraw money from a trading account.

How to Protect Yourself from Forex scammers

Protecting yourself from unscrupulous brokers in the first place is ideal. The following steps should help:

Do an online search for reviews of the broker. Take what is said and filter it based on what was said in the first section; could this be just a disgruntled trader? In the same search, find if there are outstanding legal actions against the broker.

Make sure there are no complaints about not being able to withdraw funds. If there are, contact the user if possible and ask them about their experience. Read through all the fine print of the documents when opening an account. Incentives to open account can often be used against the trader when attempting to withdraw funds. For instance, if a trader deposits $10,000 and gets a $2,000 bonus, and then the trader loses money and attempts to withdraw some remaining funds, the broker may say he or she cannot withdraw because the bonus cannot be withdrawn. Read the fine print and make sure to understand all contingencies in regards to withdrawals and whether incentives impact withdrawals.

If you are satisfied with your research on a particular broker, open a mini account or an account with a small amount of capital. Trade it for a month or more and then attempt a withdrawal. If everything has gone well, it should be relatively safe to deposit more funds. If you have problems, attempt to discuss them with the broker. If that fails, move on and post a detailed account of your experience online so others can learn from your experience. Note: It should be pointed out that a broker's size cannot be used to determine the level of risk involved. While big brokers get big by providing a certain standard of service, the 2008-2009 financial crisis taught us that a big or popular firm isn't always safe. (If this seems a little over your head, check out our Forex Walkthrough Charts, Economics, Trading, or you could start at Beginner.)

What If You're Already Stuck With a Bad Broker?

Unfortunately, options are very limited at this stage, however, there are a few things you can do:

Read through all documents to make sure that your broker is actually in the wrong. If you have missed something or failed to read the documents you signed, you may have only yourself to blame. Be stern with your broker, but not rude. Point out the course of action you will take if he or she does not adequately answer your questions or provide a withdrawal. Steps may include posting comments online, reporting the broker to the regulatory authority or marking them as a scam on forex "policing" sites...

Why forex trading features matters

Account and Portfolio Information refers to the data and display options associated with the financial account and transaction information of a forex account. All of the best forex brokers will update account information in real time, display account balances, and provide history reports and statements. While Account and Portfolio Information is relatively important, it’s safe to assume that most forex brokers offer the most important features. An investor who requires specific portfolio reporting features may want to take a harder look at the features in this category.

Most important account and portfolio features

Account History Reports – You can create reports or view statements of your portfolio or account information.

Download Statements – You can download your account statements.

Export Data – You can export your portfolio or account data.

Gain/Loss – You can run gain and loss reports for tax planning.

Order Status and Balance – You can quickly view your current trading positions, open orders, and account balance.

Real-Time Updates – Your account balances update in real time.

Cross Currency Pairs

Cross Currency Pairs includes secondary currencies traded against each other and not against the U.S. dollar. Examples include EUR/JPY, EUR/GBP, and CAD/JPY. This category represents another set of highly traded currency pairs that most reputable brokers offer. The Cross Currency Pairs category is especially important for a forex trading account denominated in a currency other than the U.S. dollar, or for more advanced traders exploiting discrepancies between other economies.

Most important cross currency pair features

AUD/JPY – The broker offers trading in the Australian Dollar vs. Japanese Yen currency pair.

CAD/JPY – The broker offers trading in the Canadian Dollar vs. Japanese Yen currency pair.

CHF/JPY – The broker offers trading in the Swiss Franc vs. Japanese Yen currency pair.

EUR/AUD – The broker offers trading in the Euro vs. Australian Dollar currency pair.

EUR/CHF – The broker offers trading in the Euro vs. Swiss Franc currency pair.

EUR/GBP – The broker offers trading in the Euro vs. British Pound currency pair.

EUR/JPY – The broker offers trading in the Euro vs. Japanese Yen currency pair.

GBP/CHF – The broker offers trading in the British Pound vs. Swiss Franc currency pair.

Major Currency Pairs

Major Currency Pairs are the most important, most traded worldwide currency pairs available through a forex broker. These pairs consist of currencies from the world’s most developed economies including Europe, Japan, Canada, and Australia. A major currency pair is created when one of these currencies is traded against the U.S. dollar. Examples include EUR/USD and USD/CAD. Major Currency Pairs is an important category because these pairs represent the most heavily traded and liquid currency markets in forex trading.

Most important major currency pair features

AUD/USD – The broker offers trading in the Australian Dollar vs. the US Dollar currency pair.

EUR/USD – The broker offers trading in the Euro vs. US Dollar currency pair.

GBP/USD – The broker offers trading in the British Pound vs. US Dollar currency pair.

NZD/USD – The broker offers trading in the New Zealand Dollar vs. the US Dollar currency pair.

USD/CAD – The broker offers trading in the US Dollar vs. Canadian Dollar currency pair.

USD/CHF – The broker offers trading in the US Dollar vs. Swiss Franc currency pair.

USD/JPY – The broker offers trading in the US Dollar vs. Japanese Yen currency pair.

Trading Technologies - Forex Brokers

Trading Technology encompasses all technology that enables the execution of a trade as well as tools to simplify trading or execute advanced strategies. The Trading Technology category includes a spectrum of features, from alerts and real-time quotes to the more advanced features such as automated trading and conditional orders. Trading Technology is one of the most important categories when considering a forex broker because the ability to execute a chosen strategy is highly important when forex trading.

Most important trading technology features

Alerts – You can set up personalized alerts for your portfolio.

Automated Trading – You can place trades by setting automated triggers.

Conditional Orders – You can place orders that, when executed, immediately triggers or cancels another order.

Customizable Interface – Layout and features of the trading platform can be customized and changed.

In Chart Trading – You can use the charting tools to actually place trades.

Real-time Charts – Real-time updating charting tools are available through the broker.

Real-time Quotes – Up-to-date price quotes are available in real time.

Customer Service and Support

Customer Service and Support is the availability of the forex broker’s support channels. The forex brokers with the best support are available during all trading hours through multiple channels including live chat, email, and phone. Some of the top forex brokers also have retail locations where you can speak to someone in person. Support especially matters for online forex trading because forex markets trade around the clock, necessitating access to support at all hours.

Most important customer service and support features

Email – You may access customer support by email.

Live Chat – You may access customer support by live chat.

Phone – You may access customer support by phone.

Trading Hours Support – You may access customer support during the majority of trading hours.

Mobile Trading

Mobile Trading is the ability to access a trading account using a mobile device. Mobile Trading encompasses the availability of dedicated apps for a variety of devices, the functionality of the features within the mobile app, and how users have rated the application. Mobile trading continues to grow in importance as the quality of applications improves to meet the demand for high-performance, on-the-go trading tools.

Most important mobile trading features

Android – The broker provides an app for Android devices.

BlackBerry – The broker provides an app for BlackBerry devices.

Create Alerts – You can create alerts with one or more of the mobile trading applications.

Favorable App Store Reviews – Three or more stars have been awarded to the broker’s iPhone app from users in the Apple App Store or Google Play.

iPad – The broker provides an app for the iPad.

iPhone – The broker provides an app for the iPhone.

Mobile Research – Research features are available using one of the mobile applications.

Mobile Website – The broker offers a separate mobile website for accessing your account from a mobile web browser.

Place Trades – You can place trades using your mobile device.

Portfolio Tracking – You can track your portfolio using a mobile device.

Streaming Quotes – Streaming quotes on mobile devices are available.

Research

Research is the resources that a forex broker provides to their clients to help them make decisions and understand market activity. The research provided by the best forex brokers include advanced charting capabilities, third-party research, research reports, and market commentary. Forex trading can be highly computer driven, and some forex brokers offer traders access to historical data so they can back-test strategies before allocating real money. Research is an important category for traders who are looking for assistance in making decisions as well as independent traders who are seeking confirmation on a trade or a second opinion. Some of the more self-directed brokers offer less research amenities because they cater to more advanced traders who pay for third-party research.

Most important research features

Charts – You have access to charts so you can conduct research on investment products.

Historical Data – The broker gives you acess to historical exchange rate data.

Market Commentary – You have access to market commentary from outside experts.

News – You have access to daily market news and updates from third party services.

Research Reports – The broker provides you with various research reports.

Trading Platforms

Trading Platforms covers the different software platforms available for forex trading provided by the broker. Trading Platforms can differ based on a trader’s needs and are often categorized as a standard or professional platform. Additional platforms include mobile platforms to execute trades on the go and virtual platforms to test strategies without risking money. Trading Platforms is an important category if a trader is looking for a forex broker that can meet the trader’s needs as they change.

Most important trading platform features

Mobile – The broker offers a platform to execute trades on a mobile device.

Professional – The broker offers multiple platform levels including a professional platform.

Standard – The broker offers multiple platform levels including a standard platform.

Virtual Trading – The broker offers a virtual account for customers to practice trading without risking any actual money.

Introductory Offers

Forex brokers often offer promotions to attract a prospective customer. Examples of incentives include introductory offers for opening an account and customer referral programs. Others offer free trading demos so traders can practice forex trading before committing to the broker. Incentives aren’t considered very important because they’re generally not related to the actual services of the broker, but it can be nice for some customers to be aware of the potential bonuses as they make a decision between two forex brokers.

Most important introductory offer features

Free Demo – You can access a free trading demo so you can try one of the trading platforms.

Referral Program – You can be rewarded for referring a friend to the broker.

Special Offer – Special offers for new traders who open an account are available.

Other Investment Products

Other Investment Products consists of other investment products a forex broker makes available for someone to trade. Other Investment Products include stocks, futures, options, and CFDs. This is a less important category because most forex traders are highly specialized, but it can be a more important category for professional traders with expertise across multiple products.

Most common investment products

CFDs – The broker provides other instruments settled as Contract for Difference

Futures – The broker provides trading of some futures products.

Options – The broker provides trading of some options products.

Stocks – The broker provides trading of some stocks.

Trading Education

Education is all of the resources an online forex broker provides to help their clients learn about forex trading and navigating the platform. A forex broker that excels in the Training Education category regularly offers webinars and videos so traders can advance quickly, learn new concepts in forex trading, and easily get accustomed to the broker’s platform. Additionally, the best forex brokers provide a superb trading community to facilitate the exchange of trading ideas. Education is less important to an advanced investor, but a beginner benefits greatly from the courses and webinars offered by most forex brokers.

Most important trading education features

Courses – You can access educational trading or investment courses from the broker.

Glossary – A glossary of important investment terms is provided by the broker.

Live Seminars – You can attend live in-person seminars around the country from the broker.

Trader Community – You have access to an online community to have discussions and share advice with other traders.

Videos – You can view training videos on the broker’s platform.

Webinars – Webinars are available to help you learn about investment products.