How to avoid forex broker scams
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Over $6 trillion a day is traded in the forex market. With such big money on the line scammers have started to prey on unsuspecting traders. This page explains everything you need to know about how to avoid forex broker scams.
What is a forex broker scam?
It’s a sophisticated ploy to defraud and steal money by creating a fake forex brokerage. These types of scams can work in two ways. The first method criminals use is to copy an existing forex broker and make traders believe they are the real deal. The second way is by creating a new brokerage platform with the sole intention of ripping off customers.
How to avoid forex broker scams
Avoiding scams is easy to accomplish as long as you are diligent and take the time to research. While imitation brokers can be difficult to initially spot, using a few techniques and checking specific information can save you from falling prey to scammers. Here’s a list of ways you can avoid forex broker scams:
Check regulation
If a broker isn’t regulated there’s a high chance it is a scam. Some scam brokers use fake regulatory information such as licence numbers. Luckily you can easily check if a regulation number is legitimate or not by visiting the regulator’s website. Every region has its own regulatory body such as the FCA in the UK.
Check contact and address information
Real brokers have their contact and address clearly stated on their websites. Scammers don’t want you to know where they’re located so will use false details. It’s easy to check if an address is real or not by searching for it online. You can also use things like Google Maps and street view. Stay away from brokers who use P.O. boxes or fake office buildings.
Research online reviews
If you have found a broker online that appears to check out but you’re still not sure then reading online reviews is a top way to find out more information. With the retail forex market being so popular there are many review websites and forums where you can learn from other traders about their experiences with specific brokers.
Some scammers take their devious actions to higher levels and create fake forum accounts to post positive reviews. Luckily these are usually easy to spot as they will be from newly created accounts who have not posted before. They may all be within a short period of time too. On most forex forums, it is easy to discover if a broker is a scam or not.
Look out for unrealistic marketing
Not even the greatest trader in the world can guarantee success from forex so if you find a broker that does, it’s clearly a scam and should be avoided. Other common marketing material scam forex brokers use are claims that you can make ‘big profits’, ‘get rich quick’, and similar unrealistic goals.
Payment options
Scam forex brokers usually only let you deposit using a couple of payment methods. Legitimate brokers let you deposit funds using your bank card or account and a range of other options like PayPal, Stripe, and Payoneer among others. Be wary if a broker insists on deposits using a payment provider you have not heard of or only accepts cryptocurrency.
Be cautious of big bonuses
It is not uncommon for a broker to offer bonuses to new users. However platforms continuously offering large sign up bonuses should be treated with caution. They could turn out to be legitimate, although you should consider how they can operate by offering large amounts of money to new traders for free. Sometimes scammers offer a bonus to gain your trust before stopping you from withdrawing
Are all forex brokers scams?
No, not at all. Most brokers are legitimate businesses operating in well regulated jurisdictions. The popularity of retail forex trading has paved the way for many new platforms to break onto the scene, all competing for your business. Unfortunately this has led to a few scammers entering the space. To make sure you don’t fall prey to fraudsters, follow the advice above and read online reviews to find the best forex broker platforms.
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