Three Red Flags to Avoid When Choosing A Broker

Many try to maintain their faith in humanity, which can be challenging. Even for those of us searching out the best in people, we need to be aware that dishonest and deceptive individuals do walk around this world. We can protect ourselves against their schemes to take away our money.

We know these people are out there because Interpol swooped into a location in Southeast Asia in 2023, arresting 3,500 individuals involved in internet cybercrime and seizing $300 million in stolen funds.

This corner of the globe is notorious for fostering financial schemes, of which the above case is just a drop in the ocean. Recently, one of the most typical forms of attack involves contacting victims via social media channels like Telegram and including them in online groups offering financial advice directly from the mouths of "professionals."

Once a part of these groups, victims are informed about financial secrets with the power to unearth great riches. All that's needed is swiftly depositing money, whether fiat or crypto, at a designated address.

Cyberattacks

Another nefarious form of attack is made through dating apps, where victims are led to believe that a stranger has developed a romantic interest in them. Ultimately, they are encouraged to sign approval for their love interest to take control of their funds, which they never see again.

Alternatively, you may find yourself opening a URL with a very plausible-sounding name and appearing like a genuine trading platform. Believing you are trading in the markets, you may deposit your money with the platform, unaware that your funds are going directly into the pockets of thieves. All in all, we know of $4.6 billion stolen through trading scams in the US in 2023, making this scam "once again the costliest type of crime tracked" by the FBI in that year, in their own words.

The Good Broker

On the other hand, plenty of legitimate trading sites offer a genuinely good app experience to their clients. This is regarding ease of use on the interface, charting technology, and educational offerings. Indeed, the advent of online trading platforms has unlocked the doors to the financial markets for tens of thousands of people who were barred from participating beforehand.

This was when financial trading was reserved for professionals working for large institutions. Now, equipped with the power to open and close deals, monitor asset prices, and analyze price trends, retail traders are starting to make their mark on the markets in their own right.

The first step for those interested in participating in the financial markets is to weed out and discard the bad seeds. In this article, we'll hone in on three red flags that help you distinguish the bad from the good in online trading platforms.

FOMO

Advertising a "once-in-a-lifetime" opportunity to double one's money can be very tempting, especially for someone in financial straits. It's common for scammers to use language implying that a one-time deposit will almost certainly lead to outsized earnings. The only catch is that the deposit must be made immediately. Thus, the spread of FOMO (fear of missing out) is promoted, and the weaknesses of vulnerable individuals are shamelessly exploited.

FOMO doesn't only affect the financially hard-up. For many people, such a scheme's lure is in its elegant solution to the cost problem of an upcoming wedding.

Besides this, nobody likes being left in the lurch while everyone else appears to be living the high life. In addition to this, many psychologists spy on symptoms of addictive behaviour in overly motivated online traders. This is evident when they experience ongoing depression, anxiety, and social withdrawal due to the distress of their loved ones.

One finger of blame can be pointed at the media, who devote endless hours to covering new cryptocurrency tokens with the potential to "shoot to the moon", not to mention the stream of stories they peddle about early crypto believers who became fabulously wealthy. Up to 80% of ICOs (Initial Coin Offerings) are scams, and most crypto traders never join the ranks of the rich and famous.

The sheer volume of new information made available through the media creates the impression that the old rules of finance have become outdated, that the world works differently today, and that there is no longer a necessary connection between hard work and financial success. These suggestions find plenty of ready ears, especially among those with less financial know-how.

If the trading platform you're considering uses language designed to instill FOMO in you, this is red flag number one. Legitimate online brokerages will never pressure you to deposit funds within a specific time limit. Anyone who attempts to apply this sort of pressure to you should immediately become suspect in your eyes. Financial decisions are easier enough as it is with being expected to put down large chunks of money on faith alone.

"No Risk!"

"The potential for high investment returns usually involves high risk", writes the Commodity Futures Trading Commission. It follows that when you are assailed by advertisements for astronomical gains with little or no risk, their trustworthiness is seriously questioned. This principle holds whether or not you know the advisor behind the scheme.

If you're discussing finances in an online group with which you have grown closely acquainted, a member may claim to be, or to know, a highly skilled financial advisor with inside knowledge of the markets. You are told this person is offering a unique opportunity to a select group of associates in which you may include yourself, and the returns are guaranteed to beat anything else. Another group member confirmed that she took the opportunity and could pay off all her debts.

A bit of healthy scepticism is appropriate at this point. All the members of this group may have been working together to ensnare you for several months, deliberately building up a friendship with you to gain your trust. "Ah!" you argue, "But they sent me a video of several pleased clients who testify that this scheme turned them into millionaires."

In reality, all of them could be actors hired by fraudsters to give credence to their stories. It can be challenging to turn around and suspect those you believe to be your friends, but that's what's needed. One way of responding could be to formulate a series of straightforward questions about the proposed deal and present them to the group. If the answers seem vague or off-point, your suspicions should grow.

Spoofing

Get in the habit of taking a close look at the email addresses and website URLs associated with financial platforms. You might be firmly under the impression that you're on a well-established site, but one inconspicuous character may be added or deleted. Cyberthieves make it their business to clone respected websites to put victims under the impression that they're in safe territory, but one thing they can't precisely clone is the company email address or URL.

Spoofing attacks are often used to set up phishing attacks, which occur when criminals impersonate legitimate entities by contacting you by phone, text, or email. You may even be called by the purported representative of an institution to which you subscribe, and the individual will claim to be doing a routine check on your private information.

This is a red flag. Legitimate firms don't usually ask clients for personal information by phone, email, or chat. For one thing, they should already have it recorded on their computer system. For another, they know to avoid running their business this way due to the same security issues worrying you.

Wrapping Things Up

When selecting your online trading brokerage, the first thing you should do is check whether or not an official watchdog regulates it. Not every unregulated firm will necessarily swindle you, but the chances of that happening increase when you deal with such entities.

Follow this by searching for some online reviews of the platform. However, take them with a pinch of salt because even the best brokers have made their share of enemies in the form of disgruntled customers. Much of the time, the fault lies with the customers, not the brokerage.

iFOREX Europe fits the bill in every possible way, commanding a loyal client base throughout Europe. iFOREX Europe clients can trade CFDs on shares, forex pairs, commodities, stock indices, ETFs, and cryptocurrencies. Visit the iFOREX Europe website to find out more.

About iFOREX

iFOREX Europe is the trading name of iCFD Limited, which is licensed and regulated by the Cyprus Securities and Exchange Commission (CySEC) under license # 143/11. The materials in this document have been created in cooperation with iFOREX Europe.

They should not be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy concerning a financial instrument in any manner whatsoever. CFDs are complex instruments with a high risk of losing money rapidly due to leverage. 73.2% of retail investor accounts lose money when trading CFDs with this provider.

It would help to consider whether you understand how CFDs work and whether you can afford to risk losing your money. Please note: Calculations of past performance movements may represent the futures, not the underlying asset. Full disclaimer: https://www.iforex.eu/legal/analysis-disclaimer.html