6 Tips to Avoid Online Trading Scams

Online trading in the form of forex, stocks or binary options is extremely popular today and it appears that there is a huge industry behind promoting these practices. There is nothing wrong with financial trading in my opinion, however it seems that a lot of the websites that provide these services are either fraudulent or are not completely truthful with their claims.

Below you’ll ding a list of things that you should look out when someone requests you to sign up at a website that offers online trading services.

1. Don’t believe the claims that you can become rich quick

Trading stocks or forex online is most of the time completely legitimate however the claims that through them you can become rich quick are completely unrealistic.

Trading stocks, forex or options is in reality extremely difficult and requires deep knowledge of various industries and even economic theory itself. The people who make money in these industries are experts in their domains.

It’s simply not possible for Average Joe or Jane to consistently make money with these things. Anyone who is claiming otherwise is lying. It is possible to learn to become good at them but it requires several years to become a pro.

There’s even studies and researches that show that most people who trade online never make money.

2. Stay away from fraudulent websites and companies

If you for some reason still decide to engage in online trading you should at least make sure not to register and deposit money at fraudulent companies and websites. You should only register at trading websites that are regulated in your respective jurisdiction.

Check out the national financial regulatory agencies of your country (for example, if it’s Canada then it’s the Canadian Securities Administrators) and see if the respective company you want to sign up at has a real license or not.

3. Don’t use any automated software or signals to trade

If you trade online either forex or options you should attempt to learn to do this yourself. There are some websites out there that claim to offer software that will analyze the markets and tell you when and what to do.

They claim that using software like these you will always be able to win no matter what. For example, some claim that using binary options signals you can always win 80% of the time. This is not true at all.

If the movement of various markets could simply be predicted by random software then we’d need no economists anymore and there would be no more financial meltdowns at all. We would just pug in some software and it would predict all the market movements for us. We’d live in a utopia. Of course, in reality it doesn’t work like that.

4. Don’t accept so-called free bonuses

When you register at online trading brokers you’ll have to deposit a certain amount of money that you will use for investment purposes. Online trading companies will sometimes offer you bonuses to entice you to sign up.

A bonus is a free money gift given to you as a thank you for signing up. For example, if you deposit $500 you might get something like $100 extra as a gift. You can’t cash out this money obviously but you will be able to use it for investing purposes.

This seems good at first but there is always a catch. The catch is that this will lock in your deposit as well. Usually when you accept a bonus you’ll be bound to the bonuses’ terms and conditions that usually state that you’ll have to invest your bonus and deposit amount an X number of times until you’ll be allowed to cash them out.

5. Don’t start trading based on some email you got

There are many legitimate online trading companies out there however there are also many that are just a scam. Legitimate companies never advertise their services through spam. So, if you see emails in your mailbox coming from forex or other trading companies then those are a scam for sure. Legit companies don’t do thing like these.

This is also valid in the case of phone calls. Some trading companies recently even started to call random people in order to persuade them to sign up and trade online. Again, legit companies don’t do this. This is pure spam and most likely not even legal.

6. Don’t invest large sums

Like said above, online trading is not really made for the causal trader. However, if you have decided to give it a try nevertheless or are serious about wanting to become a pro (it’s possible, it just takes a lot of time and effort) then under no circumstance invest our life’s savings.

Just try it out with very low amounts of money such as $100 or maximum $200. Your goal in these cases is not to make money but to experiment and learn. You’ll most likely lose all this money anyway and won’t make any profits at all until a significant amount of time passes and you’ll get accustomed to trading.

Lastly, always remember that financial trading and investing is serous stuff. There’s just no way a random person can make money with this overnight. Sure, you can train and educate yourself but to believe you will be making money right away you begin trading is foolish.


Comments

6 Tips to Avoid Online Trading Scams — 1 Comment

  1. #1 is huge. There are no ways to get rich quick when investing. Anyone that tells you that have is lying. Whenever I get approached with this claim, I ask the person what they do for a living. After they tell me about their job, I ask them why they are still working. If they were able to strike it rich quickly, why not just repeat that process a few more times and quit working altogether. That usually makes them stumble then walk away.

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