CFD trading platforms, arguably, offer some of the most lucrative investment opportunities in this digital age. These platforms allow you to make great profits trading cryptocurrencies, forex, stocks, commodities, and indices. That explains why they attract many investors.
Unfortunately, money attracts scammers in abundance. According to Investopedia, investment scams rose in 2022, with investors losing a whopping $3.8 billion, certainly more money than any other type of scam. Similarly, a report by the Federal Trade Commission shows that cryptocurrency scammers have stolen more than $1 billion since 2021.
Considering these statistics, if you decide to invest in trading platforms, your chances of getting scammed are higher compared to any other option. That is especially true if you don’t know how to avoid scams perpetrated on fraudulent CFD trading platforms.
Fortunately, I wrote this article to share with you a few secret tips on how to not get scammed on fake platforms or websites to trade CFDs.
But first things first, have you lost your money to a scam broker?
If so, and you have evidence, you should report the scammer to the appropriate authorities right away and start pursuing your funds. To do so, go to this page, or email scamread@scamreader.info.
How To Avoid Landing On Fraudulent CFD Trading Platforms and Getting Scammed
If you follow these tips, the chances of you getting scammed on dubious websites to trade CFDs will reduce to almost zero:
1. Narrow Your List Down To Registered CFD Trading Platforms Exclusively
CFD trading brokers are required by the law to be registered, licensed, and supervised by a regulatory body. Every market jurisdiction around the world has a designated regulator responsible for overseeing and regulating forex (FX) brokers and other financial services providers.
Genuine FOREX brokers will be transparent enough to prominently display their registration, licensing, and regulatory status on their websites. It just demonstrates their compliance with regulatory requirements, building trust with clients.
One thing for sure is that it’s easy to determine whether a website purporting to offer CFD trading opportunities is genuine or fake. All you have to do is check whether it’s registered, licensed, and regulated by a regulatory authority.
Simply search for the registration, licensing, and regulatory details. If you can’t find any, check for the company’s physical address. Many websites prominently display their physical address on the “About Us” or “Contact Us” pages.
Here’s a good explanation of what I’m trying to say:
Let’s say, if you find that an FX brokerage company is based in North America, based on the physical address details;
- Go to the registry of the Commodity Futures Trading Commission (CFTC) and search for the name of the entity.
- If the company’s name is unavailable on the registry, go to the National Futures Association (NFA) registry and do the same.
- Again, if the company’s name is unavailable on the registry, you know that you are looking at a so-called CFD brokerage entity that is unregistered, unlicensed, and unregulated, disregarding regulatory compliance. Such an entity is highly likely to be a scam. In fact, all the scam brokers I’ve exposed on this blog, including Finkea, Anso FG, and Intenfix are unregistered, unlicensed, and unregulated.
2. Does The Broker Provide Demo Trading Accounts?
One thing you should recognize is that legitimate CFD trading platforms offer demo trading accounts. For starters, demo trading accounts are like simulated trading accounts that mimic real trading accounts. The essence of these unreal trading accounts is to enable traders to practice trading without risking losing their funds. After all, these accounts use virtual funds as opposed to real funds.
While demo trading accounts are not a bad thing for authentic brokers, fake brokers hate the idea of providing these accounts. This is because these simulated trading accounts expose their deceptive practices.
One thing you should know is that demo accounts allow traders to test brokers’ platforms and services. These simulated trading accounts also enable traders to gain experience and knowledge about trading in the forex market. Consequently, they become less likely to fall victim to scam brokers and their deceptive practices. This is because, after mastering trading strategies and gaining experience, they become better capable of recognizing red flags and making informed decisions. Yet fraudulent brokers prefer inexperienced traders because such kinds of traders are easier to swindle and defraud.
What’s more, demo trading accounts reveal the limitations of dubious trading platforms, helping investors discover that these trading platforms don’t work as advertised. If fake brokers engage in deceptive practices such as price manipulation, again, traders will recognize that through these simulated trading accounts. These are just some of the reasons scam brokers avoid providing demo trading accounts.
Regardless, avoid any CFD trading platform that doesn’t provide demo trading accounts.
3. Steer Clear of Brokers Exhibiting Persistent Persuasion Tactics
While even authentic platforms for CFD trading will try to persuade you to deposit funds and start trading, persistent persuasion is something many of them don’t engage in. How do you recognize persistent persuasion? PS includes frequent broker phone calls or endless emails, all with one call to action—deposit funds into your account to “start trading.”
A broker who persistently nags you to put money into your account to supposedly start trading is a big red flag. You should avoid such a broker regardless of the potential profit-making opportunities they may promise you.
4. Check The Broker’s Reputation Online
What do Trustpilot and other consumer review platforms say about the broker? Are customers satisfied, awarding them high star ratings? Or are they generally rating them low, suggesting that they’re basically unhappy with the services?
Also, watch out not to be misled by false positive reviews. Many brokers nowadays pay people to write favorable reviews, giving a false impression of happy clients.
How Do You Distinguish Genuine Reviews from Fake Ones?
1. Pay Attention To Specific Details about the Purported Trading Platform
Do the reviews mention the features and benefits of trading on the platform? Do reviews talk about personal experiences with the broker? If not, you might be looking at fake reviews.
2. Scrutinize the Reviewers
Do they have complete and verified profiles? Also, do they tend to leave balanced and detailed reviews? If yes, those may be genuine reviewers who have written authentic reviews of the purported broker. But if they have incomplete and unverified profiles, as well as exhibit patterns of leaving excessively positive or negative reviews, those may be paid reviewers.
3. Consider the Language and Tones Used In the Reviews
If the reviewers have used natural language and expressed different opinions, including both positive and negative things about the trading platform, those may be genuine reviewers. However, if the reviewers have used overly promotional language, or appear too critical without providing constructive feedback, you might be looking at fake reviews.
4. Pay Attention to the Timing and Frequency of the Reviews
Is there a sudden increase in the number of positive or negative reviews of the trading platform? If so, those could be fake reviews. Authentic reviews tend to be posted over time. It reflects a more natural distribution of opinions.
5. Check Whether the Reviews Are Written By People Who Have Genuinely Tested the Trading Platform
Fortunately, some consumer review platforms classify reviews into either verified reviews or unverified reviews. Verified reviews are reviews written by individuals whose usage of the trading platforms the consumer review platform has authenticated. On the other hand, unverified reviews lack this authentication, meaning they may be fake.
6. Look for and Compare Reviews from Numerous Sources
Sources may include:
i. Trustworthy consumer review platforms, such as Trustpilot, Sitejabber, and Reviews.io.
ii. Broker reviews blogs like the European Business Review and Topedgefx.
iii. Social media platforms such as Reddit, Facebook, and LinkedIn.
iv. YouTube. There are several trustworthy YouTube channels where you’ll find comprehensive and trustworthy reviews of FX brokers. These channels include our very own Scam Detective, as well as other third-party channels e.g. Broker News.
By comparing reviews from these sources, you’ll be better able to get more balanced opinions. This way, you’ll gain a better understanding and perspective about a broker.
Final Thoughts On How To Avoid Fake CFD Trading Platforms
While the number of CFD trading platforms is on the rise, it’s sad that most investors get swindled due to a lack of basic knowledge. This knowledge includes understanding the significance of avoiding unregistered, unlicensed, and unregulated CFD trading platforms. Additionally, it’s essential not to invest in platforms that don’t offer demo trading accounts. Furthermore, be wary of brokers employing aggressive persuasion tactics, such as incessant phone calls or emails. Lastly, always conduct thorough research on the broker’s reputation using reliable broker review platforms, social media channels, individual broker review blogs, and YouTube broker review channels.
Secondly, you should know not to put your money into a trading platform that doesn’t provide demo trading accounts. Thirdly, avoid brokers exhibiting persistent persuasion tactics like bombarding you with telephones or emails. Finally, be sure to check the broker’s reputation online, using trustworthy broker review platforms, social media, individual broker review blogs, and YouTube broker review channels.
A Frequently Asked Question
1. What should I do if I’ve been scammed by a fraudulent CFD trading platform?
Answer: You should avoid engaging the services of the so-called “scam recovery firms” and instead work with the appropriate authorities. The FBI has recently warned that scam recovery entities are just another type of scam that will charge you a “retainer” or “upfront fee” and fail to recover your lost funds.