Are you considering trading Forex, cryptocurrency, or Contracts for Difference (CFDs) online? If so, do you know which financial market trading company you are going to open an account with? If not, and you are in the process of choosing an online trading partner, it is vital to be cognisant of the difference between a fraudulent scammer and a legitimate broker.

It does not matter whether you are a beginner, intermediate, or advanced trader. Beginner traders run the risk of signing up with the wrong trading brokerage because they do not always have the necessary knowledge and skill to discern between a legit company or a scam. On the other extreme, advanced traders can become complacent and not do the requisite due diligence into a company before opening an account with them.

A scam or fraudulent scheme

Before we look a way to help you choose the correct online trading partner, let’s look at a succinct definition of a fraudulent scheme or scam:

The website www.jonesmutualfraud.com/ defines fraud as ““an intentionally deceptive action designed to provide the perpetrator with an unlawful gain or to deny a right to a victim.”Thus, in our case, this definition means that any person who aims to gain illegal access to monies that they have no right to take ownership of is committing an act of fraud.

Thus, it is safe to say that a genuine online trading brokerage will do their utmost to keep their traders’ monies safe and prevent hackers (or fraudsters) from gaining access to these funds.

Tips to help you choose a legitimate online trading partner

Therefore, here are a few tips to help you differentiate between a scam or fraudulent operation and a legitimate broker:

Is the trading risk level downplayed or emphasised?

Everyone who chooses to trade CFDs or on the Forex market must be aware of the high risks levels involved. A bona fide broker will display prominently the fact that online trading is a high-risk venture and should be undertaken with care and foresight. If you cannot find the risk disclosure statement on the broker’s website, then it is best to stay away from them.

In fact, in their 2011 published guidelines on what should be displayed prominently on a financial website, the FSA requires that a risk disclosure is prominently presented on all online financial trading sites. And because online trading companies like Jones Mutual comply with the FSA guidelines, they display the following disclosure statement at the bottom of each page of their website (it is in the page’s footer):

“Risk Disclaimer: Online Trading has the potential to yield high profits, but it also involves significant risks. For this reason, Jones Mutual advises consumers not to trade funds that they cannot afford to lose. The trading outcome is dependent upon an unpredictable market. It is possible to lose one’s initial investment, and we, therefore, recommend that traders devise a money management system, including seeking professional advice, in order to protect their investments”

Online trading platform and security measures

Once again, a legitimate online trading company will make sure that their network security systems are some of the best that is available in the marketplace. They will not take the risk of hackers breaking into their online trading platform.

Also, a genuine brokerage will use a well-designed, well-supported, highly-thought-of trading platform that is regulated by the industry-standard platform,  MT4. There are cheaper versions available; however, they are not as secure as MT4, and their customer support is not as good. Therefore, it makes sense to avoid an online trading firm that does not use an MT4-regulated or -compatible trading platform.

Final words

These two tips mentioned above are the first two aspects all investors should look at before signing up with a new online trading partner. There are, however, further considerations to take into account like website usability and quality, customer support, including a dedicated financial analyst, and whether the website has a comprehensive trading academy added to the site or not.

Finally, it is absolutely vital not to be gullible; not to chase the illusion of quick money. Thus, if you trade carefully, knowledgeably, and wisely, you will increase your investment portfolio and grow your wealth. However, it is not a quick and easy process. It is a journey, starting small and growing bigger as you gain the necessary experience to trade as an expert trader.