The soaring popularity of online foreign exchange brokers has led to no shortage of choice for investors wanting to trade the currency markets. However, with so many companies vying for business, there are inevitably quite a few unscrupulous sites that may offer attractive deals that are not all they seem.

Avoid ‘get rich quick’ offers
A rule that has applied throughout the ages – if someone offers a scheme that promises a fast track to undreamt of riches then it is almost certainly a scam, or at the very least an overly optimistic account of their services. If they had discovered a way to make lots of money quickly, you would assume they would be busy trading for themselves, rather than setting up a dodgy website for consumers. Currency trading can be profitable, but like any financial tools, don’t be unrealistic.

Does risk-free trading exist?
Another frequent claim is that trading comes with little or no risk, which is obviously nonsense and should set alarm bells ringing. Trading is inherently risky, which is why there are gains. The currency markets in particular can fluctuate wildly, and should always be approached with caution and plenty of research.

Check company information
Sometimes FX brokers will have websites offering plenty of services and reasons to sign up, but little information on the actual companies themselves, or the people that work for them. If these companies are so reputable, then it seems odd that they wouldn’t want to promote the people at the top.

Another often-missing bit of information is a physical address. It’s very easy to set up email address and phone lines, but a fixed address should allow at least some reassurance that the company is legitimate.

Read (reliable) reviews
All over the internet there are reviews of FX brokers by other traders. While overly enthusiastic reviews of a trading platform should alert users to the possibility that it’s an employee of the platform giving themselves a good review, potential customers should ensure that they look at a wide range of reviews.

Know the regulation
Although online FX broking is somewhat difficult to regulate as national borders are easily bypassed online, there are some regulatory bodies that license brokers in certain territories, such as Retail Foreign Exchange Dealer (RFED). Examples include in the US the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA); in the UK there is the Financial Conduct Authority (FCA); while Japan has the Financial Futures Association of Japan (FFAJ).