How to Avoid Fraud When Trading


Meta: Are you concerned about the risk of fraud while trading? Check out the expert guide from City Index, which explains how to spot scammers and protect yourself.

Trading is accessible to everyone, with the opportunity to profit even during an economic downturn. You don’t need to be a full-time pro to spread bet or trade on the market, and it’s possible to get involved as little or as much as you want. This is especially true with the huge amount of information and tips on how to perform safe trading available online.

However, like all financial sectors, scammers are waiting to take advantage. They target everyone, so don’t assume you will be immune just because you have some trading experience.

So in light of this, here are useful tips to help guard against the many pitfalls in this specific sector.

Research the Broker

You’ll find there are plenty of brokers in the market, but getting the right one is not only essential to maximise your profits, it also stops you getting scammed.

If a promise seems too good to be true – it probably is. Beware of any broker that appears to be offering impossible bonuses or sky-high returns.

One cast-iron way to verify a broker’s authenticity is to check whether they are regulated and authorised by the FCA. This is the regulatory body in the UK and means that not only will the broker have had to pass intense scrutiny to be approved, but you’ll also have the backing of the Financial Services Compensation Scheme if needed.

You can check the FCA register to compare contact details and ensure that the broker is licensed to offer their services.

You should be able to find details of the FCA registration number on the broker website, but you can also search the register by name.

Be Wary About Pushy Sales

A reputable broker won’t pursue aggressive sales techniques or try to pressure you into opening an account. These are red flags that you shouldn’t ignore.

Rogue traders often contact people out of the blue, promise huge returns on an investment but give them very little time to make up their mind. If a broker is forcing you to make a quick decision and not allowing you time to do your research, it’s not wise to proceed.

Check Reviews

Another way to check up on the broker or site you’re thinking of using is looking for testimonials and past reviews. However, don’t stick to those on their website, search on trusted review sites to see whether there have been any issues.

Some scammers deliberately place fake reviews online, so it’s essential to use other methods to fully corroborate reviews, and use genuine sites such as TrustPilot.

Other Warning Signs 

Although regulation is the golden rule you should always look out for, there are other signs that can help you spot a less-than-scrupulous trader. These include:

  • A company that keeps changing its name
  • No direct contact details – lack of a phone number specifically
  • No track record or history for either key individuals or company
  • Lack of transparency over fees or commission
  • Amateur-looking website and/or poor spelling and grammar
  • Flaunting lifestyle rather than focus on trading
  • Guaranteeing results
  • Pyramid schemes

If you take just a little extra time to carry out due diligence, you can reassure yourself that you aren’t about to get scammed. Trading is a safe activity providing you take the necessary precautions to protect yourself from fraud, leaving you free to focus on developing your skills.