Online trading is becoming more popular nowadays. It gives investors opportunities to increase their capital and create a better portfolio. Unfortunately, as the trading landscape develops, there are also various scams investors may encounter, especially beginners.
So, if you’re a trading beginner, you should be aware of the possibility of scams. Below is a guide for beginners.
1. Understanding the Risks
Do you know the risks you may encounter when you start trading? While trading can give you opportunities to grow as an investor, many risks can be encountered along the way. This is why you should be aware of these risks and prepare for possible solutions.
Being scammed is one of the possible risks you may encounter as a new trader, and there are many ways to encounter this risk. From clicking an ad banner to enquiring about a trading platform, you should know that scammers are everywhere.
That being said, you should know the risks of every step you’re making when trading as a beginner.
2. Research
Before investing in any trading platform, broker, or contract, make sure to do some research to know whether the business is legitimate or not. When doing so, look for reviews, websites, and social media accounts. If the profiles and websites look new and there are not enough reviews, you should look for another option.
For instance, if you’re planning to try CFD trading, look for a broker who has been in the industry for a reasonable time and has great reviews. In addition, look for necessary documents, such as certificates, credentials, and permits.
3. Stay Away from False Promises
When you see an ad stating that you’re going to be rich in such a few trades, that’s the first sign of a scam. The next clue is when they make unrealistic promises because if it’s too good to be true, it probably is.
In addition, scammers can talk you up with flowery words and exciting promises that you’re never going to get no matter what happens. For instance, if you hear something about facing low risks but guaranteeing high returns, it’s time to look for other options.
As you know, trading isn’t a lottery. You need enough experience, great strategy, and abundant knowledge to understand how it works. Meanwhile, if you’re a beginner, it’s impossible to get big returns right away.
4. Check for Regulatory Compliance
Although online brokers and trading platforms can be hard to regulate, there are ways to confirm their legitimacy. For instance, if the company has a physical office, they usually have permits and certificates to prove they’re real. Knowing whether they have the proper documents to operate can help you have peace of mind.
However, not all businesses that can prove their legitimacy can be fully trusted. Some go to great lengths to scam other people, so aside from verifying their regulatory compliance, you should check their performance.
5. Secure Your Personal Information
Since the online world comes with various fraudulent acts, it’s not advisable to share personal data and financial information with any broker or trading platform you see online. Before doing so, make sure their website is secured, and there’s another layer of security. For instance, if they have cybersecurity insurance, they can retrieve the information or money you’ve lost.
Meanwhile, the ultimate way to avoid being scammed through your personal information is to avoid giving it to untrusted individuals and businesses.
6. Avoid High-Pressure Sales Tactics
Have you ever encountered an aggressive salesperson? They would say anything you want to hear, play with your emotions, and pressure you to make impulsive decisions. But this time, it’s not just about a marketing tactic but to lure you into being scammed.
There are many ways you can be scammed. It’s not just about someone stealing your money. In some cases, even if you continue having business with them, they can gradually scam you by suddenly increasing rates or adding too many hidden charges. When that happens, you should know when to stop and look for a better broker or trading platform.
7. Stay Informed and Educated
Staying updated about the latest scam tactics and current trends can help you avoid scams. As the trading industry develops, the strategies of scammers also improve. So, if you often educate yourself about the things to avoid to prevent the risk of facing scammers, you can trade without worrying about possible scams along the way.
Final Thoughts
While trading is a great way to help you with your financial needs and improve your investment portfolio, keeping an eye on possible scams is vital. From understanding the risks of encountering scams to staying informed and educating yourself about scam tactics, you can increase your trading confidence.
We hope this article helps you to know the things you should do to avoid scams. If you want to share your experience related to trading scams, don’t hesitate to comment below!
