Risk Warning: Your capital is at risk. Statistically, only 11-25% of traders gain profit when trading Forex and CFDs. The remaining 74-89% of customers lose their investment. Invest in capital that is willing to expose such risks.

Think Twice When Making A Deposit In A Forex Company

Author: Martin Moni
Martin Moni
All publications of the author

You’ve got to spend money to make money, that’s true. But also all that glitters is not gold, which is why you shouldn’t be too eager to spend your money lest you lose it all in the process. Despite all these clichés, the point is that, although you have to make a deposit with a Forex company to begin trading, you have to be careful to whom you’re making the deposit. Of the many hundreds of Forex agents out there, a large proportion includes scam agents who will only rip you off. Nevertheless, we can’t be too afraid of losing that we forgo trading the Forex markets, so it’s better to find ways around these unscrupulous agents. (The best traders know: How Not To Be Added To The 95% Of Losing Traders)

What should you consider before making the deposit?

There are a few questions you need to ask yourself of any Forex agent you come across as these will help you determine whether or not to make the deposit. The main question is, how to choose a Forex agent? For that, there are several things to consider:

How trustworthy are they?

The most important thing to consider is the company itself and its reputation. Just ask yourself, would you buy food from any hotel without asking yourself about how it was prepared? Of course not, and that is why services like Yelp have become so popular. In the same way, you shouldn’t also trust your money with a Forex company until you found out more about them. To learn more about Forex companies, the best resource is to hear from those who have used the company before. Just like Yelp, the best knowledge is first-hand, where the individual had a real experience. (Do you know: Who Are The Best Forex Social Trading Agents To Work With?)

We have been in the Forex industry for many years, and we’ve never seen a Forex agent with a perfect rating. Just imagine, Restaurant Gordon Ramsay in London had 24 negative reviews on TripAdvisor! That should tell you never to expect a perfect rating even for a Forex agent that is very good. What’s more relevant is the overall rating. In the case of Restaurant Gordon Ramsay, the restaurant received 24 negative reviews out of 2,852 reviews, 1,887 of which were overwhelmingly positive. If you want to decide on a Forex agent to deposit your money with, look at the proportion of good to bad reviews. This way, you can be confident that most of those who deposited their money there walked away happy. (How to choose a Forex agent: basic rules and useful tips)

Moreover, be very careful where you source the reviews. Many Forex scams have succeeded in the past because the agents were smart enough to buy reviews from various websites. Just visit some of the freelance writing companies and you’re guaranteed to find some agent who would be willing to pay for positive reviews of their company. What you need are real Forex agent reviews such as the ones we provide. To get the real reviews, each one should be accompanied by the account number of the agent to prove ownership. (Look at these: Top 10 Most Outrageous Forex Market Scammers)

Do they have the required license from financial watchdogs?

Every Forex agent is supposed to be licensed by the Forex watchdogs in that region. Every country has a designated financial watchdog, and some even have a dedicated body to oversee Forex markets like the NFA in the US. The main role of the watchdog is to keep tabs on what their clients are doing, thus preventing any illegal activity. If one of the agent’s clients has a complaint against them, they are free to file a complaint with the watchdog who will in turn investigate the issue. Because these watchdogs have the backing of legislation, they can pursue charges against the agent and receive compensation for the individual. (These are the: Laws and limits of forex trading in the US)

Now consider working with a Forex agent that isn’t licensed. In most cases, such Forex agents aren’t even located in the area they claim to be headquartered. Recent scams in the Forex and binary options industries revealed the tricks these companies use. Therefore, they make it almost impossible to recover any lost funds, even with the help of the watchdog who may not have jurisdiction outside their region. That is why you should always consider if the agent has a license. (Do you know: What Is The Financial Commission And Can It Be Trusted?)

Furthermore, it is not enough to simply hear from the agent that they have a license. You need to confirm the license number from the watchdog’s website to see if they match. Some scam agents nowadays just list a random license number and some people forget to confirm its validity. Even after all that, it’s usually recommended to work with an agent whose license comes from a reputable watchdog. There are three main trusted watchdogs, whose licenses give a lot of credibility to the agents. On the other hand, you should be really careful if the agent has a license from, say, the International Financial Services Commission of Belize (IFSC). Although the watchdog themselves are not particularly bad, being offshore means it may still be very difficult to get help. Remember that these financial watchdogs don’t get their money from the government, but rather from the agents who pay a licensing fee. As a result, some of the watchdogs may have a conflict of interest and may not be of much assistance. (For your account security, these are: The 3 Most Trusted Exchange Authorities in The World)

Are they honest in what they claim?

You should also conduct your due diligence on the company itself to find out more about it. Here, the more suspicious you are, the better. First find out about the main company behind the Forex company. Many companies will have a parent company that could have other companies around the world. Accordingly, finding out more about the parent company and its other operations will shed more light on their reputation. In court, they call it the ‘fruit of the poisonous tree’ meaning that if the tree, in this case the parent company, is poisonous then the fruits must be too. Some of the Forex scams in the past have been conducted by one parent company that created multiple company companies and running the same scheme. (Some Lessons on self-defence: Forex scams)

Also be suspicious about any claim made on the company website. Many scam agents like to list the rewards that they have received in the past like ‘Best Agent in Europe’ when it is all a lie. Investigate every claim on the website deeply and you quickly realize that a lot of that you read is completely bogus. Do this for the entire website while also investigating the company officials. Most of the time, you will find some of the officials tied up with some other schemes in the past, showing you that they should not be trusted. A lack of details and names should also perk your ears up because executives like to brag about their high positions. Ask yourself, if you were the CEO of a Forex company, wouldn’t you splash your name all over the website? Now as yourself why some companies don’t want to reveal any names behind the company? Again, it is all about being suspicious and investigating further. (In case you’ve been defrauded, this is: How to complain against an agent)

What are some of the signs of an agent to avoid completely?

If you follow the steps above diligently, then you will end up knowing which companies can be trusted and which can’t. In this section, though, we’re going to look at some shortcuts to use that quickly point at a scam agent to avoid without even wasting any of your time. The main point here is, when the deal is too good, think twice. That naturally means you should be wary of any company that makes promises that are simply unrealistic. Consider the largest Ponzi scheme ever run by Bernie Madoff. His company was highly sought after because he had promised his investors a 10% guaranteed annual return. If you look at the average returns of any hedge fund, they don’t always achieve returns above 10% every year, which should have made the investors with Madoff suspicious. Unfortunately, they were not, and they ended up losing a lot of money. (To be safe: Learn How Cryptocurrency Scams Operate And Avoid Them)

You should not fall into the same trap and always remember to be suspicious of any promises made. For example, if a Forex agent promises that they can double your money in a month or any other similar promise, walk away immediately. You think it’s too blatant to happen? Well, it does. Some agents will promise to connect you to an account manager who will be giving you daily tips on how to trade, but soon after you make that deposit, even an email is hard to come by. Many people fall for it unfortunately, but you should not become part of the statistics. (Should You Invest In CFDs Or Stocks To Make More Money?)

Something else that should make you highly suspicious is a ‘pushy’ agent. Have you had an experience where as soon as you opened a demo account with a company, you started receiving daily phone calls from one of their agents asking you to make a deposit? This is very common, and they will be very convincing by telling you about how many opportunities you have been missing. The reason why you should be suspicious of such agents is because no reputable agent would waste man-hours reaching out to thousands of potential clients while ignoring their current clients. That is supposed to be left to the advertising department. When you start to receive these phone calls, just know that the agent has hired a call centre to lure in new clients. These ‘agents’ are paid by commission, hence their aggression and repetition. Do not fall for this either and make a deposit. In fact, there had been such a major issue last year due to this in Israel because agents would hire call centres based there to conduct their operations. In the end, binary options were completely banned from the country. (How Is Spread Betting Different From Forex Trading?)

Finally look at the bonuses the agent is promising to offer. Many reputable agents will also issue bonuses to new clients who sign up or make deposits, but these are usually reasonable. Whenever you come across an agent promising hundreds of dollars in Forex bonuses, that is a huge red flag they may be selling hot air. These bonuses can be very tempting at times because they are free, but even the scammers know how to turn these seemingly free bonuses into returns for themselves. Either way, do not be lured in by eccentric bonuses but check deeper to see what other conditions lie beneath. (Revealing Forex Bonuses Of Agents: How To Identify A Real Bonus)

What else should you consider before making a deposit with an agent?

The above listed considerations and warnings are all to ensure that you don’t lose your shirt as you look for money. But that isn’t the only thing to consider before making a deposit. A lot of other factors have to be put on the table too, those that affect your experience itself.

Transaction costs

The first and most important is to preserve as much of your capital as you can, so you need to know how much the agent will charge you for every deposit and withdrawal you make. Usually, this will be in the form of a percentage. Some agents will charge you both for deposits and withdrawals, but most only charge you when making a withdrawal. Regardless of the condition, find out how much you will have to fork out in the process. Commissions ranging between 1% to 5% charge for transactions is quite reasonable and is also the industry average. Any higher and you should consider taking your money elsewhere. (Find out more about the: Bankruptcy of Forex agents)

Beyond just the percentage in charges, it’s also got to do with the frequency of transactions you will be making. For example, if you wanted to withdraw about $1,000 at a 2% commission, you would then receive about $980, losing $20 in the process. For someone making a single withdrawal in a month, that would be a reasonable cost. On the other hand, consider someone making weekly withdrawals, whose monthly cost would be $80. Consequently, they would be paying a lot more in the end. This is why you should really consider carefully how much the transaction costs are and how they may affect you in the long term. For anyone doing frequent transactions, it’s better to go with the agent charging the least, even if their transaction speeds may be slower. (I’m just wondering: Will Cryptocurrencies Recover From Their Price Slump In 2018?)

Methods of transaction

Because ecommerce has become so widespread, there are now very many ways of making transactions to and from your agent. The most conventional way of doing so is by wire transfer, and most Forex agents will offer this as an option. One downside to this is that the process is slower than any of the other methods since it will take a few days from your bank to the agent’s account. The upshot, though, is that this is usually secure and suitable for someone making high value transactions. So if you’re dealing in millions, then this is the way to go. If you still want to be a bit traditional, credit cards are also accepted by most agents, with the advantage that the transaction is instant. One huge downside is that you will be risking your credit card information. Bank fraud cases in recent years should make anyone wary of giving away this information over the internet, yet you may still use it if you fully trust your agent to keep you safe. Besides, there are times that call for desperate measures, such as when you receive a margin call and can’t wait three days for your wire transfer to go through. (For your own security, learn: How to protect yourself from margin call)

The other forms of transaction are really subjective and would depend on your preference. Payment service providers like Skrill, Neteller and Payoneer all have similar services and are also accepted by most agents. In addition, transaction speeds with any of them are often instantaneous. What you need to consider here is the region you’re based in, since each of these services offers specific perks to members in particular regions. For example, Skrill provides instant withdrawals into mobile money wallets in certain areas of the world like Kenya. Meanwhile, the more tech savvy can choose to transact in Bitcoin, which offers more privacy also for those trying to avoid paying taxes. Of course, payment in cryptocurrencies can be tricky because of their shifting value, but it’s good to know they are there as an option. (Do you ever wonder: What Is The Future Of Cryptocurrency In Finance?)

Wrapping up

In conclusion, there are a lot of factors to consider especially when it comes to money. Nonetheless, with these tips, you should be able to navigate the Forex market comfortable and securely knowing you can always get your money back when you need it. Now you know where to send that cheque.

 

All traders need to know how Forex brokers operate to see why the decision to make a deposit is really important, and listen to one expert describe it: 

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Risk Warning: Your capital is at risk. Statistically, only 11-25% of traders gain profit when trading Forex and CFDs. The remaining 74-89% of customers lose their investment. Invest in capital that is willing to expose such risks.
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