Is AvaTrade a scam? We’ll get to that in a short while. If you’ve been shopping around for a foreign exchange (forex) trading broker, you’ve probably heard of AvaTrade. (You may have heard of scam copies of AvaTrade as well) The real AvaTrade has been in business for over 13 years, making them one of the most long-standing forex brokers on the market with a great web presence. But, are they legitimate, or are they a scam?

In this article, we’ll take a closer look at AvaTrade’s business. We’ll explain what they do, how they make money, and whether or not they’re legitimate. We’ll also discuss how to get your money back from AvaTrade if your account has been frozen or your money has disappeared.

In this article, we’ll take a closer look at AvaTrade’s business. We’ll explain what they do, how they make money, and whether or not they’re legitimate. We’ll also discuss how to get your money back from AvaTrade if your account has been frozen or your money has disappeared.

What is AvaTrade?

AvaTrade is an online trading platform with its corporate office in Dublin, Ireland. The company is regulated in Europe, the British Virgin Islands, Australia, Japan, and South Africa. This wide an array of regulatory authorities plus the company’s relatively long history helps attract many investors.

Additionally, AvaTrade doesn’t just limit you to one type of trading. Not only can you buy and sell forex investments, but you can also trade stocks, bonds, futures, and even cryptocurrency. All in all, it’s a highly versatile platform, so it should come as no surprise that many people utilize their services.

The American AvaTrade Scam

AvaTrade does business in most of the world, but not in the USA. Because many people don’t know this, scammers have set up fake AvaTrade websites to con Americans into investing with what they think is the official AvaTrade company. These investors send a payment to the scammer, and their money disappears. If you’ve experienced this kind of fraud, MoneyBackHero may be able to get your money back through a chargeback.

But AvaTrade itself is a legitimate company. So, if you’re outside the US and you’re working with the real company, your money must be safe, right? Well, Yes and no. Read on.

AvaTrade and Market Making

Before we get too deep into the weeds, we need to talk about market-making. In forex trading, a market maker is a business or individual who’s responsible for finding a buyer for every seller and vice-versa. For example, suppose a trader in London wants to convert €5,000 into British Pounds. If they’re going to do this, there needs to be a buyer or buyers for those Euros.

 

different currencies

In a specialized market like forex, there are relatively few active traders compared to the number of people who are involved in buying and selling stocks. As a result, the buyer for those Euros could be from anywhere in the world. For example, another trader in Rio de Janeiro may want to exchange their British Pounds for Euros. It’s the market maker’s job to make that trade happen.

The Market Makers Risk

To do this, the market maker charges a small fee, called a “spread” for each transaction. The fewer the buyers and sellers who are active in the market for a given currency, the higher the spread will be. This is because the fewer the buyers and sellers there are the bigger the risk the market maker has. The market maker is the one who runs the risk of getting stuck with a currency that will be difficult to sell at a good price.

So far, so good. There’s nothing unethical about a broker buying and selling foreign currency through a market maker. The problem though is that AvaTrade acts as their own market maker. This means that they refer their managed accounts to another company owned by the same parent company, Lara Capital Management for the market making.

Lara Capital Management

There are many terrible AvaTrade reviews complaining about their experiences with this company. Essentially, Lara makes terrible investment decisions, frequently trades currencies for a loss at no apparent reason, and always chooses the trades with the highest spread. This gives the appearance that Lara is more interested in maximizing AvaTrade’s profit from spreads than they are in growing your investment.

If you’ve been a victim of this practice, you may not have a way of recovering your funds immediately. That said, it is worthwhile to file a complaint against AvaTrade with your country’s financial regulator. If enough complaints are filed, there may be an investigation.

AvaTrade and Hidden Fees

AvaTrade advertises that they charge “no commissions” and offer “ultra-low spreads”. As we’ve discussed, the ultra-low spreads claim is dubious. But even if you’re managing your own account instead of going through Lara, these fees may not be all that they seem.

Lara’s main web page only displays fixed spreads, and the average investor could be forgiven for believing that that’s what they’re going to be charged. In reality, those spreads are just cherry-picked examples. AvaTrade charges a floating spread, which means it changes according to market conditions, but this fact is buried deep in their FAQ.

There’s nothing wrong with a company offering floating spread. But there’s plenty wrong with hiding that essential information from your customers. And even worse, there’s no information whatsoever available on spreads for Middle East accounts. Only once you start trading will you know what you are getting charged.

man trading on computers

Another common complaint is the fact that AvaTrade actually does charge commissions on several kinds of accounts. Just not on forex trades. Not only that, but they also charge a percentage fee on all withdrawals, which is only disclosed in the fine print of their contract.

To be clear, none of these things are illegal, which can make it hard to get your money back. But they’re certainly unethical, and a good reason to avoid trading with this company.

AvaTrade and Arbitrage

Another frequent AvaTrade complaint is that they don’t allow arbitrage.

 

What is arbitrage?

Arbitrage is a common practice in forex trading where a trader makes a series of quick trades to exploit market inefficiencies. Here’s how it works.

Imagine that the US Dollar is trading at 1.5:1 against the Euro and the Euro is trading at 1.5:1 against the British Pound. You’d expect the US Dollar to trade at 2.25:1 against the Pound. But suppose the dollar is instead of trading at 2.3:1. A trader could sell $150 for €100, then sell those Euros for £66.67. They could then swap their British Pounds for $153.34.

Many financial analysts actually consider arbitrage to be a healthy practice since it forces the market to eliminate inefficiencies quickly and return to a state of sanity. However, AvaTrade bans the practice.

In and of itself, there would be nothing wrong with this. Unfortunately, however, if you run a Google search for “AvaTrade arbitrage”, your first result would be a very misleading blog post as part of AvaTrade’s official blog, titled “What is Arbitrage in Finance (and how to use it)”. The article is full of tips on how to use AvaTrade for arbitrage trading. This is highly misleading given that the company actually bans arbitrage altogether! 

Meanwhile, the fact that they ban AvaTrade is hidden in the fine print in their contracts. Worse, if AvaTrade’s algorithms think you may be engaging in arbitrage trading, they reserve the right to suspend your account indefinitely while they conduct an investigation. As a result, many legitimate traders are unable to withdraw money from AvaTrade. We’ve heard of people who had no access to their funds for over six months. All because AvaTrade deliberately misleads them. 

If this has happened to you, Money Back Hero can help speed up the process. Contact us for more information.

Is AvaTrade a Scam?

Strictly speaking, AvaTrade is running a legal business. They’re not in the same category as thieves or Ponzi schemes, who do nothing but steal your money. And, the truth is,  if you make smart trades and avoid putting your money in a managed account, you can actually turn a profit trading forex or other assets on their platform.

That said, many of their business practices are shady at best. Hidden fees, questionable advertising, and six-month “investigations” that can keep your money in limbo. All in all, we’d recommend going with a more reputable broker.

What you should do if you have been scammed.

 

So what can you do if you’ve already been burned by AvaTrade?

If you’ve been scammed by a fake AvaTrade website – or had your account frozen by the actual company – don’t kiss your money goodbye. Because they’re a legitimate company and not a scammer, they maintain ordinary business records the same way any legitimate business does. It’s significantly easier to get a chargeback against them or win a judgment than it is to recover your money from some fly-by-night scammers.

That said, this process can be painful for the average person. This company has deep pockets and a lot of lawyers, and they’ve had plenty of practice wearing ordinary people down with red tape. But you don’t have to go it alone. MoneyBackHero specializes in recovering money for people like you. Contact us for a free consultation. We recover your money, and you pay us a percentage. And remember we only get paid if you do.