How do we forget to do our homework before signing up to trade?
The first thing you do before parting with your hard earned money is homework. Before buying your new phone you make certain that you are getting the best deal and are not overpaying. When you purchase your house you make sure that you are paying the right price and that the property will immediately be registered in your name. Investing your money in Crypto or on forex platforms require you to perform a similar investigation process.
Is your trading platform reliable?
- Check if they are regulated by the FCA, ASIC or CySEC. Regulated brokers have their registration number listed on the bottom of their web page.
- Search the internet for feedback to make sure the trading platform is reliable and trustworthy. Search online for anyone who has complained that they are unable to withdraw their money. This should immediately raise a big red flag.
- Understand how your broker operates. There are numerous brokers who are price setters, meaning they use complex algorithms to manipulate the spreads to ensure that the odds are stacked against you, greatly limiting your chances of making money
- You want your money in the hands of someone where if you do well they do well but if you lose they lose too. Make sure your trading advisor is not just offering advice convincing you to place more bets and thereby earn his commission no matter whether you win or lose.
The Mistakes I made.
In hindsight, I should have done my homework before opening my trading account.
Instead I hastily opened an account with one of the biggest CFD trading platforms in London without doing any research. I simply chose this platform because my friend had heard how lots of people were making money with them. Do not get me wrong. I had heard about scams before but this company was listed on the London Stock Exchange so it never raised any warning bells in my head. I just assumed they were reliable and honest as they were a well regulated company. I did not bother doing any research online to see how many people actually made a profit or how their trading system worked.
Yet I became a sucker just like the rest of the estimated 75% of people who lost their money on this particular platform trying their luck.
Every time I placed a bet the fee would increase without me realizing. What started off as a small fee quickly turned into 30,40 Pounds a trade. Not only were my fees increasing with every bet but they were constantly manipulating the leverage to suit themselves. I did not understand exactly what they were doing but whenever I had a good opportunity it seemed they would manipulate the leverage and not let me trade. It was very frustrating and I ended up losing all my money.
Understand what you are signing up for.
Now this is not to say that you should never use a company like this as they were regulated and heavily audited. However you should always go in with your eyes wide open realising that there is a reason why even the regulated platforms never go out of business with their revenues increasing dramatically every year.
*as of May 20 2019, I am not permitted to use their name for legal reasons