- Is there such a thing as a legitimate online trading platform?
- If yes, how do I identify them?
- Am I ready to trade online?
- Can I build wealth quickly trading online? (get rich quick)
- What should I be looking out for?
In this post, we address the important question of whether or not there are legitimate online trading platforms? Today, more than ever, you can be browsing the web and bombarded with ads tell you that you can make money trading online. Advertisements frequently claim things like make 3X, 4X your investment, that you do not need to be an experienced investor etc.
So the first question we must answer is; Are there any legitimate online trading platforms? The answer to this question is; it’s complicated. I’ll explain:
Online trading platforms can be broken up into 3 categories
- Straight up scams where no actual trading goes on and your brokerage account merely provides the illusion of trading.
- Real trading platforms with dishonest practices. For example, there may be real trading going on but the brokers will illegally provide investment advice without disclosing that the brokerage earns when their clients lose.
- Legitimate online trading platforms that are completely above board and follow all the rules.
Identifying legitimate online trading platforms:
If you want to ascertain whether an online trading platform is legitimate, there are a few steps to take.
First, go the brokerage site and scroll down to the bottom of the website. You want to see if the broker is regulated. If they are, they will write who they are regulated by, and their license number. Now, go to google and type in the name of the regulator. On the regulators website (i.e. ASIC), you should be able to search their registry. Highlight and copy the url of the brokerage website, then paste it into the broker search function on the regulators website. If they are indeed regulated, they should show there.
If the company is not regulated, they are almost definitely a scam (99.9% of the time), and you should look elsewhere to invest. Keep in mind that it is highly preferable that the company is regulated by a regulatory body in your country. This way, if you ever have an issue or a disputer, you can easily file a claim as a local. This can simplify the resolution process.
Next, just because a company is regulated, does not mean they are a legitimate online trading platform. For example, you can have a regulated company that is regulated in one country, but the regulatory reach does not extend to your country of residence. This means that they could check out as regulated but since the financial regulatory authority they engaged has no jurisdiction in your country, they could be scamming with impunity. If you aren’t sure if they are regulated in your area, check the regulators website or call them directly to ask.
Identifying honest brokerages
Keep in mind that a regulated company can still be dishonest and be scamming their customers. Always search google for the name of the brokerage with the word scam and see what others are saying. If you see dozens of complaints. For example, a legitimate forex brokerage will never provide investment advice. The reason for this is because it is against the rules as they have an inherent bias. They make money when their clients lose money.
Are you ready to trade online?
Finally, if you are in the position where you don’t know yet how to determine if a brokerage is a legitimate online trading platform, you are probably not yet ready to invest. Why? Because you are likely an inexperienced investor, and inexperienced traders nearly always lose. So what to do? Get eductaed. Visit places like babypips.com for education of forex trading and learn the ins and outs before transferring money to a stranger over the internet. Learn how to trade, how to research a brokerage etc.
Get rich quick
If you see an ad that makes claims of doubling or tripling your money in a short time, you are looking at an ad for a scammer. When it comes to investing, there are no get rich quick solutions. They simply do not exist. But the thieves play on the naive and the desperate to sell them a dream. Even Bernie Madoff, the notorious ponzi scammer only promised returns of 10% a year. Why, because he was scamming educated investors, and he knew that if he told them he could make more than that, they would immediately know he was scamming them. Because even 10% a year is very high in the world of investing and trading.
Here are few pointers you should be looking for to help you identify legitimate online trading platforms:
- No get rich quick schemes
- “Managed” accounts are usually scams
- Make sure the brokerage is regulated by a regulatory body based in your country, or at least with jurisdiction in your country
- Look out for brokers based in areas that are known for corruption like Bulgaria, The Seychelles, Estonia, etc.
- NEVER transfer money via wire transfer. Always pay via credit/debit card. This way, if something does go wrong, you are protected by your chargeback rights
- Get educated before you invest
I hope the info in this article was helpful. If you think you may be a victim of an online trading scam, please start a chat below, or fill out the form here to schedule an appointment with one of our wealth recovery specialists.