Is forex legit? How to avoid forex scams?

Written by
Krisztián G.
Fact checked by
Tamás D.
Apr 2024

Many people think that forex is a scam. Don't believe them, they are wrong. Trading forex is a perfectly legit form of investment and the forex market - where forex trading takes place - is the biggest financial marketplace in the world, with daily turnover of $6.6 trillion. Nevertheless, the forex trading universe is ripe with forex scams and forex pyramid schemes, so it makes sense to be extra cautious. 

The foreign currency (forex) market is where forex trading takes place and the largest players are governments, banks, huge corporations, asset managers and professional traders. With the advance of computer technologies, everyday people also gained access to the forex market via online forex brokers. Even though forex trading is a legit form of investment, retail traders often fall prey to fraudsters and forex pyramid scheme operators. Applying an extra measure of caution is always recommended.

The essence

  • Forex trading is a perfectly legit form of investment
  • The forex market is the largest financial market in the world
  • Forex scams and forex pyramid schemes are widespread globally
  • Retail forex traders are the prime targets of fraudsters
  • Choosing a reputable forex broker is a key step in anyone's trading journey
  • Learn how to identify the red flags that point to forex scams 

How to spot a forex scam?

Be suspicious if you’re offered forex trading services that promise massive gains in a short period of time. As with all forms of investment, forex trading carries massive risks and there is no guarantee your trades will always be profitable. Promises of exorbitant gains are almost always a red flag. 

It’s not a good idea to let other people have access to your money. Never deposit any funds without due diligence of the person/organization you are dealing with. One of the most common types of forex scam relies on not allowing people to withdraw the funds they had deposited earlier. If you decide to send some money, first use a small amount to deposit and withdraw as a test.

How to choose a legit forex broker?

Whether a financial provider like a broker is safe and legit is an important and very legitimate question. After all, you are trusting this broker with your investment money and savings. It is also a very common question we get asked.

The first key aspect of any broker you should check is whether they are regulated. Regulation means oversight by a government-mandated authority and almost all countries in the world have a financial regulator. If a broker is not regulated, do not work with them, it may be a forex trading scam. Reputable brokers publish all regulatory information on their websites, including the regulator's name and license number. 

Remember that not all regulators are created equal. Oversight practices and regulatory standards can differ greatly from one authority to the other. Investor protection schemes can also vary from authority to authority. There are top-tier regulators whose excellence lies in the standards they require, such as segregated client accounts, the range of protection tools, and the investor protection amount itself.

We’ve compiled a list of the highest rated forex brokers that we keep up to date. One thing worth bearing in mind: all the brokers you find on BrokerChooser are regulated by at least one top-tier authority. These include the UK’s FCA, the SEC/FINRA in the US, the ASIC in Australia, and Germany’s BaFin.

If you would like a tailor-made recommendation of the best brokers available in your country of residence, check out our unique broker finder tool.

Not sure if a broker is legit or scam? Write to us at [email protected] and our broker experts will answer your questions. BrokerChooser is here to help people invest. 

Pro tips for beginners

The more of these points can be identified, the more probable that the broker is a scam. Always check these 10 points before opening an account.

  1. Warning lists: Clients should consult these lists that include companies which are operating without permission or running scams. Such lists are provided by numerous national regulators, including the FCA, FINRA or the CFTC. 
  2. Regulation: A first step when choosing a broker is to check their regulation. Clients should strive for brokers working with top-tier regulators such as the FCA or the SEC. Low-tier regulators are a bad sign.
  3. Webpage: The quality of a broker’s website speaks volumes. Low overall quality, scant information should be treated as a red flag as these are typically signs of a scam broker.
  4. Unrealistic offerings: High bonuses for account opening are a warning sign. So is a promise of  guaranteed profits or profits over 10%. Trading courses, robo-advisors, PAMM accounts or signal selling services with unrealistic profit promises are most likely scams.
  5. Withdrawal: More than 5% in withdrawal cost or discouraging investors to withdraw money is always a bad sign.
  6. Contact: No contact or non-professional emails addresses like indicate a scam. Check the contact list on the webpage of FCA.
  7. Market makers: In this case the broker has a dealing desk and clients trade directly with the FX broker, therefore there is a conflict of interest. Double check whether these brokers had been penalized for requoting or other illegal practices such as asymmetric slippage.
  8. Recovery scams: A typical scam is to promise to recover the money that clients lost to a scammer. These fraudsters usually ask to be paid before providing any service.
  9. Offering binary options: Binary options are banned by regulators in many jurisdictions as a form of gambling. Brokers offering it are probably scams.
  10. Ponzi scheme: This type of investment fraud pays existing investors with funds collected from new investors. It is characterized by offering high FX returns with low or no risk.

Every year, BrokerChooser picks the best forex brokers based on more than 500 criteria. Working with these service providers can greatly help reduce the risk of falling prey to scams.


Is forex a legit thing? 

Foreign currency (forex) trading is a perfectly legitimate form of investment. Gvernments, banks, large corporations are all involved in forex trading and individual investors can also be forex traders if they open an account at an online forex broker. Nevertheless, forex scams and forex pyramid schemes are alarmingly widespread, so extra caution is required on the part of individual investors. Especially beginners should be wary of forex offers promising huge profits in a short period of time. If it sounds too good to be true, it probably is. 

Can forex make you rich? 

Forex trading can make you rich if you are an exceptionally skilled forex trader or if you have a vast amount of money to invest. Nevertheless, do not expect to get rich overnight when you start trading forex. Similarly to all other investments, forex trading carries a high number of risks and retail investors may lose all their money if they get carried away. Leverage (trading with money borrowed from your broker) is a common practice in forex trading, and carries the risk of losing more funds than you initially invested. Forex tradng is not a one-way ticket to making big money in a short period of time.

Can a forex broker steal your money? 

In theory, a forex broker can steal your money, but this will never happen if you choose a well-regulated, reputable forex broker. Legally, there is no way for your broker to steal your money, only scam forex brokers can and will do that. If you choose a forex broker or trading platform that is regulated by a top-tier authority, your money will be in safe hands. 


Feeling confused? Check out our educational material on forex trading

You can also dive into our broader glossary explaining all the exotic terms of the financial world. 

If you're looking for a forex broker, check out the best forex brokers or read all forex broker reviews. Alternatively, visit our unique broker finder tool for a personalized broker recommendation. 


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Further reading

Everything you find on BrokerChooser is based on reliable data and unbiased information. We combine our 10+ years finance experience with readers feedback. Read more about our methodology.

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Krisztián Gátonyi
Author of this article
I have 15 years of experience in proprietary trading, mainly in the interbank currency market as a foreign exchange risk manager. I'm actively involved in reviewing the 100+ brokers listed on our site. I personally open accounts with real money, execute trades, test customer services. I hold an MSc in International Business from the University of Middlesex. My purpose is to help people find the best investment provider.
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