The Covid-19 pandemic has left many people working from home and looking for new sources of income. Many people across Africa have turned to Forex trading to supplement their income. Forex trading has a low cost of entry and is easily accessible to anyone with a mobile phone and a bank account.
But, while it is easy to get started in Forex trading, it is important to stay safe. The Forex industry in Africa (and in many other parts of the world) is poorly regulated and full of conmen and bad brokers just after your money.
Even brokers who seem to be legitimate and have a regulatory licence can be dishonest. A good example of this is the recent case of JP Markets in South Africa. Despite being one of the largest brokers in South Africa, the FSCA (the South African financial regulator) recently suspended JP Markets licence
following an investigation into a series of customer complaints.
JP Markets stands accused of not paying out client withdrawals, not posting client’s deposits to their trading accounts and, more seriously, manipulating data feeds thereby forcing profitable traders into losing positions.
Jeffrey Cammack, Chief Operating Officer at TradeForexSA, an online Forex broker review portal, says that there are always a few warning signs that a broker is dishonest: “Dishonest brokers operating in the Forex industry tend to market themselves heavily on social media platforms. We have had dozens of complaints about JP Markets and most of the victims were contacted on Facebook or over WhatsApp. But it is not just brokers, we have also found many scammers offering to trade on people’s behalf on Facebook.”
There has been a noticeable increase over the last few years of people getting caught out by Forex scammers, usually individuals who either offer to teach people how to trade or offer to trade on other’s behalf. While this is a tempting offer, people must be aware that it is illegal to trade on someone’s behalf without a financial licence and that these offers are almost always scams.
Most of these individuals are running a pyramid scheme, or a Ponzi scheme, and use Forex trading as a cover. They will use complex-sounding financial terms and attempt to pull the wool over the eyes of their victims, but there is very rarely any actual Forex trading taking place. Many victims will even receive money back from their “investment” at first, but this will quickly dry up and the scammer will move on.
While many bad brokers and Forex conmen operate on social media, so do most of the best Forex brokers and it is not a bad thing to have a Forex broker with a social media profile. But if you are contacted out of the blue via Facebook Messenger or on WhatsApp, or an individual is recommended to you by a friend or acquaintance, then it would be best to be suspicious.
Cammack points out that the best way to find a good broker is to use a well-regarded review site like TradeForexSA. “We always have traders’ best interests at heart and we never recommend bad brokers. We do our best to educate new traders and steer them away from those brokers who are less interested in their client’s success”.
He continues: “Forex trading can be a great way for disciplined, dedicated, people to supplement their income, but it is not a get rich quick scheme and don’t trust anyone who tells you otherwise.”