“There are many potential bad actors in the space, and it is a prime atmosphere for spoofing, ghosting and/or front-running,” says Braden Perry, a regulatory and government investigations attorney with Kennyhertz Perry LLC, based near Kansas City, Missouri.
Spoofing and ghosting
- When a trader try to manipulates the market by placing a large order. But the trader doesn’t plan to execute in order to create the impression of interest in the position.
Front-running
- Broker knowing a client is going to be placing a big order, places an order for the broker’s own account ahead of the client’s.
The rise of internet-based trading platforms has only exacerbated the risks, creating more opportunities for fraudulent promotional schemes, overstatement of returns and the failure to pay out for wins, Perry says. “Furthermore, some actors are using manipulative software to rig the system.”
The main issue with forex trading is a lack of transparency and unclear regulatory structures with insufficient oversight. However, there are forex products listed on exchanges that have regulatory oversight. Likewise, there are legitimate brokers making a business in the market as well.
How to Choose a Forex Broker
- Select a brokerage account and firm. Investors to test brokers by putting money in and taking it out to gauge how accessible it is.
- Know where the firm is located and country affiliation. And make sure the company is registered with the Securities and Exchange Commission (SEC)