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How Brokers Scam People - Avoid Broker Scams

Updated Apr 22 2021

How Brokers Scam People - Avoid Broker Scams

This article may constitute one of the most disturbing pieces of text you’ll ever read, but we assure you, it might save your life in the future, so don’t skip even a single line and pay close attention to everything.

The real reason behind TheTradingBible.com is much more complex than what it looks like, on the outside it appears to be a fun, friendly quality trading education website, but on the inside it’s literally a big mission to stop scams that have ruined the life of thousands of innocent people.

In order to stop this scams without us getting hurt, instead of pointing fingers towards the companies or individuals that act in bad faith, we decided to take the positive road which consists of educating people correctly to ensure they make their own decisions and they’re able to differentiate a good thing from a bad one.

1 - The Broker

In order to understand who’s scamming and who’s not, the first thing is understanding brokers. If you haven’t read our guide / brokers section or done our beginners course, don’t worry, we’ll summarise it right here.

In theory a broker should only be a middleman between a trader and the markets, which means when you order to buy 100 App shares, your broker executes that transaction, nothing else.

There is also another way to trade, which is through CFD (contracts for difference) brokers. When you trade with these, you’re not trading the real asset, you’re trading a financial derivative based on the price of the real asset, so technically you’re taking bets on it going up or down.

CFDs are not traded on exchanges but rather via OTC (over the counter) which means that the transaction occurs directly between you and the broker without anyone overseeing it.

CFD Brokers earn money through several channels, the most common one is through commissions, spread, but also through client’s losses.

So far there is nothing wrong, CFD brokers bet on the probability of the majority of traders loosing more than they profit, so they make a business out of it. Here lies the importance in understanding how brokers make money

2 - And the Scam Begins

This is the part where the horror movie starts:

Many brokers realised they could accelerate the loss process of their clients in order to make more money, and that’s when they went wild, here’s how:

Account Managers

Good brokers operate usually in two different ways:

In the first way, the broker never calls you unless there’s a security issue, documents, etc.

In the second way, the broker hires sales agents that call you in order to motivate traders to deposit and in the case of the account manager to motivate you through trade by providing you market updates, none of them provide any kind of advice, so far we’re on the good side of the brokers.

Now we can start talking about the evil ones, in these, there’s no such thing as an account manager, the job title is called “retention agent”.

Sales and Retention Agents

When a trader registers his first point of contact will be with a sales agent.

The evil sales agent will use many verbal tactics in order to convince all kinds of people to deposit money, he doesn’t cares if they’re ruined, in debt, dying of cancer, he just wants the deposit as he gets paid a bonus per deposit.

Once the sale is closed, the trader leaves the sales agent’s portfolio and moves to the retention officer’s portfolio.

His mission is to receive clients, cultivate deep relationships, build trust, make them invest everything they have and advice them to open the wrong trades so they lose everything.

3 - How do they accomplish it?

Simple, now that they client has been sold and lubricated by the sales agent and has the false expectation of making money through the help of an “account manager”, he comes with some trust towards the process and that’s where the retention agent picks up and begins to plant their mental seeds.

In the beginning they’ll advice you correctly to ensure you see some profits and then slowly start convincing you to deposit more money.

Once the retention agent sees that the trader reach their maximum potential deposits based on their net worth profile they built by talking he will proceed to advice the trader to open huge trades, to not use stop losses and he will continue to do this until the client goes bust.

Once the trader is in negative open loss, the retention agent will continue to ask for more money in order for the trader to be able to meet the margin requirements and keep the positions open, and here’s were victims usually sell cars, houses or anything they can to keep their positions open.

This will continue until the market makes a huge movement and the trader loses everything, causing the account manager to get paid a huge fat bonus.

Some clients hurt themselves, others are left with post-traumatic stress disorder, the truth is that no one tells the real stories out of shame.

4 - How to identify scammers?

The most common place where this scams take place is amongst binary option brokers, unregulated CFD Brokers and a few regulated CFD brokers.

Before, people used to say that only an unregulated broker could be a scam, and they were right, but nowadays the reality is more complex as there is many broker that are regulated and keep performing this type of activities due to the fact that regulators take bribes and keep the party going.

One extremely good positive point is that just like dinosaurs, these scammers don’t change their tactics and we know them by heart, so just pay attention to this points and run away when you hear them:

The Sales Agent

Sales Agent

- They describe trading as a way to change your life and generate secondary income
- If you tell them you’re busy and you can’t talk, they will keep you on the phone and push more.
- If you say you’re not interested they will call you anyways and keep insisting
- They promise profits, give investment advice on what to buy or sell
- They are arrogant and mean towards clients
- Everything needs to happen NOW, it’s now or never, deposit now as the market will disappear tomorrow.

The Retention Agent

Retention Agent

- Using stop-losses is bad because it stops you from recovering losing positions.
- You need to open bigger trades in order for them to match a better risk management plan,.
- The more volatile the market, the better for you, you can make more profits.
- Gold, Oil and Gas are the best assets to trade.
- You must grow your account slowly through your own deposits to be able to make real big trades.
- Take profits need to be small so you can reach them quickly.

The Broker

- They don’t display risk warnings on their webpage
- They’re located in questionable places on the earth such as micro small islands where there is barely one palm tree (just a front location, they’re not really there).

Also, something important to take into account, when the broker is a complete and total rip-off it doesn’t even matters if you managed to save yourself from the process described before, you’ll simply never be able to withdraw.

If by any chance you make some profits and decide to withdraw them, alarms will ring, they will never answer the phone and you’ll never see your money.

The broker will remain operational for some time until they can change their name into a new brand and continue scamming people.

5 - Conclusion

Brain

Trading is a really amazing thing, a beautiful art. The only thing we want is to make your experience positive by ensuring that:

- If you lose money, may it be your fault.
- If you profit money may it also be your actions.

With everything you read here, you’re prepared to identify scams and save yourself on time, mission accomplished.

It’s true that there are other scams such as electronic platform manipulation where people talk about stop-loss hunting, but as long as you know how to trade, you define correct position sizes, avoid tight stop-loss placement and also avoid scalping on market makers, you should be alright.

This guide can save your life and many others, so please share it in social media and spread the word.

Our dream will be complete when this guide travels the world and everyone talks about it, as we’ll have saved many more people from going through this.

Good luck!

Note: All the brokers we display in our page are good quality brokers that we have tested, so at least when you’re here, we do our best to provide you a safe experience.

How Brokers Scam People - Avoid Broker Scams

Author

Stefano Treviso

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