The eToro guide to safe social trading: How to avoid scams

Online trading has become increasingly popular in recent years and its popularity continues to grow. However, as with many other Internet-based industries, there are scams that are created for the sole purpose of stealing people’s money. One of our declared missions at eToro is to promote financial literacy, and part of that is informing the online community of the existence of these scams and how to avoid them.

Key elements for safe online trading

With a decade of experience in online trading, eToro is trusted by more than six million traders and investors around the world. However, there are numerous other online trading services out there. How do you separate the genuine ones (like eToro) from the scams? Here are a few things you should look out for:

  1. Regulation: There are a number of regulatory bodies which make sure online trading is done legally and without misinforming traders. For example, eToro is regulated by both CySec (Cyprus) and the FCA (UK).
  2. Security: Always look at your browser’s address bar and check if the link is secure. You could also dive deeper into each platform’s information and see what kind of security measures they have in place.
  3. Verification: Regulators demand that any new user that signs up to an online trading platform undergo a strict verification process, to ensure that all of the users on the platform are real.
  4. Longevity: Many scams close after they’ve made a ‘big score’ – so find out how long the service you are thinking about joining has been around.

The do’s and don’ts of interacting with other people

On occasion, people will try to use email or legitimate trading platforms for malicious activities. While some spam or scam attempts can  be spotted quite easily, others are not so easy to detect. Here are a few ways to avoid such scams:

  1. Stay on the platform: If you are contacted by a fellow user who is trying to convince you to conduct business elsewhere or contact them outside the platform, be suspicious of their intentions.
  2. Always check the URL: Sometime scammers will send you a link that leads to a page that looks exactly like the platform. However, the URL (web address) will be different, as part of an attempt to steal your login details or other personal information. Always make sure the URL is correct and that there’s a secure connection.
  3. Never give out personal information: Platforms will only ask you to supply personal information when you sign up and will very rarely ask you for information that you’ve already provided. If someone contacts you on the platform, asking you to send them your information, they are most likely doing so under false pretences.

Types of scams

Unfortunately, there are almost as many types of scams as there are scammers. However, there are some that repeat themselves, which you can learn to recognize and avoid:

  1. Prime Bank: While in its traditional sense, the term “Prime Bank” refers to very respectable financial institutions, it has become the term of choice for many scammers to make their ruse seem more legitimate. Therefore, be wary of any offer that includes the term. It is quite easy to find out if a major bank is actually involved with the offer.
  2. Pump and Dump: A highly illegal practice that has been revived in recent years within the cryptocurrency market. This occurs when a small group of scammers start to spread rumors that a certain asset is about to increase in value. As a result, many trader buy that asset, causing it to increase in value. These scammers then sell off their assets at a huge profit and leave the rest of the unsuspecting buyers to suffer the crash. To avoid this type of scam, don’t take advice from someone you don’t know and always do your own research before making an investment decision.
  3. Forex scams: These have also become quite common in recent years. While the foreign exchange market is the largest market in the world, in which numerous well-respected financial institutions operate, it is also the playground for many scammers. To avoid these scams, always check to see if the platform is regulated by a well-known regulatory authority, is secure, requires a verification process and has some traction online.

Online platforms could be a good way for private people to invest their money wisely. However, on top of the risks involved with trading, which require individuals to do their research and invest wisely, there are also scams lurking out there. Be sure to be careful when trading online and follow the tips mentioned above, to ensure an enjoyable, scam-free trading experience.