10 tips to avoid scams in the social trading and investing industry

In today’s world, the online trading industry is unfortunately riddled with scams. Malicious people who prey on others using spam and false promises of quick profits. The reality is that trading involves risk and generating profits over time requires knowledge, experience and risk management. As part of our declared mission, we at eToro promote financial literacy, and an important aspect of that agenda is raising awareness to online scams. Here’s a quick guide we’ve put together, with 10 ways to avoid social trading scams:

1 – Check the infrastructure

If you are offered a new online service or trading and investing app, the first thing to do is just look at it. Serious, legal trading platforms will usually pour a lot of resources into the technology and design of their platform. Scammers who are looking for a quick way to swindle people out of their savings wouldn’t invest so much in making their platform user-friendly or high tech.

2 – Look for regulations

Another quick way to see if a platform is a scam or not is to see if it is regulated. There are various regulatory bodies who oversee the operations of different trading and investing services. A regulated platform adheres to strict rules that are put in place to protect the end users – so you gain a lot more confidence trading on such a platform. eToro, for example, is regulated by both the CySec (Cyprus) and the FCA (UK).

3 – Make sure you’re secure

You are risking your money, so it is best to make sure you are using it within a secure environment. Check the SSL certificate for the website you’re browsing by looking at the address bar. Most browsers have special icons indicating whether or not a platform is secure. Moreover, try to find out which services the platform uses. Does it use top-tier banks? Does it enable an array of payment methods using well-known services? These are some of the indicators for a secure platform.

4 – Who supports you?

Scammers do not care about their “clients.” All they want is to scam them out of their money. Therefore, they will offer little-to-no support services. When using a new platform, test their customer support. See if they are really there to care for you as a client, rather than just trying to coerce you into making a deposit.

5 – Verify your identity

Identity verification is paramount for maintaining a legal, secure online trading and investing platform. If you sign up for such a service and there’s no request for identity verification (such as uploading a photo ID and a utility bill), it is most likely a scam. Platform operators are required by regulators to verify their users’ identity and have an interest in doing so regardless since it safeguards their platform from malicious activities.

6 – Look for media presence

The Fintech industry is still relatively new, meaning many of the more prominent, legitimate players in the field received news coverage at a certain point. If you find the platform or service mentioned by a well-known media outlet, this contributes to its legitimacy.

7 – Reputation goes a long way

It’s important to remember that you’re dealing with high tech companies here. This means that the good ones are often nominated for high profile awards. It doesn’t take much research to find out if a certain company has a good reputation as a trading and investing platform. So, just google it.

8 – Look for risk warnings

Risk warnings are the marker of a regulated trading and investing platform and should be seen throughout the platform. Regulation requires users be notified of the risks involved in online trading and refrain from giving investment advice. If you see these warnings, it is a good indication that the platform is legitimate.

9 – Check for responsible trading agendas

Unlike scammers, real trading platforms have an interest to preserve their clients. Therefore, they will regularly and  actively promote responsible trading agendas. By promoting responsible trading, these platforms are helping their clients to reduce risk, which translates into a long-term presence on the trading platform and customer retention.

10 – Ask your social circle

While you can quite literally ask your friends about a certain service or platform, you can also look at its social network activity. A legitimate platform will have social profiles on Facebook and/or Twitter with lots of interactions. On Facebook, users can also write reviews – so give those a look and see what people around the world are saying about the platform you’re considering to use.

We hope that this guide was useful to you. If you follow these tips, you can greatly reduce your chances of getting scammed.