How to Spot a Forex Scam in Kenya - Caution for Investors & Traders

Investing in financial markets using online brokers and applications is one of these internet business prospects. Online Forex trading and other types of online market trading have been increasingly popular throughout the epidemic. Since the beginning of the epidemic, the number of new retail investors and traders has considerably grown as a result of individuals being stranded at home and seeking alternative sources of income.

Due to the abundance of con artists operating in the internet market, many unwary investors and traders, particularly novice traders, have been taken advantage of, with promises of abundant and improbable profits.

This article's goal is to educate new Kenyan online Forex traders about how to prevent scams.

In Kenya, online forex trading is permitted.

Online forex trading is permitted in Kenya and is governed by the Capital Markets Authority. It also involves CFDs on underlying foreign assets (CMA). The CMA grants three different licenses to businesses thatf provide forex trading services: a dealing forex broker license, a non-dealing forex broker license, and a money management license. A dealing forex broker acts as a market maker or counterparty (acting as a forex investment portfolio manager for clients).

The CMA has granted licenses to six non-dealing online forex brokers in Kenya to provide forex and CFDs. They originally had four members, and two of them just received licenses. These companies include Windsor Markets (Kenya) Limited, Scope Markets, Pepperstone Kenya, Exinity Capital East Africa, and HFM Investments Limited (HotForex), which was the first to receive a license and also runs the brand FXPesa. Additionally, one business, Standard Investment Bank, has been granted a money manager license (Mansa X).

In Kenya, non-dealing forex brokers act as a conduit between traders and the foreign exchange market. In exchange, the non-dealing broker will receive a commission or markup spreads from the Forex trader. While a money manager manages your investments through a dealing or non-dealing broker and serves as a portfolio manager.

The forex broker doesn't participate directly in trading and market activity, as per CMA regulations. Additionally, they don't advise or trade on behalf of the clients. Their responsibility is to make sure the traders have access to internet trading platforms so they may carry out their jobs from any location using electronic equipment.

Checking to see if your Forex broker is authorized or licensed to operate in Kenya through CMA should be your first step as a novice investor if you are investing without the assistance of a money manager. Then, because the brokers' fees differ, you should compare them.

In addition to picking the best broker, make sure the broker fits your budget, minimum deposit, and chosen payment method. For example, you could choose a forex broker with an MPesa option because it is a well-liked payment method.

So, as a beginner, how would you recognize a forex scam？

Before you invest in any foreign exchange or capital market, ask yourself these short questions.

Is the CMA in charge of regulating the brokerage or online dealer？

If you are a beginner Forex investor or trader in Kenya, it is strongly advised that you only select a forex broker who is licensed by the CMA and has a reputable reputation in order to prevent the potential of being a victim of fraudsters.

Only one of the six authorized non-dealing FX Brokers may be used by Kenyan forex traders.

Why should you stay away from unauthorized or fake brokers？ There are currently a lot of phony brokers out there who pose as actual brokers and seem legitimate, but their nefarious goal is to deceive the unwary traders. They take part in activities that are detrimental to the traders that conduct business with them.

For example, a greedy forex broker or its owners could utilize the funds that traders have placed for their own personal gain. They can lose that money and not be able to give it back to the traders.

Therefore, Kenyan internet traders should constantly make sure that their brokers are acknowledged by and regulated by the CMA so that they may pursue legal action in the event that a broker engages in unethical behavior.

The rule increases traders' accountability. A broker may be regarded as trustworthy if they have licenses from reputable regulatory bodies like the CMA.

Please review the CMA's List of Licensees if you are a novice Forex trader in Kenya to learn about the firms that are.

It is not sufficient to merely accept a Broker's assertions; you need additionally request evidence of their reliability. Please don't be afraid to get in touch with CMA if you have any questions.

ARE THE RETURNS UNREALISTICALLY GOOD？

The fact that fraudulent Forex brokers sometimes provide mouthwatering or overstated profits on modest investments is one of the easiest methods to discover or recognize one.

Forex, any investment that promises 10% returns in 15 days, whether it be in forex or another market, is probably a fraud.

The general public and inexperienced traders are the major targets of forex fraudsters, who are always coming up with inventive and alluring ways to prey on them. Most of these con artists are just Ponzi schemes and don't even invest your money in the markets.

Kenyan newcomers to the forex market should be aware that guarantees of great profits are a major red flag that fraud is likely to occur.

The highly unpredictable nature of the Forex market makes it practically impossible to foresee these “guarantees,” something new traders should be aware of.

New traders should use caution when dealing with brokers, companies, or people who promise unreasonably huge earnings.

Is the Broker Offering Tempting Bonuses & Charging Excessive Fees？

A prospective investor in Kenya should also be aware that many rogue brokers typically demand exorbitant commissions.

For EUR/USD, the standard spread (relative value trading) typically varies between 1 and 3 pip. Brokers who provide spreads of seven pip should be avoided by traders as they might be shady characters.

Additionally, these brokers will make an effort to entice traders with bonuses and rewards to deposit money with them. Additionally, they could include options like Unlimited Leverage.

Avoid dealing with these brokers. A regulated broker would never take part in such prohibited activities.

RISE WITHOUT RISK？

The term “Risk Free Return” is not included in the lexicon of online trading in forex and other capital markets, which is important for new traders in Kenya and other African nations.

Investors and traders should be aware that there are significant dangers involved in trading on the foreign exchange market. It is thus recommended to employ your extra cash for trading.

About 70–80% of all forex traders experience a net loss. This occurs as a result of the volatility and high unpredictability of the FX markets.

Therefore, if someone or a group assures you that they have proven tactics that will always help you earn money in the forex market, you should beware of them because they are con artists. There are currently no proven procedures that ensure that forex trading is a risk-free endeavor.

Does the Limited Period Offer Put Time Pressure on You to Invest？

Online Forex con artists are aggressive in their appeals and employ all types of persuasion techniques to win over inexperienced and trusting traders.

One of the techniques they employ is the alleged investment's time period, which they advertise to you. They will inform you that the “juicy bargain” they are presenting to you is only available for a short time.

They will employ all persuasive strategies at their disposal to persuade you to part with your money. Therefore, avoid falling for the “limited time offer” ruses.

Unsolicited advertising is one of the tricks utilized by online Forex fraudsters.

Some of them could contact you by unsolicited email, frequently asking for personal details like your name, contact information, and home addresses.

They will make claims to establish their reputation, such as belonging to a recognized organization or possessing special qualifications.