One thing you should pay close attention to before trading or investing is the trading platform you’re planning to use. Although there are now tons of great trading platforms to choose from, there are still some platforms you should think twice before using.

This is because a trading platform acts as a medium that allows you to trade (buy and sell) financial instruments and also speculates the market efficiently using its analytical tools, risk management features, etc. So it’s pretty essential to stick to one you can rely on with your trades!

To help you out, below are some common red flags to keep a look out for when scouting for a trading platform:

1 – Lack of regulation

Financial regulators like the SEC, FCA, or ASIC should register and oversee legitimate trading platforms. So before registering with a platform, ensure the platform provides verified regulatory facts at all times. Unregulated platforms should be avoided as some may make misleading claims about their regulation or claim to be regulated in areas with loose laws.

You can steer clear of fraud and make sure that industry standards are being followed by confirming the regulatory status of a platform. To guarantee the platform’s validity and financial security, always do extensive research and validate regulatory claims via the official websites of financial authorities.

2 – Unrealistic guarantees when signing up with them

Some of the few guarantees sketchy trading platforms promise are guaranteed returns and over-aggressive marketing. To know when you’re encountering either one, here is the gist of when each one is:

Guaranteed returns – High, guaranteed return promises with little to no risk are a typical telltale indication of fraud. Profits without risk cannot be guaranteed by any reputable investment. Such statements should always be taken with a grain of salt, as all investments include some level of risk. It’s critical to carry out an in-depth investigation and comprehend any possible hazards. 

Over-aggressive marketing – Another warning sign is exaggerated promises of easy and rapid money. Sketchy trading platforms frequently entice gullible victims with high-pressure sales techniques. They can most times spam you with calls, emails, and sales pitches, all urging you to move fast to seize what they claim is a good opportunity.

Trustworthy trading platforms don’t depend on forceful promotional strategies and provide prospective investors with enough time to make well-informed choices. When assessing an offer, always take your time and, if necessary, seek financial advice.

3 – Bad reviews and reputation

A bad reputation exists for a reason and in trade where money is involved, it’s vital for you to not give bad reviews platforms the benefit of the doubt. To know if a platform is reputable and reliable, consider it essential to search independent websites for customer feedback.

When faced with large amounts of bad comments or complaints, particularly ones about difficulties making withdrawals, there might be a serious red signal suggesting possible platform troubles.

Another red flag is a lack of transparency; if it’s hard to get precise information about the staff, history, or location of the organisation, it might mean that the platform is hiding something crucial or isn’t running properly. A reliable trading platform should always be characterised by transparency and favourable user reviews, so always do your homework and be wary of any indications to the contrary.

4 – Bad customer service 

The quality of a trading platform’s customer support should be taken into account while considering reliability. Long response times or trouble getting in touch with customer care are signs of subpar support and possible problems with the platform’s functionality. Also, unprofessional communication is a major problem as it casts doubt on the platform’s dependability and legitimacy if the support staff responds in an unclear or unprofessional manner.

Resolving problems and ensuring a positive user experience need effective, open, and competent customer service. Consequently, receiving unprofessional or unresponsive help should cause one to exercise care and look into the platform’s overall credibility further. 

5 – Shady platform practices

Checking a trading platform’s withdrawal policies, fee schedules, and account management procedures is crucial to confirming its legitimacy. Unusual withdrawal procedures, such as difficult, drawn-out, or refused requests, might raise serious suspicions about possible fraud or liquidity problems. 

Also, unstated hidden costs might reduce your earnings and be interpreted as a lack of openness. Additionally, exercise caution if the platform puts pressure on you to give up management of your account to the platform or an “account manager.” These actions might compromise your financial security by resulting in unauthorised transactions and losses. 

Take away

Now you know 5 red flags to consider when trying to spot a sketchy trading platform, we hope you’ll be able to efficiently spot a bad trading platform from a good one. And if you’re still unsure about registering with the platform you have in mind, consider sticking to reputable platforms like Interactive Brokers, MetaTrader 4, Fidelity, TD Ameritrade and more.