Social Trading: 10 Tips on How to Protect Yourself From Online Scam

Unfortunately, nowadays scammers can be found on many modern online trading platforms, even the most reliable ones such as Robinhood and Interactive Brokers. Dishonest people are trying to steal your money by sending out spam messages promising quick profits. But we all know that trading involves risk. Whether you are an advisor, investor, or trader who plans to buy in a bear market or sell in a bull market, making a profit over a long time is impossible without knowledge, experience, and risk management.

Raising user awareness of fraudsters on stock markets and online trading platforms is crucial in fighting financial illiteracy. Here's a 10-point quick guide that will help you avoid falling victim to scams on online social trading platforms.

1. Infrastructure
If you are being offered a new online service or trading/investing app, make sure first to take a look at it. Serious, legally operating trading platforms usually invest a lot of resources in technology and design. Scammers looking for quick cash will not waste their money on building a high-tech platform or worrying about user experience. They will also not bother to provide useful features or valuable metrics such as return on investment (ROI) or net profit.

2. Regulation
Regulatory status is another way to quickly determine if an app is fraudulent. Various regulatory bodies control the transactions carried out using trading and investment services. A well-regulated platform adheres to strict rules to protect end users, so its credibility is much higher.

3. Security
You are risking your money, so it is best to make sure that the trading platform you are using is secure. Check the SSL certificate of the website you are viewing in the address bar. Most browsers have special icons to indicate whether the platform is secure. Also, try to find out what services the platform uses. Does it use the services of first-tier banks? Is it connected to well-known payment systems? This is just a small part of what indicates the security of the trading platform.

4. Support
Fraudsters don't care about the problems of their "clients." All they need is to take control of their money through deception. Therefore, you will not find support services on such platforms, or simply will not get the help you need from them. Chat with customer support when registering on the new trading platform. Make sure they are really interested in helping you as a customer of their platform, and not just trying to steal your brokerage commission or get you to deposit funds into an account.

5. Identity verification
Identity verification is at the core of a legal, secure online trading/investing platform. If there is no requirement to pass an identity verification upon registration (such as uploading a copy of your ID and utility bill), fraud is highly likely.

For conducting financial transactions, the law obliges trading platforms to require their users, be it a broker, a day trader, or an investor engaged in options trading, to verify their identity. They are also required to do this regardless of what means they use to protect trading platforms from malicious activity.

6. Publicly available information
The financial and technological sector began its development not so long ago, so many representatives of this sphere who were legally conducting their activities were mentioned in the news at a certain point in time. If a platform or service receives the attention of a well-known news outlet, this serves as proof of the legitimacy of that trading platform or service.

7. Reputation
It is important to remember that it is referring to companies operating in the field of high technology. This means that companies that perform well will receive top honors. The reputation of the online financial trading platform is easy to find online. Just use Google Search.

8. Risk warnings
A true phenomenon of the modern digital age is FOMO, the fear of missing out on big opportunities, which affects nearly 70% of millennials and is a common issue that many trades can experience throughout their careers. However, being a FOMO trader can have a crucial bearing on your trading practices, like entering trades without enough thought or closing trades at the wrong moments. Therefore, dealing with it is a precious skill, particularly when it comes to risks.

Risk warnings are a marker of the regulated activities of the online trading and investment platform. Such warnings must appear in all sections of this platform. Regulators require to notify users about the risks associated with financial transactions and prohibit providing investment advice. If you see such warnings, this is a good sign. Most likely, such a trading platform is operating legally.

9. Programs to promote responsible trading
Good online trading platforms are interested in retaining their customers, as opposed to scammers. Therefore, they regularly encourage users to trade responsibly. By promoting responsible trading, such platforms help their customers mitigate risks, extending the period during which such users remain loyal to the trading platform.

10. Word-of-mouth
Ask your friends if they are familiar with a particular online trading platform. In addition, you can study the activities of such a platform on social networks: a company conducting its activities legally will have a Facebook page or Twitter profile, where its representatives actively communicate with users. On Facebook, users can leave reviews. Whether you prefer to invest in an Exchange Traded Fund (ETF) or play the stock market, be sure to check out the real experiences of those who have already tried the activities of a particular online platform.

How to Trade Safely on the Internet?

Even though ways are being sought to secure the network, traders, buyers, and sellers of stocks still prefer to remain anonymous while making transactions. Meanwhile, this is practically impossible without using a reliable VPN service.

VPN creates a secure tunnel from your device to the VPN server and then from there to the world wide web, protecting your privacy and keeping your personal data safe.

Why Use a VPN?

The most important and compelling reason to use a VPN is for online privacy and security. The very architecture of the Internet requires users to actively take care of their security. If they are too passive or reckless, they risk becoming a victim of hacking or data breaches.

Every time we go online, we disclose information that could fall into the wrong hands. Both attackers and legitimate businesses view personal data as a valuable resource. With a VPN, you not only prevent your ISP from collecting data, but also hide your geographic location. Ultimately, a VPN makes it harder for others to know who you are.

If you use public Wi-Fi networks, it is crucial to understand the risks. Generally speaking, public hotspots are a favorite spot for hackers. VPN protection is highly recommended if you must use them for your trading activities. You should at least choose sites that rely on HTTPS over HTTP, as the former encrypts the connection using SSL/TLS.

Benefits of Using a VPN While Trading:

1. Hidden location
With a VPN, it appears that you are connecting to the Internet from a different location. This allows you to bypass your country's restrictions on access to certain sites or geo-blocking the site itself.

2. Better security
Since your communication goes through an encrypted tunnel, no one but the endpoint (i.e., the VPN Service) can understand anything about it. This encrypted connection prevents ISPs, hackers, and other spies from collecting your data. If the site you visit uses HTTPS, the VPN server does not see the content of your request. It only knows which site you are accessing.

3. Better privacy
In addition to the fact that your ISP cannot find out what you are doing online, you also prevent the sites you visit from determining your location.