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Is forex and CFD trading safe, legal or a scam?

Is forex trading safe? The truthful reply comes in two parts. Forex and CFD trading is a real, legal product in most countries, and the firms that sell it in those places hold a regulator’s authorisation. A contract for difference, or CFD, pays you the change in a price without you owning the asset. Yet forex and CFD trading is also a product on which most people lose money, however honest the firm. The EU markets regulator, ESMA, looked at national regulators’ data in 2018 and reported that 74 % to 89 % of retail accounts lost money (ESMA press release).

Written by 14 min readUpdated

So “safe” can mean two different things. The first is whether the firm is honest and supervised, and you can check that yourself in a few minutes. The second is whether your money is likely to grow, and the figures say it probably won’t. This page takes each meaning in turn, then sets out where the product is legal, where it’s banned and who the regulator is in nineteen countries.

Key points

  • Forex and CFD trading, in itself, isn’t a scam. Such trading counts as a legal, regulated product in the EU, the UK and Australia, though most retail accounts still lose money on it (ESMA press release).
  • Fraud is a separate risk. A clone firm copies a real firm’s name and number, then changes the contact details, and the FCA publishes a Warning List of firms it knows are unauthorised (FCA on clone firms, FCA Warning List).
  • A regulated forex broker is one that appears on a regulator’s own register under the exact company name in your contract. The brand name and a logo in the footer prove nothing.
  • Using an unauthorised firm in the UK means you can’t use the Financial Ombudsman Service. The FCA says it’s unlikely you’ll get your money back (FCA Warning List).
  • In Belgium, selling CFDs to consumers through online platforms is banned (FSMA). CFDs in the European form can’t be sold to retail customers in the United States (CFTC).
  • Regulators in Brazil, Colombia and Peru state that no firm is authorised or registered there to offer forex to the public (CVM, Superintendencia Financiera, SMV).

Is forex trading safe?

Forex trading is safe in one sense and risky in another, and the two are easy to mix up. If the company that opens your account is authorised in the EU, the UK or Australia, your deposit is held under rules and the firm is supervised. You also can’t lose more than you put in. A global company in the same group answers to its own regulator, under that regulator’s rules. None of those rules make the trades themselves safe.

The risk in forex trading comes from leverage. Leverage lets you open a trade many times bigger than your deposit, and the deposit you put up against the trade is called margin. A small price move then becomes a large move in your account, in either direction (leverage and margin). Every trade also begins with a cost: the spread, which is the gap between the buy price and the sell price (costs and fees).

Regulators measured the result. National regulators found that 74 % to 89 % of retail accounts lost money (ESMA press release, 27 March 2018). The FCA’s UK data showed 82 % of customers in its sample lost money (FCA CP16/40). These accounts were held at authorised firms, so the losses came from the product working as designed and had nothing to do with fraud.

A worked example of how leverage turns a small move into a big loss

Worked arithmetic: the numbers follow from the formula given in this section.

Leverage is easiest to see in an example. The numbers are made up. Say you deposit 1,000 and open a trade worth 20,000, so the trade is twenty times your deposit. Then the price moves 1 % against you.

One per cent of 20,000 is 200. So a move that small takes a fifth of your deposit. A 5 % move against you would be 1,000, and that’s the whole deposit. The price moved and the size of the trade did the rest, so nobody cheated you in this example (risk management).

Is forex a scam? Losing on a real product versus being defrauded

Forex in itself isn’t a scam. Scams borrow its name, though, and once you know the signs the two ways of losing money look very different.

How a loss on a genuine leveraged product differs from a loss to a fraudulent firm.
QuestionGenuine product, authorised firmFraud
Is the firm on a regulator’s register?Yes, under the company name in your contractNo, or it has copied the details of a firm that is
Why did you lose?The price moved against a leveraged trade, and you paid the spread and other costsThe trades may never have existed, or the money was simply taken
Can you withdraw what’s left?Yes, to the account you paid fromWithdrawals are delayed, refused or made to depend on a new fee
What were you promised?Nothing. A firm regulated in the EU or the UK must show a risk warning with its loss rateHigh returns with no risk, often with a deadline
Who contacted whom?You found the firm and appliedA caller, a message or a social media advert found you
Who can you complain to?The firm, then an ombudsman or the regulatorOften nobody with any power over the firm

The warning signs in the right-hand column are explained further on the page about choosing a provider.

How clone firms and unauthorised brokers work

Clone firms pass themselves off as a firm that really is authorised. The FCA says they copy a genuine firm’s website and alter small details such as the phone number. They may quote the real firm’s name, address and reference number, so a quick look at the register seems to confirm their story (FCA on clone firms).

Unauthorised brokers skip the disguise and sell with no permission at all. The FCA keeps a Warning List of the unauthorised firms it knows about. The FCA says the list can’t be complete because these firms often change their names, so a firm missing from it may still be a scam (FCA Warning List).

What you lose with either kind is the safety net. The FCA points out that an unauthorised firm gives you no access to the Financial Ombudsman Service. The regulator also says you’d be unlikely to get your money back (FCA Warning List). And the FCA lays out the usual pattern of these frauds: fake profits on a screen, then blocked withdrawals (FCA on online trading scams).

How to check if a broker is regulated

To check whether a broker is regulated, you look for the company on the regulator’s own register. That takes four steps.

  1. Find the company name in the contract Find the legal name of the company in your account agreement or the website footer. A brand can belong to several companies under different regulators and your protections follow the company you sign with (offshore brokers).
  2. Open the regulator’s register yourself Using an address you type in yourself, go to the regulator’s site and search for that company. For the UK, use the Financial Services Register or the FCA Firm Checker. Australia’s regulator, ASIC, has a professional register for firms it has licensed (ASIC registers). In Cyprus, CySEC publishes its list of investment firms with each licence number (CySEC list).
  3. Match the contact details Compare the phone number, email and web address on the register with the ones you were given. A clone firm gets the name and number right but the contact details wrong (FCA on clone firms). For each firm, CySEC also lists the web domains it has approved and the ones it has not approved (CySEC warnings).
  4. Search the warning list Look the name up on the regulator’s warning list as well. The FCA keeps a Warning List, while CySEC runs a warnings page. Regulators elsewhere maintain similar lists (FCA Warning List, CySEC warnings).

Licence verification covers the permissions to check for on the register.

What an FCA, ASIC or CySEC licence adds to an offshore one

A licence from the FCA, ASIC or CySEC sets rules on how the firm treats retail clients, meaning ordinary customers not classed as professionals. An offshore licence often has fewer such rules. Those rules reach you only if the company that opens your account holds that licence. An offshore forex broker here means a global company regulated in a place like the Seychelles or the Bahamas.

Retail protections under the EU, UK and Australian rules, and what global companies regulated offshore offer.
ProtectionFCA, ASIC or CySEC licenceOffshore licence
Leverage capYes. 30:1 at most on major currency pairs, and lower on other assets (ESMA Decision (EU) 2018/796, FCA PS19/18, ASIC 20-254MR)Usually none. Higher leverage is the reason these companies exist (maximum leverage)
Negative balance protection, so you can’t lose more than your depositYes, by ruleDepends on the contract. Some promise it, and some make you pay the deficit
Margin close-out, which closes trades when your account runs lowYes, by ruleSet by the company
Bonuses for depositing or tradingBanned under the EU and UK rules (ESMA Decision (EU) 2018/796, FCA PS19/18)Often offered
A register you can checkYes, searchable by name and numberThe Seychelles regulator lists the firms it regulates by category, and its register has no licence-number column (FSA Seychelles)

A Seychelles forex licence is a real licence, and the company named on it is a different company from the group’s European or Australian one. You can find a comparison of what each global company’s contract says on the offshore brokers page.

Where CFDs are banned or restricted for retail clients

CFDs are banned for retail buyers in a small number of countries. Belgium’s regulator has banned the sale of CFDs and similar leveraged products to consumers on online platforms since 18 August 2016 (FSMA regulation).

In the United States, only firms registered with the CFTC, the US derivatives regulator, can offer off-exchange leveraged products to retail customers (CFTC: Foreign Currency Trading). The CFTC has treated CFDs sold off-exchange to US retail customers as unlawful (CFTC release 7809-18). Forex trading itself is legal in the USA through registered firms, but the CFD accounts sold in Europe aren’t available there.

Risk warning

A regulated broker makes fraud unlikely, and it doesn’t make trading safe

A regulated broker protects you from being cheated, and that’s all it does. The loss figures come from regulated firms. ESMA reported what national regulators found: 74 % to 89 % of retail accounts lost money at authorised providers (ESMA press release, 27 March 2018). Checking the register removes one risk but leaves the bigger one in place (risk disclosure).

Common questions about whether forex and CFD trading is safe

Questions about whether forex and CFD trading is safe, legal or worth it, with each answer short and standing on its own.

Is forex a scam?

Forex isn’t a scam, because it’s simply the market where currencies are exchanged. Retail forex and CFD accounts are legal, regulated products in many countries. Scams do use the name: clone firms copy the details of an authorised firm, and unauthorised firms promise returns no real provider may promise (FCA on clone firms).

Is CFD trading safe?

CFD trading is safe from fraud if your provider is authorised and you’ve checked it on the regulator’s register. CFD trading stays high risk no matter who you trade with. National regulators found that 74 % to 89 % of retail CFD accounts lost money (ESMA press release).

Is CFD trading a scam?

CFD trading isn’t a scam when the provider is authorised, and it’s a legal product in the UK, the EU and Australia. Where the company that opens your account is regulated in one of them, its regulator limits leverage (ESMA Decision (EU) 2018/796, ASIC 20-254MR). Most retail accounts still lose money trading CFDs, and fraudsters operate fake platforms that mimic the appearance of genuine ones.

Is forex trading profitable, and is CFD trading worth it?

Forex and CFD trading turns a profit for a minority of retail accounts. ESMA reported national figures that put the proportion of accounts losing money between 74 % and 89 % (ESMA press release). The most honest starting point for deciding whether it’s worth it is the loss rate each provider publishes (risk disclosure). That decision is your call.

What is a regulated forex broker?

A regulated forex broker is a company that a financial regulator has authorised and supervises. An FCA-regulated broker appears on the UK Financial Services Register (FCA register). An ASIC-regulated broker appears on ASIC’s professional register (ASIC registers). A firm under CySEC regulation appears on CySEC’s list of investment firms (CySEC list). The company named in your contract is what matters, because one brand can sit on several licences (compare brokers).

Sources

The original documents this page cites, in the order they first appear.

  1. European Securities and Markets Authority, ESMA
  2. ESMA agrees to prohibit binary options and restrict CFDs to protect retail investors, ESMA, 2018-03-27
  3. Financial Conduct Authority, FCA
  4. Clone firms and individuals, FCA
  5. FCA Warning List of unauthorised firms, FCA
  6. FSMA Regulation establishes a framework for the distribution of OTC derivatives (binary options, CFDs…), FSMA, 2016-08-08
  7. CFTC Charges Trading Platform with Illegal Transactions Margined in Bitcoin… (Release 7809-18), CFTC, 2018-09-27
  8. CVM lança vídeo de alerta sobre CFD/Forex durante a Semana ENEF 2025, Comissão de Valores Mobiliários (Brazil), 2025-05-15
  9. ¡No se deje engañar!, Superintendencia Financiera de Colombia
  10. Comunicado: advertencia sobre el ofrecimiento público de productos y servicios Forex y de contratos por diferencia (CFD), Superintendencia del Mercado de Valores (Peru)
  11. CP16/40: Enhancing conduct of business rules for firms providing contract for difference products to retail clients, FCA, 2016-12-06
  12. Online trading scams, FCA
  13. Financial Services Register, FCA
  14. FCA Firm Checker, FCA
  15. Australian Securities and Investments Commission, ASIC
  16. Search ASIC registers, ASIC
  17. Cyprus Securities and Exchange Commission, CySEC
  18. Cyprus Investment Firms: list of regulated entities, CySEC
  19. Warnings to investors, CySEC
  20. ESMA Decision (EU) 2018/796 of 22 May 2018 to temporarily restrict contracts for differences in the Union, Official Journal of the European Union (EUR-Lex), 2018-05-22
  21. PS19/18: Restricting contract for difference products sold to retail clients, FCA, 2019-07-01
  22. 20-254MR ASIC product intervention order strengthens CFD protections, ASIC, 2020-10-23
  23. Regulated entities, Financial Services Authority Seychelles
  24. Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin
  25. Allgemeinverfügung bezüglich sog. Differenzgeschäfte („Contracts for Difference / CFD“), BaFin, 2019-07-23
  26. Comisión Nacional del Mercado de Valores, CNMV
  27. Resolución de 11 de julio de 2023, de la CNMV, sobre medidas de intervención de productos relativas a CFD y otros instrumentos apalancados, Boletín Oficial del Estado, 2023-07-11
  28. Autorité des marchés financiers, AMF
  29. AMF’s decision of 1 August 2019 restricting the marketing, distribution or sale, in France or from France, of contracts for differences to retail investors, AMF, 2019-08-01
  30. Commissione Nazionale per le Società e la Borsa, CONSOB
  31. Delibera n. 20976 del 20 giugno 2019 — Limitazioni alla commercializzazione, distribuzione o vendita di contratti per differenza (CFD) a clienti al dettaglio, CONSOB, 2019-06-20
  32. Komisja Nadzoru Finansowego, KNF
  33. Decyzja Nr DAS.456.2.2019 z dnia 1 sierpnia 2019 r. w sprawie kontraktów na różnicę (CFD), Dziennik Urzędowy KNF, 2019-08-01
  34. Comissão do Mercado de Valores Mobiliários, CMVM
  35. Regulamento da CMVM n.º 5/2019 — contratos diferenciais e opções binárias, Diário da República, 2019-06-28
  36. PS20/10: Prohibiting the sale to retail clients of investment products that reference cryptoassets, FCA, 2020-10-06
  37. Alertas al inversor, Comisión Nacional de Valores (Argentina)
  38. Advertencia al público inversor por el uso de plataformas digitales no autorizadas, Comisión Nacional de Valores (Argentina)
  39. CMF alerts about unregulated platforms and entities offering investment services, Comisión para el Mercado Financiero (Chile), 2025-12-12
  40. Joint press release: Bappebti transfers regulation and supervision duties on digital financial assets, including crypto assets and derivatives, to OJK and BI, Otoritas Jasa Keuangan (Indonesia), 2025-01-10
  41. Cek legalitas pelaku usaha perdagangan berjangka komoditi, Bappebti (Indonesia)
  42. Guidelines on Contracts for Difference, Securities Commission Malaysia
  43. Frequently-asked questions: Guidelines on Contracts for Difference, Securities Commission Malaysia
  44. Investor Alert, Securities and Exchange Commission, Thailand
  45. Commodity Futures Trading Commission, CFTC
  46. Foreign Currency Trading, CFTC