Are Online Trading Apps Safe?

Are Online Trading Apps Safe?

We have all seen how Gamestop’s shares rose dramatically due to Reddit. We have seen how Bitcoin has taken off, dipped, and rose again. These have netted people a lot of money which has brought a new wave of first-time investors trying online trading apps. Traders need to make a deposit into their account to participate in a trade.

But the question arises: are these trading applications safe?

Are the deposits you are making to a trading app or the balance you are holding in your online trading account safe?

The risk of cyber securities and their vulnerabilities will always exist in online trading so let’s look at some precautionary steps to mitigate the risk that is involved in online trading.

Rise in Online Financial Scams

With the ease of availability and rapid growth in the reachability of online trading applications, the number of cheaters has also increased.  According to a report published by the FBI in the US in 2020, 791,790 complaints were registered in a single year against online phishing scams with an overall theft of more than 4.2 billion USD for Americans.

Phishing scammers can ask for account details with a familiar or trustworthy name. They might ask to update the account details from fake links to get your login details.

Some scammers can also promise to provide you with lucrative returns by handling your account. Online traders must be thoughtful enough to identify these phishing schemes and should not be lured by unrealistic offerings.

Traders can report any suspected or actual phishing scam to the local administration or the concerned judicial authority. However, the recovery of the lost funds to online phishing scams is rare. The best practice is to stay aware and not fall into lucrative traps set by the scammers online.

How to Check Safety of an Online Trading & Investment App?

The safety of online trading and investment application depends upon multiple factors. Traders need to consider multiple aspects for a safe and secure online trading experience.

Is the Platform Regulated by Regulatory Authorities in your country

Regulatory Authorities in multiple jurisdictions oversee the activities of online trading and investment service providers. However, many of the trading platforms available on App store & Google Play are not licensed or regulated by any regulatory authorities.

Traders must make the required efforts to check the authenticity of the regulatory licenses of the trading platform.

The compliance with the regulatory guidelines and any history of data breaches in the past can should be checked before choosing a concerned trading platform.

The chosen online trading platform must be regulated in the country of your residence. The regulatory authorities ensure the safety and welfare of traders and investors while keeping an eye on the activities of regulated service providers. In case of any compliance breach, traders can report the issue to the regulatory authority & seek remedies.

For example, the best forex trading apps are regulated by multiple Tier-1 & Tier-2 regulatory authorities like FCA in UK, FSCA in South Africa, ASIC in Australia, etc. Or similar regulators in your concerned jurisdiction.

Similarly, an online stock broker must be regulated and licensed to offer service by the concerned financial authority or stock exchange.

Check the App’s Sources

The parent, origin, or source of the trading platform can be checked with a few clicks online. It is important to ensure that the trading platform is owned by a trustworthy source. The terms and services of the trading app must be well developed and described on the platform.

Trading applications with a trustworthy parent organization with history, public financial reports etc. are less likely to involve in deceitful activities for self-interest.

Reputed trading and investment services providers generally use encrypted and secure methods to process trade orders and other activities. Hence, there is a lesser probability of cyber theft and security compromise for online traders.

The online trading application must be downloaded from Google Play or Apple Store after reading the reviews & rating. An online trading application downloaded from a third-party app store is more probable to be fraudulent and unregulated. Traders using a trading application downloaded from a third-party app store are not as secure as the ones downloaded from Google Play or Apple Store.

2FA in Trading App

Protection of the login credentials is of utmost importance while trading and investing online. No matter how secure or trustworthy the broker or platform is, any online account can be compromised if the password and login details are leaked, even from the user side.

It is a general mistake by online traders to make an easy-to-remember password that is somehow related to them. Oftentimes the easiest to remember passwords are the easiest to crack for the hackers and conmen. The passwords must be robust, unique, complex, and most importantly should not make any sense.

A secure platform would require you to set a difficult password with complex combinations.

Many trading applications use 2-factor authentication to login into the accounts. By choosing the trading apps with 2FA login, you can provide an extra layer of protection above passwords to mitigate the risk of account theft. Login with fingerprints or face identification can be an additional step to enhance safety in online trading.

The account details must be protected at any cost and should not be shared with anyone. Traders should never leave their mobile application or computer unattended and must log out after every trading session.

SSL Encryption

Check if the broker’s website uses https connection & a does the app uses encryption for handling data. Generally, it regarded as safe of the app uses a 128-bit key to encrypt & decrypt data & files, as normal computers cannot break this encryption.

Server Security

There have been reports of data leaks at brokers due to security flaws & sometimes due to misconfigured cloud databases where they store client’s data.

Although an end-user can never know the backend infrastructure that an App has, you should check whether the broker has a history of data leaks or breaches. You can find this information by searching about the broker, normally in case of such a breach, there would news & the regulators would also take action.

Take care of Security from your Side

Even if your app is most secure, the developers cannot eliminate the risks & vulnerabilities that originate from user side.

If you have downloaded a Trading app or platform, take these precautionary steps.

  • Use an Anti-Malware: Some malicious software or viruses can log what you type on your device, and leak your credentials to a third party. Installing an authentic anti-malware or antivirus like Malware Bytes can reduce the probability of theft through software. Choose an Anti-malware that also offers web protection.
  • Do Not Use Public Networks: The freely available networks or Wi-Fi can be tapped to leak your login or trade details by man in the middle attack. Hence, online traders must avoid using the public or freely available networks to trade.
  • Do Not Reply to Unknown: Some of the scammers can access your credentials if you respond to any of their texts, emails, or clicking on any unknown links.
  • Do Not Copy Others: Just because your friends or colleagues are making profits trading online does not ensure your profits. Traders should only deal in the markets that are suitable for them.
  • Never Share your Login credentials: Don’t share your login details with anyone. Also, never leave your device open in public or private that has access to your data & login credentials.

Should I avoid Trading Online?

Your decision to trade online or not should be based on your financial adequacy & knowledge of the financial markets. The availability of a wide range of capital markets at your fingertips is an advantage if you are a professional investor or a day trader. But there are financial risks involved in trading online in the capital markets.

Trading or Investing in an unknown capital market just because of availability or potential gains is a common mistake among millennials. Such users are prone to take extremely high risks and are more likely to end up facing drastic losses.

The capital markets that deliver high returns also involve a high risk that may lead to fatal losses. Users should not get carried away with their emotions to grab unrealistic returns. If you are risking your hard-earned money to potential losses, you must make adequate efforts to mitigate the risk that you will be dealing with.

The golden rule still holds true:  don’t invest money you can’t afford to lose!


*note: none of this is financial advice!

Liron Segev - TheTechieGuy

Liron Segev is an award-winning tech blogger, YouTube strategist, and Podcaster. He helps brands tell their stories in an engaging way that non-techies can relate to. He also drinks way too much coffee! @Liron_Segev on Twitter