Securing Online Trading: The Role of VPNs in Safeguarding Financial Transactions

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The surge of online trading and digital investing has transformed financial markets into a 24/7 global ecosystem accessible to traders from anywhere in the world. However, with this unprecedented access comes a significant rise in cyber threats. 

As the ecosystem grows, so do the risks. According to the 2024 CDW Cybersecurity Research Report—a survey conducted among financial institutions—55 percent of respondents reported that data breaches had cost their organization between $5 million and $10 million in the past five years. 

Moreover, 14 percent of survey respondents said the breach cost their company over $10 million in the same period. The data was obtained from 171 leading IT influencers and decision-makers among American financial firms.  

These numbers highlight the urgency of adopting robust cybersecurity measures to safeguard digital transactions in the fast-growing fintech industry and volatile world of online trading.

Virtual Private Networks (VPNs) add a protective layer of security and anonymity to users' online activity. VPNs encrypt internet connections, mask a user’s true public IP address, and "tunnel" traffic between a remote server and the user's device. While VPNs have many uses, for the purposes of this article, we will focus on their applications in financial services and trading. 

We will also explore the specific vulnerabilities of various trading platforms, including crypto, commodities, securities, and FX (foreign exchange) sites, and how VPNs, particularly tier-1 services like iOS VPN IPVanish, can protect traders by fortifying their online privacy and security.

The Risks of Online Trading Platforms

Online trading platforms, especially those that handle large volumes of financial transactions, have become prime targets for expert cybercriminals seeking to exploit vulnerabilities in their systems. According to a report from S&S Insider, the growing online trading platform market was valued at $9.58 billion in 2023. It is projected to reach $18.8 billion by 2032 and has a CAGR of 18.8 percent from 2024 to 2032. 

The globalization of trading has introduced a new set of risks. Attackers no longer need to be physically close to their targets. From the comfort of their computers, cybercriminals can launch sophisticated attacks on traders and brokers, targeting weaknesses in network security, account credentials, and platform infrastructure.

These platforms entice attackers because of the sheer volume of personal and financial information they store. Whether it's a securities trading platform, a cryptocurrency exchange, or an FX platform, each is a treasure trove of data—account numbers, bank details, trade histories, and personal identities. All the data in each platform has immense value that can be monetized or exploited. 

In this digital environment, hackers' entry barriers have been significantly lowered. Today, many platforms still need adequate security measures to protect users from increasingly sophisticated threats.

1. Securities trading risks

Securities trading, encompassing stocks, bonds, and other financial instruments, has become a prime target for cybercriminals. Online brokerage accounts hold significant financial and personal information, making them susceptible to:

Phishing attacks

Hackers send deceptive emails that appear to come from legitimate sources, tricking traders into revealing their account credentials.

Man-in-the-middle (MITM) attacks

Cybercriminals intercept communications between a trader and the platform, potentially altering or stealing sensitive data.

DDoS (Distributed Denial of Service) attacks

These attacks can disrupt online trading platforms, preventing access at critical trading times, such as during high-volatility market hours.

2. Cryptocurrency trading risks

Cryptocurrency trading introduces an entirely different set of cybersecurity risks due to blockchain's decentralized and pseudonymous nature. Notable vulnerabilities include:

Exchange hacks

Unlike securities, cryptocurrency exchanges are not always regulated, which makes them prime targets for large-scale cyberattacks. 

Private key theft

Hackers who gain access to a trader's private keys can transfer cryptocurrencies without the possibility of recovery.

Ransomware and malware

If infected, traders' devices can completely lose funds stored in wallets or exchanges.

3. Forex trading risks

Foreign exchange trading (FX) involves significant daily global transactions, exposing traders to various risks, including:

Unencrypted transactions

Many FX platforms do not prioritize secure communications, which leaves them open to interception by malicious actors.

Social engineering attacks

Traders on FX platforms are often targeted with social engineering tactics to steal login information or financial data.

Unregulated brokers

Many FX platforms operate in unregulated environments, increasing the risk of fraudulent activities.

4. Commodities trading risks

Commodities trading, which involves the buying and selling raw materials such as oil, gold, and agricultural products, has long been a staple of the financial markets. Traders now use platforms to speculate on the future prices of commodities through futures contracts and options.

Commodities trading platforms face cybersecurity risks, including: 

Market manipulation and spoofing

These are common tactics where a trader places false buy or sell orders to manipulate prices. 

Ransomware and phishing attacks

Because commodities trading often involves large sums of money, these platforms are prime targets for ransomware and phishing attacks. Traders must ensure that their personal information and trading activities remain encrypted and shielded from malicious actors attempting to hijack their transactions or manipulate markets in real-time.

5. Derivatives and options trading risks

Derivatives trading encompasses options, futures, and swaps, financial instruments with value derived from an underlying asset such as stocks, bonds, or commodities. Derivatives are often used to hedge risks or speculate on price movements, and trading in this space has increased due to the accessibility of online platforms.

Because derivatives trading can involve complex financial instruments, the platforms facilitating these trades are often targets for the following security risks:

Advanced persistent threats (APTs)

Hackers may attempt to exploit system vulnerabilities to gain insights into trading algorithms, pricing models, or trader positions. 

Cyber espionage

Unprotected traders risk having their derivatives strategies exposed to competitors through cyber espionage. They can mitigate this risk by encrypting all data transmitted between traders and the platform, keeping strategies and financial positions hidden from prying eyes.

6. Risks to Peer-to-Peer (P2P) lending and crowdfunding platforms

Another emerging area of online trading lies within peer-to-peer (P2P) lending and crowdfunding platforms, where investors can trade in loans or equity shares of startups and small businesses. 

P2P lending platforms allow individuals in the network to lend money directly to borrowers in exchange for interest payments, bypassing traditional banks. Similarly, equity crowdfunding enables investors to acquire stakes in early-stage companies.

These platforms present a unique set of cybersecurity challenges. Since P2P and crowdfunding involve direct interaction between investors and borrowers or businesses, they are vulnerable to the following:

Identity theft and account takeover 

Hackers can enter a user's account through phishing or brute-force attacks and steal personal information or divert funds. 

7. Risks among social trading platforms

Social trading platforms are popular with both experts and beginners. They allow traders to mimic the strategies of more experienced traders by following their trades in real-time. These platforms have democratized trading by providing less experienced investors with a way to learn from the pros and implement similar strategies. 

However, because of their inherently social nature, these platforms are also prone to:

Identity theft

On social trading platforms, attackers may impersonate successful traders or manipulate the social aspect to deceive users into making poor trading decisions. Additionally, because traders often share their performance and trading strategies openly, hackers may exploit these insights for their gain.

Social engineering attacks

Social engineering in the context of cybersecurity risk is a term referring to a range of malicious activities involving human interactions. Attacks use ingenious methods of psychological manipulation to trick users into giving away sensitive personal or financial information or making other security mistakes.

Account hijacking

Hackers hijack a trader's account on an app to access information and commit fraud, including publishing content under their name. The main attack vectors for this fraud are malware, phishing, and exploiting weak passwords.

How VPNs Mitigate Online Trading Risks

VPNs provide a robust solution to mitigate the cybersecurity risks associated with online trading. Here’s how a VPN can protect traders across different platforms:

Data encryption 

VPNs encrypt all data transmitted between a trader's device and the online trading platform. This encryption guarantees that even if hackers or cybercriminals intercept the data, they cannot decipher it without the encryption keys. 

IPVanish, a top-tier VPN, employs AES-256-bit encryption, the highest standard available, which is the same used by militaries and governments worldwide.

IP address masking

A VPN hides a trader's location and personal information by masking their real IP address and routing their connection through secure servers. This makes it difficult for hackers to pinpoint their online activities, reducing the risk of man-in-the-middle (MITM) attacks and identity theft.

Secure remote access

Though not advisable, traders can sometimes access their accounts from public WiFi networks, which are not secure. 

VPNs create a secure tunnel that prevents anyone on the same network from viewing sensitive trading data. This is especially crucial for mobile traders who rely on smartphones or tablets to manage trades on the go.

Photo by Pejmon Hodaee on Unsplash

Protection against malware and phishing

Some VPN services come equipped with built-in malware and phishing protection. This vital feature adds a layer of security by blocking malicious websites and preventing traders from downloading infected files that could compromise their devices or trading platforms.

Security Tips for Traders Using VPNs

To maximize the security benefits of a VPN, traders should follow these best practices:

Always use a VPN when trading on public WiFi

Public networks are notoriously insecure, and a VPN is essential to protect sensitive financial data.

Use two-factor authentication (2FA)

While VPNs secure your connection, using 2FA adds an additional security layer to your valuable trading accounts by requiring a second verification form.

Keep your VPN and trading platform software updated

Regular software updates protect you from the latest vulnerabilities and security flaws.

Choose VPN servers wisely

For best performance, connect to a VPN server close to the trading platform's location. This will reduce trading latency and improve connection speeds.

Invest in a tier-1 VPN service

Look for a well-reviewed tier-1 VPN service with all the ideal features. Free VPN services often have limitations, including much slower speeds and weaker encryption protocols, which can compromise security.

Advantages of Using a Top-Tier VPN: Ideal Features for Online Trading

VPNs are not created equal. Despite the temptation to use free VPNs, they have numerous limitations, including potential security holes. Tier-1 VPNs work best when handling financial transactions. 

Robust encryption

Using a tier-1 VPN like IPVanish provides AES-256-bit encryption, a global standard for securing sensitive financial transactions. This level of encryption ensures that no one—whether hackers or government agencies—can intercept and decipher your trading data.

No-logs policy: the ultimate privacy

Ultra-private VPNs like IPVanish follow a strict no-logs policy. This feature means they do not store any records of a trader's online activities. This ensures that should the VPN provider be compromised, no sensitive trading data would be accessible.

Maintaining high-speed connections: never miss a trade

Unlike free or lower-tier VPNs that may slow down internet speeds, high-quality VPNs maintain fast connections, allowing traders to execute trades without delay, even during extreme market volatility.

Multiple device support: optimal access and convenience

Traders often switch between devices—laptops, tablets, and smartphones. When a VPN offers support for several devices, users can simultaneously protect up to 10 devices, ensuring security across all platforms.

Photo by PiggyBank on Unsplash

Ensure Safe Trading Across All Platforms: Use a Reliable VPN

VPNs are powerful tools for mitigating cyber risks regardless of the type of trading platform—whether it's securities, crypto, commodities, derivatives, P2P, or social trading. They provide strong encryption, hide traders' online identities, protect sensitive financial data, and prevent a wide range of attacks, from phishing and identity theft to market manipulation. 

As hackers and fraudsters evolve their tactics, adopting VPNs remains critical for ensuring that traders can conduct their activities securely without fear of being compromised.

To further safeguard investments, traders must remember to regularly update their trading platform and VPN software and use two-factor authentication (2-FA) and strong, unique passwords for each platform.

By leveraging a tier-1 VPN service across their devices, traders can protect themselves from growing cybersecurity threats and focus on what matters most—making informed and strategic trading decisions.

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