There is no denying that the Forex market is a playground for scammers, and beginners are the easiest prey to fall for them. So, how? Even though the Forex industry is much more regulated than it was a few decades back, it is still not bulletproof, and frauds abound here as well.
Being informed about them and distinguishing between the reliable platforms from the scammers goes a long way in staying safe and well-fortified in the market. Let’s take a look at the varying types of scams that can happen and how to spot them.
Spotting a scam
Traders have to keep their eyes peeled for scammers to avoid being ripped off by them, even unknowingly. A thing to keep in mind about scammers is that they are, in general, very resourceful in swindling traders’ hard-earned money from them.
Of late, as traders have become wiser in recognizing a scam, new methods are being implemented by swindlers to steal and exploit. Though they come in different forms, they have a few things in common. Lack of proper regulation, being non-transparent, and promising unreal trading results are clear indications that you are dealing with a non-certified entity.
Beginners are often enticed by such schemes due in no small part to their inexperience. As you progress in your journey, it will get increasingly simpler to spot these scams. If you’re being promised trade results of hundreds of pips, you should proceed with caution. If someone could make this amount of profit on trades, they wouldn’t be selling you things. They’d simply be making money with that method.
A lack of regulation is a clear indication that you’re dealing with an unauthorized player. Find out about the company and look for a license or the certification of a regulatory body. If it’s not there, you should hear alarm bells in your head. Here is a checklist to help you identify them better:
- Is the trader/company promising impractical profits without mentioning risks?
- Is there a regulatory body backing it up?
- Are the trade-results double-checked and verified by another party?
- Is there any background info available about the trader/company?
Four popular forex scams you should avoid
Here are four types of scams that you should steer clear of at all costs.
Robot scams
Robots and algorithmic trading systems simplify trading activities, but they are potential gateways for scammers to get access to your funds. These robots track the markets non-stop and find out trading opportunities based on a set of predetermined rules.
But many times, such software is advertised rather brazenly and is claimed to generate immense profits for the user. This is no different than trading with bad signals. Once your purchase, you realize that the thing is ineffective and not properly optimized or tested in actual market conditions.
Of course, not all of the robots are like that. Some do help traders significantly. But one has to do enough research before laying one’s money down. If a robot advertises a 2000% return rate, drop it. Examine the testing parameters before you consider buying it. If they don’t turn out valid, the robot will only generate signals at random and will bleed your account dry.
Signal seller scams
This is one of the popular scams of today. A signal seller is usually a trader, a manager with pooled assets, or an account managing company that provides systems that claim to provide recommendations to spot advantageous times to trade based on their experience for a fee. Their experience, abilities, and testimonials from other users are advertised as parameters for reliability. All that they need is a trader to hand over their money to receive their recommendations.
But various scammers have emerged that simply take the money and run off with it. Some of them will give a recommendation here or there that will profit, but that is only to keep the money from the scam flowing. This type of scam has quickly spread like a forest fire. Even though there may be actual honest signal sellers, a little caution will go a long way to keeping your funds safe.
Phony forex trading investment funds
Investment funds have become quite popular in the Forex of late, especially amongst those traders who are still inexperienced regarding their positions and their money. In such an account, traders give a percentage of their capital to an expert manager to trade on their behalf. This helps the traders actualize returns that they wouldn’t have been able to otherwise, and the manager takes a cut.
But the rise in Forex scams has bogged up this avenue as well. Various phony fund managers of this kind have spawned. They are easy to spot, though, as they advertise a track record par excellence with no real support for their claims.
If you want an investment fund manager to trade with your capital, you should spend the time to research them and find out the evidence that they provide to back up their claims and authenticity. This should include checking such things as their years of experience, trading strategies, and risk levels.
Dishonest brokers
The market is flooded by dishonest brokers. Churning is a common example of their unethical practices, which involves transactions just for the sake of getting commissions. They don’t care about their clients and earn money through their partnership with a discredited firm. It doesn’t matter to them whether the practice of overtrading is hurting their clients or helps them achieve their objectives. This leads to colossal losses that are hard to recover from.
The best way to protect yourself from them is to always have complete control of your account. One could also get into a fee-based agreement if one wants to get the benefits that honest brokers provide without risking one’s account.
Conclusion
There are various pathways through which scammers can get access to your fund in the Forex market. To stay safe, one has to stay informed and vigilant, for that is the only way by which the scammers can be kept at bay.
