Forex is a $5 trillion market a day and with such high volume, scams are obvious. It cannot go untouched with scammers and in this article, we will discuss some of the forex trader scams in detail like what are the types of forex scams, how do forex scams work, and how to avoid forex trader scams.
Forex spot market includes futures contracts and currency options, but simultaneously an unregulated spot market exists, and this tends to lure new beginners to earn fortunes within a short span of time to become a forex trader for themselves or to copy someone else.
A signal-seller scam is one of the most popular in today’s forex trader scams. The sellers are like pooled asset managers, retail companies, individual traders, and managed account firms.
They claim can perfectly predict the favourable time to trade a currency pair and suggest the same to clients against a fee.
Instead, they will get you to open up a broker account under their registration link (which is a referral) and get you to deposit real funds into it. Once confirmed, the “service” will begin and they employ tactics to get you to trade on your account and follow their signals.
The idea is that you don’t pay the signal-provider, the broker does for referring you as a client.
It’s a win/win/win on paper – you don’t pay for these services, the provider gets paid by the broker, and the broker gets an actively trading new client.
Seems legit so far, right?
For the signal provider, it doesn’t matter if you win or lose – as long as you meet the minimum requirements for the brokerage to pay them.
They can send you 5-10-15-25 signals a day and hope you trade at least 1 of them. All that matters to them is that they get paid by the broker.
If you blow up your account, but they get paid – for them the job is done, they have made money and you have lost it.
On top of that, did you know it is against the law (in most regulated countries) to promote guaranteed returns? This, or a high “success” rate, should raise a few flags.
Beginners who are planning to enter the market should take note that this is one of the several types of forex trader scams in the industry which is prevalent widely.
Robot EA Scamming
Not all the trading systems are tested by any independent agency and here lie the loopholes paving way for another forex trading scams. Scammers tout the trading system being used can generate trades automatically, even when a trader is sleeping. They further claim their software can earn vast wealth.
The trading system is termed as Robot, or an Expert Advisor (EA), and if not tested can gamble unsuspecting traders.
Similar to trading signals, these can also be given away once you have a live “verified” account. By verified, it can be where you open up a broker account, verify your identity, and deposit funds.
Only once verified, will they send you the EA. They would do this, again similar to the signal scams, to provide you with an automated robot to trade for you on your live account. In the hopes of generating enough trades to earn their referral fee from the broker.
It is suggested to do some research about the robot before investing money before getting trapped in these types of forex trader scams.
Phoney forex investment management funds
In recent years an increase in phoney forex investment management funds has been seen. In such arrangement investors give up complete control of their investment to the fund management team who are usually hyped-up and little is known of them. Most of these fund management companies reveal false success records through brochures and websites. One of the easiest ways to recognize scammers is their more than 100% annual returns claim. This is one of the most popular types of scams across financial markets.
Forex market is gradually becoming more regulated and a simple Google search can help to know how do forex scams work and how to avoid forex scams. The study can help in recognizing scammers and remaining away from those.
While identifying a broker it is important to do research about him and ensure no complaints are registered anywhere against the broker. It is suggested to read all the documents made available by the broker and discuss the course of action before investing money.
There are several websites that list regulated brokers. Hence, it is suggested not to deal with any broker or brokerage firm that is not on the list.
All brokers must be regulated by their regulators in every country that the broker wants to do business with. This is to protect clients from dishonest brokers.
Signs of forex trader scams
Tons and tons of forex scammers are around. They claim to know the industry way very well and can predict the right time to buy or sell currencies. They generally sell trading signals but everything without any authentic proof. Investors should try to remain away from such services.
Not only that, anyone offering financial advice or offering you financial services such as account management must be regulated. Individuals are most certainly not able to hold and segregate client funds – so if someone is offering to hold your money on your behalf.
Tips to Avoid Forex Scams
Industry experts recommend not to fast forward-searching process of a broker. One should consider all the pros and cons before making a decision as finding a professional and scam-free service is easy to find.
However, with the use of relaxed financial advertising and posting fake lifestyle images on social media – people get consumed by what they see and don’t take into consideration any red-flags.
The first factor to consider is to look for real reviews of customers about the service. The reviews should not sound fake.
Secondly, no outstanding legal actions should be there against the service.
Thirdly, investors should keep themselves away from such opportunities that claim more than 100% guarantee in earning from forex.
Apart from all these, if coming down to a decision becomes tough, even after following the tips, it is suggested to seek advice from a licensed financial advisor.
It’s not all doom and gloom though…
Forex scams are highly common these days and sometimes it becomes tough to understand how to avoid these scams. Just above we discussed the types of forex trading scams and how do forex scams work. Now we will wrap up with some important notes:
Never rush while searching for a forex service, whether it’s a broker, education or any other services.
Try to know whether the service is registered and regulated. This is one of the most important factors to avoid getting scammed.
Follow these simple guidelines and add a sprinkle of common-sense, and you will be safe in these markets.