A surprisingly large number of people believe that forex trading is a scam. This is simply not true, at least for the most part. The reason why we say this is because even though you can legitimately make money through online forex trading, the industry has a lot of scams and fraudulent individuals. An unsuspecting trader can easily fall for some of these scams if they blindly trust every forex advert they come across.
With a little bit of knowledge and some sound judgment, you can avoid the various scams on forex platforms and enjoy your share of the 6.6 trillion dollars a day turnover that is only possible through forex trading. Read on to find out what sort of forex scams you should be wary of and how best you can avoid being the next victim.
What Kind of Forex Scams Exists?
Watch out for these common forex scams:
- Robot trading forex scams
- Signal-sellers forex scams
- Multi-level marketing forex scams
- Broker Scams
Risk has always been part and parcel of every form of investment that involves speculation. However, in most cases, a legitimate investment will also give the trader a very good chance of making some profit if they make the right choices.
With a forex scam, on the other hand, you are guaranteed to lose your money because the scam artists and fraudsters are only there to take you for every cent in your pocket.
Robot Trading Systems Forex Scams
A huge part of the daily forex trading volume is controlled by robot traders that scan for and identify good opportunities to make profits among the huge pile of exchange data generated by trading platforms.
While robot traders have a lot of proven benefits, they have also opened the door to unscrupulous online fraudsters. These individuals make a living off selling unrealistic promises to inexperienced traders, using clever wording, fake reviews/testimonials, and other high-pressure tactics designed to convince you that their trading robots will make you rich.
Ultimately, the trader will pay for the fake robot and also end up losing any funds they entrust to this software. If you must rely on software, create your trading parameters or put your trust in legitimate, well-known platforms.
Signal Sellers Forex Scams
How do inexperienced traders or those without the time to do their technical analysis manage to make trades? They purchase what are known as trading signals from firms that specialize in these types of transactions.
In most cases, the trader can choose either weekly, monthly, or yearly subscriptions. However, the problem is that some of these signal sellers do not do any technical analysis at all, so what the unsuspecting trader is buying is simply some randomly generated data that will put them at great risk of losing their money.
It is unwise to rely on the information you have bought from unknown entities whose past performance record you do not know. Many traders still fall for the same scam, though, and as a result, end up thinking all forex trading is fake.
Multi-level Marketing Forex Scams
As with any industry that has a high turnover rate, forex trading has attracted a lot of companies that specialize in multi-level marketing.
What these companies do is that they invite traders to register on their platforms for a subscription fee and in return, the companies will provide educational material, tips, signals, or any other forex-related service.
Once the trader has registered, they are then given small incentives to recruit other traders who will in turn recruit more and more. In this way, the company keeps generating funds through subscription fees while not providing any useful services for the trader.
Eventually, the trader will realize that they have spent more time and money on recruitment drives than they have on actual trading. By that time, though, it is already too late because their subscription will not be reimbursed.
The MLM company will simply move on to the next unsuspecting trader, usually after rebranding to avoid negative publicity.
You cannot trade forex without going through a broker. However, some of these brokers are not what they seem. If you are unlucky, you might land on one of the many unreliable and dishonest brokers that have filled the internet.
These scammers are specialists when it comes to finding ways to take your hard-earned money. From giving you false information to charging you unnecessarily high fees, they know every trick in the book.
The worst kinds of fake brokers are the unregulated ones, that use fake profiles and contact details to make sure that should you seek to take legal action, there would be no way to locate them.
Since you have no choice but to choose a broker before you can trade forex online, the best thing you can do for yourself is conduct a deep background check on your selected broker before handing over any money.
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Fake Forex Funds
Whenever you come across forex funds that guarantee returns in a short period you need to steer clear because they are fake entities. Forex trading is all about speculation, and no one, not even the largest financial institute can guarantee that you will make money on any future trades. If you stick to the proven trading platforms from which other traders are making modest returns, you will safeguard yourself from fake forex funds.
Is Forex a Scam or Legit?
Forex trading is legit only if you put your trust in the right broker or other third-party service providers. The industry is full of scammers but some traders are still making an honest living from trading forex.
With a bit of care and due diligence, you too can avoid the scammers and experience the other side of forex trading, where individuals make a profit from a few good decisions.
How To Ensure You Are Not Scammed When Trading Forex?
Every trader needs to take measures to protect themselves from scammers. The following steps are the best ways to ensure that you are not scammed while trading forex:
- Avoid Any Guarantees - The forex market is always shifting and nothing is ever guaranteed. A currency can be going strong one minute only to take a complete nose dive the next. Not even veteran traders can predict what is going to happen. Anyone who says you are guaranteed to make money is lying to you.
- Do a Background Check - The power of the internet is at your disposal, so conduct background checks on your broker and see what comes up. Brokers will try to show you pictures, charts, and figures that support their claims but you should not pay attention to these. Base your decision on the information you dig up on your own, especially if it comes from other traders who have used that broker before.
- Refuse Unsolicited Marketing - Any broker that is legitimate and has a history of providing good services does not need to go around soliciting customers and using high-pressure sales tactics. This is a sure sign of a broker that is on a mission to recruit traders at all costs, which is something you need to be wary of. Withhold your money and personal information until you are sure you are dealing with a legitimate entity.
What Do I Do if I Have Been Scammed?
Despite your best efforts, you may find yourself the victim of a forex scam. What do you do in that case?
The best thing is to contact the Commodity Futures Trading Commission. If you act quickly, there may be some hope of getting your money back using a bank transaction reversal.
How To Avoid a Forex Scam
Rather than trying to fix things, the best thing you can do for yourself is to avoid forex scams in the first place. Educate yourself about forex trading and the different scams out there. When you finally settle on a broker, make use of the demo trading platform first before diving right in.
There is a lot of potential to make great profits through forex trading, but only if you do it the right way, use the right broker, and avoid becoming the next victim of forex scams.
Using the information in this article as a weapon, you will be better equipped to identify scammers from a mile away.
Forex Fraud FAQ's
How Can You Protect Yourself Against Forex Scams?
Educating yourself on forex scams and conducting a background check on any brokers you intend to register with are the best ways to safeguard yourself from the many forex scammers out there.
What Are the Best Ways To Check on a Forex Broker?
The internet is the best place to get information about a potential broker. Rely more on feedback from other traders rather than all the “evidence” the broker will try to show you.
What Is the Best Way To Avoid Forex Fraud?
Forex fraud usually affects people who fall for the 100% guarantee trick. If you want to avoid being duped, never register with a broker that promises unrealistic profits in a short space of time.
Go for well-known brokers that offer guidance and the necessary tools for online trading while being realistic about the risks involved.
What Should I Do After Being Scammed by Fraudulent Forex Traders?
As soon as you suspect that you have been scammed you should report it to the authorities immediately. Do not engage with the scammers any further as they will only try to take more money from you. Call the Commodity Futures Trading Commission for assistance.
Can You Get Scammed in Forex?
Yes, if you are not careful there is a real possibility of getting scammed when trading forex. However, with proper research and vigilance, you can avoid scammers and only do business with legitimate brokers.
How Do You Spot a Fake Forex?
When you know the signs of a fake forex service provider, spotting one becomes easy. Watch out for unrealistic guarantees, pushy sales tactics, unclear background information, suspicious testimonials, and abnormally high fees.
Can Forex Be Trusted?
Yes, forex is a trusted type of investment that many people not only rely on but make a significant profit from. However, that is not to say all forex brokers can be trusted, because there is surely a large number of scammers out there that you need to be careful of.