Forex scam

The Forex market is a decentralized market where traders buy and sell currencies. Since trading in the forex market is online based, investors can join this market from anywhere in the world.

The liquidity of this market is very high due to which there is no shortage of currency for trading. There are many more benefits as well. A huge number of investors are involved in the Forex market for these benefits.

A large portion of these traders are newbie. They do not know much about the Forex market but want to invest in this market in the hope of making decent profit.

A class of unscrupulous brokers is pocketing thousands of dollars by targeting such traders. They are tempting new traders by offering high returns. Many traders are falling into their trap and losing their capital. So those who are going to start trading in the Forex market must know about Forex scams.

How to Spot a Forex Scam

There are many ways to spot a forex scam. The easiest way is if a broker offers you a 100% guarantee of income, then you have to understand that the broker is a scam. Because there is no guarantee that you will be able to make money through forex trade.

Brokers usually do not want the clients’ personal information. But scam brokers ask clients for personal information. But in this case you have to be very careful. Do not share your personal information with anyone you do not trust. If it is required to provide personal information, then before passing your personal information, you will have to ask the broker for a risk disclosure document. If everything is ok then provide your personal information.

Legitimate brokers will never limit your withdrawals from your own account held with them. But the scam brokers will prevent you from withdrawing money from your account. When you request a large withdrawal, they will try to delay your request on various pretexts.

There are many more ways to spot a forex scam, such as –

  • Illegal brokers will offer you a huge amount of profit.
  • They will tell you that there is no financial risk in forex transactions.
  • They cannot show live trading data, audited financial statements, and past performance information.
  • Scam brokers have no office locations or contact details. They do not have a valid license.
  • The do not provide any valuable company information.
  • They will show ridiculously high win / loss ratio.
  • Scammers always say they have secret formula.
  • Bad online review
  • Scammers never register with any regulatory authority.

Related Article: How to Read Forex Charts

Types of Forex Scams

Signal Seller Scams

Forex signal sellers are individuals, asset managers or investment account companies who offer different types of advice on buying and selling currencies in the Forex market. They always claim to be very experienced and successful traders.

Signal sellers may show exaggerated testimonials to convince you. They offer huge profits to tempt the average trader.

Since they promise huge profit, you will have to pay high subscription fees to get access to the trades. Sometimes they illegally sell customers’ personal and financial information to third parties.

Some signal sellers offer trading tips if trader sign up through a specific broker. In return they get commissions from those brokers. But most of the time it is seen that these brokers are not good brokers.

You have to remember that scam signal sellers can disappear at any time, so you need to be careful about them.

Point-Spread Forex Scam

Most of the newbie cannot understand this scam. Scam forex broker increases the spread between the bid and the ask price in their favor to make excessive profit.

Automated Trading Programs/Robot Scams

Automated Trading Programs or Robot Trading is an automated trading system through which a novice Forex trader can trade very easily.

This system has been created for the benefit of new investors as they have little knowledge about the Forex market. This system can trade up to several hundred dollars without human intervention.

You must remember that not all Forex robots are scams. Some Forex Robots or Expert Advisors (EAs) are designed to manipulate forex trade.

Scam robots will give you false assurance. They will try to confuse you by presenting unrealistic information. Some forex robots will guarantee you a huge profit which is impossible in forex trade.

Some forex robots follow the scalping system that means they trade for tiny profits. In a short period of time they buy and sell currencies which make their winning rate higher, so that you may think they are wildly successful.  But when the market is not in their favor, they may face huge losses. So you have to be very careful while trading through robots.

Trading Management Funds Scams

There are some forex scammers who offer forex trade management service to new investors claiming to be highly skilled forex trade manager. They try to tempt traders by presenting various types of fake information or unverified results.

When traders fall into their trap, forex scammers ask them to transfer funds to their accounts. After transferring funds, they may disappear or refuse to receive funds.

In some cases it is seen that they open an account with an unregulated shady broker and start trading. After some transactions they wipe out your account. In this case, they blame the volatility of the market. But the reality is that your money gone to their brokerage company.

Crooked Brokers

There are some brokers who serve customers with sincerity but they may not be successful due to the volatility of the forex market. You have to remember that a failed broker does not mean a scammer. You may be harmed for their inefficient forex trading strategy.

But dishonest brokers are those who make money without giving you any benefits. They make extra profit by fooling you.

Unscrupulous brokers do not want to give customers the benefit of price slippage. If the expected price of a trade differs from its actual price, it is called price slippage. It can happen at any time, but most of the time it happens during a higher volatility period. Price slippage is sometimes good for the trader and sometimes bad. The scam broker will share the loss with you but will not pass the profit to you.

The trader has to pay commission to the broker for each transaction. So Scam brokers make unnecessary purchases / sales for higher commissions which cause losses to the traders. Since they are not regulated you cannot take legal action against them.

High-Yield Investment Program Scam

Some investors want to make more profit by investing less. Such investors have very little idea about the Forex market. Scam brokers offer higher profits by targeting these customers.

These brokers launch High-Yield Investment Program where new traders invest in the hope of making more profit.

These brokers will give you high payouts for a limited period to earn your loyalty. But it will not continue for long periods, one day you will see that they have disappeared. So be careful of these programs.

Related Article: Most Appealing Benefits of Forex Trading

How to Avoid Forex Scams

There are several ways to avoid scam brokers. One way to avoid scam brokers might be to start trading on a demo account. Through this you will be able to know about the nature of that broker. You can learn about their strategies and various rules. In addition to trading during this time, you have to monitor broker very carefully. Say goodbye to their service if you find their activities unusual and illegal.

There are many other ways you can protect yourself from scam brokers.

Educate Yourself Before Starting Forex Trade

Before you start trading in the Forex market, you must study about forex market. Learn about the nitty-gritty of this market.

Learn the basics of Forex trading such as brokers, regulators, currency pairs, bid price, ask price, pip, technical analysis and market risk. You need to have a clear idea of ​​what causes the market to rise and fall. Do a study on trading strategies in Bull Market and Bear Market.

You should follow experienced traders. Try to take different advice about the forex trade from them.

Related Article: What is the Forex Market and How Does It Work?

Read User Reviews

This is another way to avoid scam brokers. User reviews are a very important issue. Before opening an account with a broker, you must read the reviews of the users of that brokerage company. Once you read the user reviews, you can easily understand that the company is real or fake.

Do Google to find the review of the respective broker. You will get a bunch of review post on the service of the broker. There are also various forex forums where you can see review about any forex company.

Physical location

You have to remember that all legitimate companies must have a physical location. Legitimate companies have office building and management staff.

But those who are not real companies do not have any physical location. All their activities are online based.

So my advice would be to choose brokers who have detailed contacts. Of course, choose a broker which is located in your own country. It is better not to open an account with a broker which is located in a foreign country. Because you can’t take action against a foreign company.

Only Trade with Regulated Brokers

The real broker must be regulated by a government agency. They are registered company as per government rules.

Registered companies are accountable to the government. So forex trade is safe through them.

There are various authorities through which you can verify the legitimacy of brokers, Such as CFTC (Community Futures Trading Commission). The CFTC was founded in 1974, besides other operations this government agency deals with forex trading.

The Financial Conduct Authority (FCA) is a UK-based consumer watchdog agency that looks after financial matters. They have a database of legitimate Forex brokers. If you want, you can get an idea about Forex Company from that database.

Shun the Opportunities that seem too good to be true

The Forex market is a market from which you can earn and put a lot of money in your pocket and also face huge loss. No one can guarantee that you will win. If a broker’s offer sounds too good to be true then you must avoid this broker.

To be successful you have to invest huge time in the forex market analysis. You have to learn the trading strategies. Then after a lot of practical experience you will emerge as a skilled trader. So don’t trust anyone who guarantees success in the short run.

Terms and Conditions

Before joining the Forex market through any broker, you must check the trading terms and conditions of that broker’s.

In this case, the regulation issued by the regulatory authority should be considered as a benchmark. If you see that there are many inconsistencies and anomalies in the terms and conditions of the broker then it would be better for you to stay away from them.

If you don’t understand these things, you can get advice from a licensed financial advisor. Take the next step as advised by the financial advisor.

Conclusion

The Forex market is a financial market where you will earn profit if you trade carefully and according to the market conditions.

But you have to remember that forex market is unregulated. Each country regulates this market in its own system.

Since there are no regulatory bodies globally, many brokers cheat traders. I hope after reading this article you will be able to identify scammers and also avoid them.

LEAVE A REPLY

Please enter your comment!
Please enter your name here