Scams in the financial markets come in many forms and sizes. Forex scams do exist and they are probably among the worst in the financial world.
Two major reasons explain why Forex fraud thrives today. First, the lucrativeness of this market attracts both good and bad players. The Triennial Survey produced by the Bank of International Settlements estimates daily spot market turnover to be USD 1.65 trillion. Combining this with the amount traded through currency futures and options contracts, the Forex market as a whole has a daily turnover of about USD 5.3 trillion.
When scammers see this mind-blowing figures, they see the opportunity to make lots of money through shady ways. These ways are what every trader should learn to identify to avoid losing their hard earned money while trying to invest.
Secondly, the global Forex market is on the larger part unregulated. Various governmental and independent institutions have been set up to supervise the trading of currencies in individual countries. These include:
However, there is no central body to govern the global currencies market. This leaves accountability loopholes that Forex scammers use to lure traders, especially those who are looking to earn a fortune quickly trading Forex.How to identify Forex scams
Forex scams are propagated by the people and organizations with whom traders have to cooperate in daily Forex trading activities. Keep a hawk eye on the following sources of Forex fraud.1. Dishonest Forex brokers
A Forex broker is the first entity that comes to mind when a retail trader thinks of buying or selling currency. While there are good brokers who treat their clients fairly, a significant number of Forex brokers out there either deal unfairly with traders or operate fraud schemes just to steal clients’ capital and profits.How to avoid bad Forex brokers
Check the broker’s online reputation on Forex brokers review sites. Websites that put the spotlight on dishonest Forex brokers can also help you identify brokers you need to completely avoid. In light of the extensive lack of regulation of the Forex market, it is preferable to work with a broker that also offers services and support for trading other financial products such as stocks, bonds, and commodities. These brokers usually have a license for the other securities and will not risk losing their license by defrauding customers.2. Forex signal sellers
Signal sellers offer information about favorable times to trade a currency pair and charge a daily, weekly, or monthly fee. Usually, they are signal generators are systems that use technical analysis, breaking news, or a form of the two combined to generate trading timing signals. But trading analysts criticize signal sellers’ proposition of providing favorable trading opportunities’. They argue that if a system that helps to beat the market really exists, it would be more painful for the creator to use it and make incredible profits rather than publicize it.Do you still believe that a signal seller can help to trade Forex?
You at least want to avoid scammers by opening a demo trading account with a well-known broker and practice trading with the signals. After some time, you will determine whether or not predictive signaling can work for you.3. Automated trading software
The growing market for expert advisors or Forex trading robots is majorly driven by hyper marketing activity. This market has lately become a fertile breeding ground for fraudsters. Many self-styled automated Forex trading software always makes unbelievable profitability claims as they try to sell them. Some download free EAs, they repackage them and then sell to make huge sums of money.4. Dodgy Forex investment management funds
Forex management funds claim to be operated by highly skilled traders on behalf of a Forex investor who cannot trade himself due to various reasons. These funds promise to offer attractive returns and are compensated with a share of profits agreed beforehand. The tricky bit about Forex management funds is that as a trader you hand your money to a stranger. Often, these individuals hype themselves with unverifiable success records to look like they can really help. Woe to you if you fall to the lure of this kind of Forex scams. You will surrender your capital and get nothing in return as the scammers buy private jets, islands, and yachts.
It is noteworthy that there are good Forex management funds but you would be very lucky to get one. Most of these funds are scams.
There are various ways to identify Forex scams and avoid losing your money. In addition to the above recommendations, check out for warning signs such as difficulties withdrawing money from a trading account, problems with the trading station, and suspicious promotional twist in marketing content for any service provider within the Forex market. The general rule of the thumb is that if returns on any investment sound too good to be true, you are almost certainly dealing with a scam. Avoiding Forex scams cannot get simpler than this.