Forex is the largest financial market globally, with a daily transaction volume of $6.6 trillion. Knowledgeable forex traders make millions of profits, but the market is notoriously unpredictable, and the profits are not guaranteed.
As a new trader, you have a lot to learn about the market, including the increasing number of forex scammers who lure traders to fraudulent schemes. Forex is not a scam, but fraudsters set fake websites to steal from unsuspecting traders.
Luckily, you can avoid most scams and trade a wide range of foreign currencies by working with a licensed forex trading broker. Read on to learn more about forex scams and how to avoid them for a smoother trading experience.
How to Identify Forex Scams
Online trades involving huge amounts of money are prone to scams, and the forex market is not an exemption. While most websites and brokers are legit, you may come across criminals looking to steal your hard-earned investments, so you should be keen.
Here are the main tell-tale signs of forex scams to avoid getting caught off.
Aggressive Brokers
Legit brokers are not aggressive and will let you decide once they approach you. An aggressive broker who constantly pushes you to invest or contacts you every time may have some hidden agendas. Progress with caution or avoid them completely.
Exaggerated High Returns
There is no doubt the forex market is profitable, but there is no 100% guarantee for the same. A broker promising excessively high returns within a short time may be a fraudster. The forex market is highly volatile, and you may not always receive returns quickly.
Unsolicited Offers
It’s a red alert when someone keeps texting, calling, or emailing you about a lucrative forex opportunity. The person may go ahead and collect your details, then use them for malicious activities. Don’t give your details or even money to strangers.
Social Media Adverts
Most forex scammers use social media to post luxury cars, mansions, and other convincing adverts to show how rich you will become if they help with your trade. Some may be legit but be warned of exaggerated social media adverts.
Time Pressure
Some scammers pressure you to invest within a certain timeline, indicating that this is the best time to secure the most returns. Some scammers may even offer discounts to make sure they lure you. Avoid them!
The Main Forex Scams
Here are the main forex scams to avoid:
Forex Robot Scams
A forex robot is an algorithm set to trade for you automatically when you are busy and can’t access the trading platforms. A legit trading robot is tried, tested, and even reviewed before it trades for investors. Some fraudulent brokers may use fake robots to steal investors’ money. Carefully research your broker’s trading robot to avoid losing your hard-earned money.
Forex Broker Scams
Forex brokers guide and help traders in the highly volatile market. However, some brokers are fraudsters and only exist to lure and steal from unsuspecting people. Ensure the broker you deal with is registered and licensed before you trade with them. Check customer reviews, and confirm that vital contact details are outlined on the broker’s website.
Forex Ponzi scheme
A Ponzi scheme is an investment scam that makes money for earlier investors using funds from recent investors. The fraudsters ask investors for a small investment that they claim will yield more after inviting friends, relatives, and other people.
Eventually, the scammers run away with the money when the investors become many. Avoid a forex broker who promises more money when you bring in more people.
Signal Seller Scams
Some scammers promise to sell signal details with up to 98% success. These signal scams could be about currency pairs or target levels. The scammers then ask the trader to pay a certain fee or subscription charges to get timely alerts on when to trade.
Most signal sellers target inexperienced traders who are in a hurry to make profits, and they often disappear after milking your money.
Managed Trading Accounts
Some forex traders opt for managed trading accounts when they are too busy or lack trading skills. The account manager trades on their behalf and charges a small fee for the service.
However, some capitalize and take advantage of this arrangement to run away with clients’ money. If you need a managed trading account, do background research on the manager to ensure you work with a legit person/company.
How to Avoid Popular Forex Scams
Here are a few personal protection tips to ensure you have a safe experience trading in the forex market.
- Don’t give personal information to a stranger
- Don’t rush trading decisions. Take time to research the market, and find reputable brokers to work with
- Avoid opportunities that seem too good to be true
- Understand there’s nothing like risk-free investing in the forex market
- Avoid time pressure for money transfer
- Only work with licensed and registered brokers
Summing Up
To trade currencies, you should understand the market basics, the risks, what to expect, and the possible scams. Find a reputable broker to guide you, and start with a demo account as you continue to perfect your skills.
