To start trading in currencies, you need a Forex Broker. Forex Trading is one of the best ways to make big amounts with little investment. However, the largest financial market has many forex broker scams. So it might be possible that you are dealing with Scam forex brokers. Read this article to know more.
What is a Forex Broker Scam?
Forex broker scam is a well-designed fraudulent activity carried out by a trading platform or company. These companies act as legitimate Forex brokers to take advantage of new traders.
These forex scam brokers use attractive sales tactics to attract traders, make big promises of guaranteed returns, and provide untrue information to convince a trader to invest. Their main motive is to make money by fooling traders.
Unregulated forex brokers are a major part of the forex market scams. It is difficult to distinguish them from regulated brokers because they look like real brokers. They are also active on social media platforms and have a well-maintained website.
Can a forex broker steal your money?
A regulated forex broker will not steal your money. However, the unscrupulous Forex brokers take advantage of beginners’ lack of market knowledge and experience and steal money in different ways.
A quick glance
Forex broker scam is a well-designed fraudulent activity carried out by a trading platform or company.
A regulated forex broker will not steal your money. However, the unscrupulous Forex can steal money in different ways.
- PAMM Accounts scam
- Fake trading platforms
- Withdrawal Restrictions
- Robot scams
- Forex Signals Scams
- Unrealistic Leverage scams
A trader can report the forex brokers’ scams to different regulatory bodies. Learn the steps to report.
Types of Forex Broker Scams
Scam brokers’ Forex came in different ways. Sometimes individuals claim to be regulated companies and use false information to lure traders; sometimes, unregulated companies work as scammers. As these are unregulated firms, they have nobody to answer for their activities. Have a look at the Forex broker scams list.
PAMM Accounts scam: Under the Percentage Allocation Management Module, the broker is responsible for making investment decisions on behalf of the investors. Some brokers use these accounts for scams. They created a website to make people invest.
After collecting many client deposits, they close the site or run away. Forex trading is over the counter, which means all the trading is done on the Internet. An investor is left with no option to find them.
Forex trading pyramid scheme: One of the most common scams in Forex Broker Scams is a pyramid scheme. Under this scheme, the company presents itself as a broker but collects deposits from traders.
These companies lure investors with an attractive scheme that promises high returns on small investments. Under this, they urge new traders to join and pay an entry fee for services.
To generate high income, beginners invest their money. However, the brokers use funds from new investors to pay returns to existing investors rather than making money from forex trading. At last, the majority of investors lose their money.
Fake Trading Platforms: Forex brokers scammers use their website, landing page and social media platform to lure traders. It includes fake reviews and previous performance, untrue information about regulations, use of wrong trading signals and charts.
In simple words, they manipulate their trading platforms and make it difficult for traders to earn money by providing complex information.
Withdrawal Restrictions: Another red flag to identify is your forex broker, a scam by withdrawal restrictions. Some Forex brokers’ platforms use regressive restrictions and impose unreasonable fees on traders willing to withdraw their money.
If your broker is making excuses or bringing policies at the time of withdrawal, then there are chances of it being a scammer.
Robot scams: Another common scam in the Forex scammers list is Robot scams, which is fraud by using artificial intelligence. Various legitimate Forex Brokers use automated trading tools for accurate results. However some use technology for scams.
Under this, robots advise false data claiming big returns with no effort and low risk to the traders. So traders must be careful before trusting automated software that claims unrealistic returns.
Forex Signals Scams: The forex brokers providing trading signals with 100% accuracy or even 90% are fooling you. No expert or software can predict the forex market with 100% accuracy. Even after using the most trusted and reliable Forex signals, there are chances of loss.
It is necessary to check the accuracy and reliability of forex signals. If your forex trading platform makes such unrealistic claims, they are scammers. That’s where a little investigation can save you from big losses.
Unrealistic Leverage scams: Leverage is one of the best ways to invest for small traders. It allows traders to open large positions with small account balances.
However, some broker forex scammers offer unreasonably high leverage levels to attract traders, such as 3000:1. They make promises of big profits with little investment. A trader needs to remember that the amount of risk depends on the profit.
How to identify a Forex broker scam
We have learned about Forex Broker scams. The best part about Forex Trading is you can find out about the scam with little enquiry. A trader needs to check the following factors before putting their money.
Regulation: The most important factor is regulation. It is advisable not to invest with unregulated brokers. You can find broker regulations on its site. It is important to check it with the regulator.
Forex traders also need to check the reliability of the institution by which the forex brokers are regulated. As some forex broker scammers use the name of such institutions which do not have the authority to provide regulations.
Unrealistic promises: Forex scammers use guaranteed return, no risk in investment and other sales tactics to attract traders. However, a trader must remember that there are no such things in trading.
Risk is part of the Forex trading business. So these kinds of fake promises are used by scammers to steal money from clients.
Dubious Rating: Many websites and rating platforms provide fake ratings of the brokers’ platform. To check the reliability of the rating, you can search your broker on blacklist brokers or check its client reviews.
Unclear communication: A regulated broker presents all the important instructions on their website. However, in the case of scammers, there is a lack of transparency.
Effective communication is the key to reliability. You will find a lack of transparency, contact information and a complex price structure on scammers’ websites. You will also find a warning or disclaimer on these trading platforms.
These position trading strategies are formulated on the basis of technical and fundamental analysis of position charts. These are formulated by keeping the economic and social factors in mind that directly or indirectly affect the forex market. One can use these strategies not only in forex but also in all financial markets like stock and crypto.
Scalping Strategy: Scalping Trading Strategy is formulated in order to earn profit from small price changes. It is generally for beginners. Under this strategy, the number of trades is comparatively large, and the gain to the individual is very small. A small profit is generated by opening and closing multiple positions in a day. The main aim of scalping is to make a large number of winners with small profits and not a few successful trades with large winning profits. The formulation of scalping strategies is based on the idea of lower exposure risk, large numbers of winners, and a small amount of profit.
Trend trading strategies: With the name, it is clear that these are the strategies that are formulated on the basis of the ongoing trends in the market. In other words, these strategies enable an FX trader to identify the movements or trends in the market and take advantage of these movements. These strategies are formulated on the basis of technical and fundamental indicator that gives a trader the right idea of buying or selling a currency pair due to change in market trends. A trader analyzes the historical and market movements to predict the future of a currency pair. For example, the price of company stock first increases by 50p, then decreases by 25 p, increases again by 100 p, and then decreases by 50p. So a trader can predict that the price of the currency will increase in the future.
Hedging Forex Trading Strategies: It is a process of opening additional positions to protect oneself against adverse movements in the FX market. In other words, hedging forex offsets the risk of changes in price in order to reduce exposure to currencies from other positions. Traders use hedging forex strategies in order to safeguard their interests against changes in the exchange rate. Hedging strategies are the risk management strategies frequently used by forex traders to reduce the possibility of loss. Under this, a trader selects two correlated currency pairs. For example, EUR/USD and GBP/USD trade in opposite directions. In this case, if a trade occurs loss from the first, he can settle it with the profit from the second currency pair or vice versa.
Bounce or Break spot Trading Forex Strategy: When a forex trader takes reference from the past for future forex trading is Bounce or Break spot strategy. When a forex trader believes that the levels that were important in the past could be important in the future, then he will place the order according to past experience. If a trader believes that a market has dropped to a level, then it will be bounced back and feels that it is a great time to buy the pair. The strategy is called as Bounce or break spot strategy.
Range Trading Strategy: Under this trading strategy, a forex trader can identify the ranging position in order to trade more effectively. A trader identifies the support and resistance points of the market and places trade accordingly. The range position or points are identified on the basis of Technical analysis tools. These positions can be used in prediction with the Price Action trading strategies to predict better. These strategies are best to reduce the risk and identify various trading opportunities. However, rapid decision-making ability is required for placing the order at the right time on the basis of range positions.
Swing trading: It refers to the strategy that takes oscillations into consideration for the generation of profit. The traders will seek opportunities within a time frame. Under this strategy, a trader aims to earn profit from a small part of a longer trend within. It is a medium-term trading style; a trader tries to earn profit from price swings. Under this process, a trader has to hold a trade for several days at a time. Swing trading can be done in two ways day trading and position trading.
Day Trading Forex Strategies: A Day trading forex strategy refers to the process of buying or selling position within the trading day. Under this process, a trader opens or sells a position within a single day’s trading on the basis of small price movements. A trader only takes a day to open a position and close it when the day is over. It is the best strategy for those traders who have enough time throughout the day to monitor, analyze and execute a trade within a day.
Counter trend Trading strategy: With the name, it is clear that under these trading strategies, a trader trades in the opposite direction. Under counter trading, a trader determines the overall trend and trades in the opposite direction of the trend. It is a risky strategy as it is based on the idea of finding out the trend and waiting for the trend to reverse before placing your order.
How to report a forex broker scammer?
If a trader becomes a victim of forex brokers’ scammers, he can report the incident by following these steps.
- In countries where Forex trading is legal, some regulatory bodies regulate the trading and monitor Forex brokers. You can find the information about regulations on their website. The foremost step is to inform the regulating authorities.
- Suppose you have invested your money through banks, debit or credit cards. In that case, you can recover your money by filing a complaint to that particular financial institution.
- If you have opened an account with a renowned Forex Broker, then file the complaint to them directly. A big broker will act on your complaint to save its reputation.
- If you believe the forex broker platform has committed a criminal offence, file a case with the appropriate law enforcement agency.
- If your broker is unregulated, then the most you can do is post a bad review about your experience on social media and review sites. Therefore it is important to trade with a regulated broker, so in case of scam brokers’ Forex, you go ahead with the above steps.
Forex Trading is a legitimate process. Thousands of traders make money in the Forex market daily. However, scammers’ presence in the form of brokers makes trading questionable.
Like any other financial market, you can invest money in currencies and make profit from its fluctuations. However, it is essential to choose a regulated broker to remove the possibility of a forex broker scam.
In your journey to becoming a successful trader, conducting research is necessary before selecting a broker. Read the customer reviews, analyze the social media platforms and website, check pricing policy, stay away from unrealistic promises and check the regulations to select the best forex broker.