Every novice or advanced trader must have suffered from currency trading scams once in their career. Scams have become an unavoidable part of the forex market. That is the reason why many traders are scared of entering the currency market.
The advancement of technology has made forex scams unidentifiable, especially for new traders. Thus, in this blog, we will have a detailed study of Fx scams and tips to avoid them.
An Introduction to Foreign Exchange Trading Scams
Forex Scams are fraudulent activities organized in the currency market to fool traders and steal their money. Such scams are of a different nature, but the goal is common: lure traders and take advantage of their innocence.
In the forex world, traders enter the market with the aim of making money from money. The zeal of becoming a millionaire in one night and lack of market knowledge make them susceptible to Fx scams.
Fraudsters know the pain points of forex traders very well. They lure traders with unrealistic discounts, offers, and bonuses. Ultimately, traders become victims of such tactics and end up losing money. Therefore, knowledge of such activities and how to spot and deal with them is necessary.
6 Most Popular Forex Trading Scams
The Foreign exchange market is the largest financial market, with participants from all around the world. Thus, trading scams come in different forms and natures. To help you in identifying the scammers, here is a common forex scammer list:
FX Signals Scams
Forex trading is the process of predicting the rise and fall of a currency pair and making the buying and selling decision accordingly. Identifying trading opportunities requires market knowledge and hours of watching charts and news.
Not every trader has the time or skills to predict the dynamic foreign exchange market. Thus, in such scenarios, they look for forex signals. Forex signals are trade alerts suggesting to buy or sell a particular currency pair at a specific time.
Such alerts are beneficial for traders, and there is no harm in using them. However, problems arise when the signal provider is not trustable. Many fake and fraudulent signal providers in the market charge a big amount and sell false signals.
In some cases, they charge money and share copied signals from Telegram groups. And, if a trader places a trade based on such services, they can lose the entire capital.
A quick glance
Forex Scams are fraudulent activities organized in the currency market to fool traders and steal their money.
- FX Signals Scams
- Forex Automated Software Scams
- Ponzi Scam
- Forex Broker Scams
- Social Media Trading Scams
- Fund Manager Scams
A Ponzi Scheme is a common trading scam where the scammers pay the return to the old investors from the capital of new investors. Once they have collected a big amount or when there is no new investor, the scheme collapses.
- Stay Informed
- Never go for unrealistic returns
- Check regulations and license of a firm
- Don’t become the victim of aggressive sales tactics
- Analyze customer reviews and reputations
Forex Automated Software Scams
Have you ever heard of automated trading software or robots? Automated software is an algorithm-based system that helps traders automate their trading. This system can identify trading opportunities and place trade on traders’ behalf.
But technology has both pros and cons. Today, this automated software become a way to steal money from innocent traders. Many Forex scammers in the market sell automated software and robot advisors at whopping prices to traders. Once a forex trader pays a good amount to such scammers, either the scammer escapes or sells a useless automated system.
Ponzi or Pyramid Schemes
Ponzi schemes are well organized and amongst the most common currency trading scams. Under this, traders or investors are asked to invest a good amount of capital, promising high returns with no risk.
The scammers pay the return to the old investors from the new investors’ capital. Ultimately, scams collapse once they have collected a large amount or when no new investor exists. With all the capital of the traders, these kinds of scammers elope.
Forex Broker Scams
Traders are required to open an account with a forex broker platform to get access to the market. A broker provides traders with many facilities and services to trade.
Traders need to deposit capital with the broker platform to start trading. However, in the financial market, many unregistered brokers are operating. With such scam brokers, traders’ money is unsafe. In addition, such a broker does not follow the rules and guidelines to protect the trader’s interest.
Scam brokers ask traders to deposit more and more money. Also, the withdrawal policy with scam brokers is restrictive, and traders lose control of their money. So go for reputable forex brokers for safe trading.
Social Media Scams
In the digital world, every person has accounts on at least two to three social media platforms. Connecting people through these platforms has become quite easy. As a result, many forex scammers use these platforms to conduct fraudulent activities.
Such scammers create fake websites and social media profiles. They target novice traders and lure them with unrealistic offers. Due to a good profile with huge followers, traders pay a big amount to such scammers.
Fund Manager Scams
Fund managers are professional traders with great market knowledge. These people trade and invest with their clients’ money to help them stay profitable. Such managers charge investors a commission for account handling.
Generally, big investors or traders with good capital go for the fund manager. However, in the name of fund managers, many currency trading scams are running in the market. Such scam advisors engage in high-risk trades to make big commissions.
Tips to Avoid Forex Trading Frauds
Traders generally face problems in identifying currency trading scammers. Some traders even think that forex trading is a scam. But that’s not true. Forex is a legitimate career option.
However, scammers present in the market raise questions in traders’ minds. So here are some tips to spot and identify forex scams:
Stay Informed
It is true that scams have become quite common in trading. However, identifying such scams is not as difficult as you think. What forex scammers are doing is taking advantage of traders’ lack of knowledge.
A little research can save you from big forex scams. A trader needs to stay aware of common tactics scammers are using. Also, just ask some questions when someone reaches out to you to sell trading-related services. A scammer will try to disconnect or avoid the conversation in such cases.
Never go for unrealistic returns
Scammers know the psychology of new traders very well. Almost every trader comes with the expectation to get rich quickly in the market. And scammers take advantage of such a mindset.
They lure traders with unrealistic offers like a 100% profit guarantee, zero-risk trading, no commission trading, etc. But think first: how can someone give you a profit guarantee, or why will a platform provide trading services for free?
Check regulations and license of a firm
Trading in forex or any other financial derivative involves a significant amount of risk. Therefore, a firm dealing with forex products needs to have a proper license.
In addition, government and financial authorities framed some guidelines, and firms need to follow them. Remember, if you are dealing with an unregulated firm, then in case of scams, nobody can help you.
So, to avoid currency trading scams, trade with a regulated firm. You can check the firm’s regulations on the platform’s official site. In addition, read the terms and conditions and risk disclaimers before subscribing to the services.
Don't become a victim of aggressive sales tactics
The biggest red flag with a forex trading firm is aggressive sales tactics. Everyone in the market wants to make money. Obviously, every firm will try its best to make you subscribe to its services.
However, problems arose when they started using aggressive sales tactics or pressuring clients to deposit more funds. So, if you spot high-pressure sales tactics, then you should avoid such platforms.
Analyze customer reviews and reputations
Whether you are buying signals, opening a trading account with a forex broker, or subscribing to any other trading services, you should first check the platform’s review.
Go to different review sites and search about the platform to read previous customer reviews. Also, check the official website and social media pages, as well as the address, regulations, and fee details. Don’t go for it if you find many negative reviews or a lack of transparency.
Bottom Line
Undoubtedly, the world of foreign exchange is the best place to invest your money. However, like any other financial market, scams and fraudulent activity are increasing.
And, if you become a victim of these currency trading scams, then instead of making money, you will end up losing the money you have. So be vigilant, embrace knowledge, and stay aware of what ill practices are going on in the market.
Before subscribing to any trading services or depositing your money, organize proper research, check customer support, and try dummy trading services. If everything looks good, then start with a small amount.