Planning to participate in forex trading? Have you researched it? Have you checked alpha and beta in finance? Here is a comprehensive guide to forex trading for your understanding of it.
Forex trading is a broad industry that provides users with global exposure. These markets are supervised by rules that limit and control the use of deceptive brokers. Despite the enormous industry, forex scammers continue to con traders and operate their businesses.
This article can help you if you’re new to forex trading and aren’t acquainted with how these scams operate. Learning about such scams, on the other hand, is just as important as understanding how the currency market operates; just as the proverb goes, prevention is always easier than cure. While it’s admirable that you’re trying to learn about the many forex scams, it’s also smart to be aware of forex scam recovery organizations that can help you get your money back. These businesses aid in the recovery of funds by completing early assessments. Gathering proof and dealing with corrupt practitioners are the following stages. On behalf of their victims, these companies go to tremendous efforts to reclaim money from scammers.
Following is a guideline about forex scams that will surely help you along the way.
Table of Contents
What is Forex Trading?
The foreign exchange market, sometimes known as forex or FX, is a global market where national currencies are exchanged. Foreign exchange is the process of converting one currency into another for several reasons, most commonly for trade, tourism, or commerce. Because of the global reach of commerce, business, and finance, forex markets are the world’s largest and most financial asset markets.
Types of forex scams
Unlicensed broker
A forex broker must be licensed and registered by a regulatory authority in the country he is operating from. For example, the broker should be registered by Financial Conduct Authority (FCA) if he is operating in the United Kingdom; by Cyprus Securities and Exchange Commission (CySEC) if the broker is operating in South Africa, etc. Some brokerages are multi-regulated and this makes them more trustworthy. Brokers like AvaTrade or eToro have licenses from different regulators.
While some reputable forex brokers have a track record of being highly regulated in several jurisdictions, the majority of brokers are not licensed by any regulatory authority.
Unlicensed brokers run brokerage firms and provide trading platforms to the general public, and when a trader deposits funds, he won’t be able to withdraw them.
Signal sellers
Scams today are inventive and sophisticated. The signal-seller is a common forex con. To generate good money, they advocate buying or selling currencies. These services are exchanged for fees that are paid on a daily, weekly, or monthly basis. They claim to be able to provide you with expert advice to help you become wealthy.
Furthermore, they highlight their trade abilities, considerable expertise, and excellent user ratings. The Broker is outstanding at what they do, according to the sponsored reviewers, and transforms your life with a quick income. Even though this is not the case, traders are drawn to the image of stability in a chaotic market.
Many of these signal-sellers defraud an inexhaustible number of traders and then vanish. They may even assist a trader in making money at first to maintain their trust or get them to invest additional money. Since its inception, the scam has been spreading like wildfire. Not all signal dealers are unscrupulous; some provide excellent service. To guarantee that the signal-seller is genuine, a trader should undertake a background check.
High Yield Investment Programs
High Yield Investment Programs (HYIPs) such as Ponzi and Pyramid schemes collect resources from the unknowing public to participate in forex trading or other investments with the promise that the profits will be shared among all donors. They work in the same way as funds, gathering capital to invest on behalf of clients. They also guarantee very large profits and begin paying out payments to the first contributors.
Ponzi schemes entice victims by recirculating money received from early contributors and using it to pay subsequent contributors, giving the impression that the program is real. Investors are tempted to put more money into the scheme when they see their investment rise.
A forex company with a trading platform is commonly involved in forex pyramid schemes and multi-level marketing (MLMs). They are using the pyramid strategy to attract traders to recruit more of them to their platform. The individual at the top of the pyramid recruits two people who will be below him on the pyramid. The pyramid continues to rise as the two people below him recruit three more people. Every time someone is hired, the person at the top is given a commission, and so on. The higher up the pyramid you are, the more profit you will receive.
Guaranteed bonus
Forex markets may be extremely volatile, and margin trading carries a substantial risk of loss. That is why major regulators require brokers to post risk statements on their websites to advise potential traders about the risks involved in trading FX and CFDs.
If a broker is spotted promoting bonuses such as a $50 bonus on account opening, risk-free trading, or 80% returns on acquiring trading signals, this is a red flag.
These claims of rewards are merely red herrings designed to divert the trader’s attention away from the required due diligence. Most major regulators forbid brokers from making any offers.
Spotting Forex scams
Lack of background information
It’s fairly easy to find images of profit charts on the internet. Scammers are astute, and they will only show gains rather than losses over time. In the worst-case scenario, they may even display charts from demo trading accounts that do not reflect real-world trading. Do not choose to work with someone or buy a product based on any incomplete information. Request background information as well as a complete accounting of earnings and losses. It’s most likely a con if they refuse or remain unclear.
Unprompted marketing
Unprompted and relentless marketing is usually indicative of deception. It’s probable you’re being fooled if you’re being persuaded to acquire an item or brand with very little information or time. If they start asking for private details that could be exploited for things like identity theft, be warier. Avoid it if it makes you feel uncomfortable or invasive.
Social media advertisements
Scammers are actively using social media to advertise fake investment opportunities. To entice buyers to invest, they commonly use photos and videos of high-end items.
Avoiding Forex scams
- Ensure that the broker is regulated, although regulation alone does not imply a scam, it is better to be safe than be a victim of the scam.
- If the broker offers rewards upon opening an account on them, then it is a big red flag. Genuine brokers do not offer any such rewards.
- If the broker also promises guaranteed results, then do not approach the broker. Forex is a volatile platform, no one can predict or guarantee any results.
- Check for the platform’s headquarters and its history.
- Do not fall for flashy websites, they are just mere deceptive schemes and nothing else.
Conclusion
When seeking ways to generate extra money through FX trading, you may run across a few con artists. As a result, it’s critical to conduct thorough due diligence and study before entering the market such as scams, their types, how to identify scams, and how to avoid them if you come across a forex scam.
