Forex trading scams refer to any currency trading scheme employed to defraud investors, by making them believe that a particular trading system or technique will yield high profits. So, when someone or a company presents you with Forex trading software or technique with the claim that high profit is guaranteed and that there is no possibility of potential losses, you need to think twice.
As in early 2008, Michael Dunn of the United States Commodity Futures Trading Commission said, “Currency trading is now the fraud du jour”. The New York Times also stated, “the market has long been infested by swindlers preying on the vulnerable”. The Wall Street Journal also commented on the Forex scam, “The average Forex scam victim loses approximately $15,000, according to CFTC records”. We can go on and on with the various publications and statistics on the alarming rate of Forex trading scams. They resound as a warning for you to trade with caution on the foreign exchange market.
Due to the lack of centralized regulation of the Forex market, the investors in this niche are gullible to Forex fraud. Fraudulent activities in the Forex market come in different forms; it could be via a ‘hyped’ Forex trading software that does not fulfill expectations.
How to Spot Forex Trading Scams
As mentioned earlier, currency trading scam comes in various forms. Typically, the Forex scam artists wouldpromise huge monetary profits to a trader on the condition of a lump-sum initial investment. Also, other typical foreign exchange frauds include swiftly-traded accounts to realize high commissions (unscrupulous brokers are culprits to this act). The scam also comes in form of Forex trading software that guarantees massive returns on the funds invested. Another style is the ‘hyped’ and false Forex investment advertising with non-existing platforms (in reality).
It is common knowledge that the foreign exchange market is highly volatile, thus bringing with it favorable trades sometimes, and unprofitable trades at other times. So, if anyone promises you profitable earnings at all times even with the best Forex trading software, you should be alarmed. The genuine high-tech and best Forex robot will still reflect a percentage of uncertainty (about 5-10%). So, do not be deceived by ‘all-time profitable earnings’ ads and claims, it doesn’t exist. In fact, such things are red flags to Forex trading scams.
Also, we stated earlier that FX scam could come in form of brokers’ commission when a broker increases commissions illegally by churning through the client’s trades. You should target a broker whose reputation is unquestionable. You can determine such reputation by researching the broker’s past records to date. Also, see what reviews users are leaving behind for the broker (not self-crafted reviews).
You should also watch out for retail currency trading brokers that recommend the very large positions to traders without a backup capital initially. Investors who fall prey to such retail brokers will risk high leveraging and may be asked suddenly to fork up funds when losses arise.