How to spot and avoid a forex scam

Introduction

Foreign exchange trading or forex trading could be a legitimate way to make money. But, along with that, there are many forex scams on the rise. It is essential to know how to identify a forex scam before engaging in one. In this article, we are going to look at some things to know about forex trading and the scams that come along with it.

Key Takeaways

  • Unfortunately, there are many shady people or companies who will try to scam individuals through Forex trading scams
  • Forex scams have been and will be around for as long as Forex Trading exists
  • The Best way to avoid a Forex Scam is by getting proper Forex Trading education before you start trading in the Forex Markets

What Is Forex Trading?

The foreign exchange market or forex is an over-the-counter (OTC) market that determines foreign exchange rates for every currency in the world. It includes all the aspects of selling, buying, and exchanging currencies at determined or current prices. It is considered to be the largest market in the world.

Is Forex Legit?

Yes, forex is a legitimate endeavor. You can earn profit from your investments. It may take some time or it could be quick, depending on your trading style and the risk that you are taking.

Is Forex A Pyramid-Scheme?

No, legit forex trading is not a pyramid scheme. It does not require traders to recruit more traders to earn more commission or stay in the company. However, lately, we have identified some MLM/pyramid-scheme businesses that base their operations on traders recruiting more traders. This is, however, not how the actual forex works like.

What Are The Common Types Of Forex Trading Scams?

Robot Trading Systems

Robot Trading Systems are one of the most popular trading scams (Not all of them are scams though). The Robot Trading System scammers cheat the customers by promising them to provide guaranteed/money-making on autopilot robot trading systems. They promise to do all the hard work for you by computing technical decisions about your money and investments. They also promise to predict world events and other economic signals that may impact the market.

As we mentioned before, not all forex robots are scams. A legitimate Forex robot consists of a network of Expert Advisors(EAs) which uses algorithms and lines of computer codes as technical signals to open and close trades. If you want to employ a forex robot for your trades, ensure that you first do an online search of popular forex robot scams. If there are signs that the robot trading system is legitimate, make sure to also go through the multiple reviews that you can find on TradingDominance or on other websites. Keep in mind though that not all reviews will be helpful as many people get money by referring customers to the forex robots.

Shady Signal Sellers

Signal sellers are individuals or companies who ask for a fee for their advice. They claim to give expert advice on when to buy and sell a particular currency pair. (Currency pairs compare the value of one currency to another and indicate how much of the quote currency you will need to purchase one unit of the base currency). They guarantee the customer of outperforming the market and ask your money in exchange for this information.

The forex signal scammers collect your money or fee beforehand without providing any information. Even if they give you advice, it is not that useful. It is so because the signal sellers are neither qualified nor experienced to provide you with any advice. Some signal sellers charge even daily, weekly or monthly fees.

All you have to do to identify these kinds of signal seller scams is search their profile online. Be careful of false reviews. A trick to remember false reviews is the number of praises these companies receive. Some reviews can be so flattering that it is too good to be true. Ensure that you read the recent reviews and not the top reviews.

A genuine signal seller will not deny any information about their qualifications and experience.

Multi-Level Marketing Forex Scams

The emergence of Multi-level Marketing (MLM) has increased the multi-level marketing forex scams. These scammers ask their customers to pay a subscription fee or monthly fee in exchange for their forex market’s daily trade signals and educational materials. They will ask members to recruit more new members to receive a certain amount of commission fee. They will lure you into building a network of more new members for you to earn more commission. Some MLM scammers even claim that they will provide you with free trading money as long as you keep referring to them paying customers.

These multi-level marketing forex scams have nothing to do with the forex trading system but to earn money from unsuspecting investors.

Stay away from these kinds of companies. They have nothing to with the daily trade signals and the forex market.

Do not give your hard-earned money in advance to anyone.

Broker Scams

A forex broker is a company that allows you access to a trading platform to buy and sell currencies. To invest in forex , it is required you use a forex broker. They will make more money from you and overwhelm you with broker charges. Any governing body does not regulate these companies. If any of their companies trick you, it will be quite difficult for you to take legal action.

On the other hand, a legitimate broker will provide you with the research of their backgrounds and give due diligence to you as an industry professional. They will also charge fees for their advices, but they will help you understand all the complex market trading topics.

Fake Forex Funds

In this type of scam, a company promises you a guaranteed return on your initial investments. They will entice you by doubling or tripling your investment within a short period. Do not invest your time and money in these investments if it sounds too good to be true because it is probably not.

Instead of wasting your money on these types of unreliable funds, try investing your money in a reputable index or mutual fund, or even try out social trading/copy trading that has a lower risk.

How To Avoid Forex Scams?

The only way to avoid forex scams is to educate yourself in Forex Trading. Knowledge is the key.

Try to get familiar with the forex terminologies and understand the forex trading fundamentals before you invest any time or money. Also, finding a reliable Forex Broker should be at the top of your priorities list. Spending some time to evaluate the many Forex Brokers will benefit you in the long run.

If you are interested in investing, hire a financial advisor who will help you educate you on the forex trading market and systems. Ask your financial advisor to develop a financial plan for you.

Make sure, before you pay for anything are start trading with a broker, that you look online for reviews on trustworthy websites, forums, Twitter and Reddit.

Summary

In order to be ready to invest in Forex, you will need to make sure, before you pay for anything are start trading with a broker, that you look online for reviews on trustworthy websites, forums, Twitter and Reddit.

You should always invest with a regulated broker that is well established and has a decent online presence and positive reviews.

Sources

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