The foreign exchange trading world, or forex trading, is one of the world’s largest financial markets. Because of who massive the market is and how many traders take part in it, you can imagine the number of scams that come up.
Individuals and companies find new ways to scam forex traders, resulting in the trader losing a significant amount of money (an example being this Hugosway review of an unregulated company). Although there are many forms of a forex scam, the more you know about them, the better you can spot them.
Here are four points to help you detect a forex scam even as a beginner trader.
Large Profits with Minimal Risk
One of the biggest giveaways that you’re faced with a forex scam is the promise of massive profits with little to no risk involved. That is an untrue statement that can pull in beginner traders quite easily.
The truth is, there is no way to guarantee profits in trade, mainly profits with little risk. Typically, it goes the higher the risk, the bigger the return.
If you come across an offer like this, ask yourself a simple question first: if someone had a strategy that guaranteed a profit with minimal risk, why would this person share the strategy? Remember, if it sounds too good to be true, it likely is.
Using Unregulated Platforms
You would think that your broker and trading platform would be reliable. Unfortunately, that isn’t always the case. There are many shady brokers and companies out there that could ultimately cost you all of your money with forex trading.
When choosing a broker, check to see if the company is compliant with forex trading regulations (this FBS broker review is an example). A trustworthy broker will have no problem showing it’s licensed and follows a regulatory authority.
Broker Provides no Background Information
Unfortunately, not every broker out there is in it for the right reason. If you come across a broker that refuses to provide you with their background information or seems to take a long time to show evidence, take that as a warning sign to run.
Watch for the Signal-Seller Scam
More of a modern-day forex scam is the signal-seller scam. This is when an individual or company offers you a system to identify the best times to trade for a fee (daily, weekly or monthly). They entice the trader to use their system because their recommendations will make them wealthy.
Although you can find legitimate signal-sellers out there, many of them will take your money and disappear. Some may throw out a recommendation now and then to keep enticing you to pay their fee.
These four points are only a few of the potential scams out there and ways to spot them. What makes it difficult to spot scams is how they change and evolve to be more believable. A forex scam often looks legitimate because there are opportunities that are genuine out there.
It’s best to be cautious when provided a forex trading opportunity. Listen to your gut and go back to the old saying – if it’s too good to be true, it likely is.