Spot and protect yourself against forex scams to avoid losing money
The Forex market is a huge, global financial market. It has been around for more than 30 years and it is one of the most liquid markets in the world.
The Forex market has no central exchange or clearinghouse and it operates 24 hours a day and five days a week. The Forex market can be traded online or over-the-counter (OTC). The OTC market is estimated to account for about 80% of all transactions in the Forex market.
Forex scams are a problem that is getting worse. It has been estimated that 50% of all unregulated forex brokers are involved in fraudulent activities, with more than $150 billion in investor funds vanishing in the last two decades.
The truth is the Forex market while growing nearly 300% in the last decade, remains largely unregulated and, as a result, has become home to some of the most egregious fraud cases ever experienced.
Forex scams come in many forms, some are more obvious than others, but all have one thing in common: they take your money and give nothing in return.
What Are Forex Scams?
What Are Forex Scams? What do they look like?
Forex scams can be defined as any fraudulent scheme that involves the trading of currency. These schemes are often promoted by unscrupulous brokers who offer financial advice and tips on how to make money with forex.
They will often claim that they have developed a unique trading strategy or secret software that can predict market trends with complete accuracy.
Forex scams can be broken down into three main categories:
1) Forex platforms that are not regulated or licensed by the authorities. These platforms often claim to offer higher returns than other brokers and attract traders with their low trading fees. The problem is that these platforms are not regulated and do not have to follow any rules, which means there is no way for you to verify if they are legit or not.
2) Forex sites that use stolen money from other users’ accounts or credit cards without their knowledge. These sites copy other legitimate forex sites but replace them with fake ones after taking over the domain name and email addresses of previous users. They then proceed to advertise these sites as genuine so that they can lure more users who will deposit their money into these accounts thinking they are real ones.
3) Ponzi schemes – where new investors are used to pay back old investors so that they can get their money out of the scheme faster than expected (which never happens).
How Do They Work?
Forex scams can take many forms; however, some common characteristics include:
Advance Fee Scams
These scammers will contact you through email or phone and claim that they are investment brokers who want to help you make money on the Forex market.
They will ask for a fee in order to invest your money into their company and tell you that if you pay them now, they will double it in 60 days (or some other time period).
The reality is that these people do not have any money or assets; they simply take your money and then disappear with it.
One of the most obvious signs of a scam is high commissions for investors. This is because brokers who are not actually involved in the business of trading currencies often charge high fees to cover their own expenses (such as marketing).
If you have been offered a high commission rate from a broker, then it is worth investigating further before entering into any agreement with them.
Another common characteristic of forex scams is high returns on investment. Brokers may claim that you will be able to earn up to 70% or 80% per month by trading currencies; however, this cannot be achieved by anyone who is trading without leverage and without risking their own capital.
You should always check these statements against historical data before proceeding with any investment.
Fake News/Press Releases
Fake news releases are used by scam artists to create hype around their products or services. These fake press releases appear legitimate at first glance but once you read through them closely you’ll see that something doesn’t add up.
This is because these fake news releases have been created by scammers who want to make themselves look good so that you will invest your money with them.
The best way to protect yourself from this type of scam is to avoid reading any press release that comes from an unknown source or company. If you feel like a press release has been sent out without authorization from the company behind it then it’s probably best to avoid it.
The “too good to be true” scam
This is one of the most common scams in forex trading because it’s easy for scammers to use false information about a company or product to lure in unsuspecting victims. In these cases, scammers will claim that they have software that can make you rich with little effort on your part.
They’ll say that this software is so powerful that even professionals use it to trade.
But often these claims are false, and no such software exists! This is why it’s important to do your research before investing in anything new or unfamiliar – especially when it comes to money. If something seems too good to be true, then it probably is!
The “secret formula” scam
Another common scam involves promising access to a secret formula that will allow you access to buy low and sell high every time without fail.
Again, this kind of claim is almost always false! No single formula exists that can guarantee profits.
These scammers offer you the opportunity to become an investor in a company that sells lottery tickets online. They may also tell you that you can earn money by referring other people to the site.
In reality, these sites are all scams meant to trick you into giving up your personal information so that they can steal your money or sell your identity to other scammers.
1. Check for hidden or monthly fees: Avoid forex brokers who charge fees that are not listed in their contracts. Some brokers have recently added maintenance or holding fees that they don’t explain upfront, and some will switch your account into a different fee structure without your permission if you fail to maintain a minimum balance. When opening an account, it’s important to make sure you know how much each trade will cost as well as whether there are any maintenance fees in place. It’s also smart to check on any other potential costs such as transaction fees, rollover rates, and taxes.
2. Ask about leverage rates: High leverage rates can be tempting but they can also put you at risk of losing more money than you can afford to lose. You should only use margin when you’re confident enough in your ability to predict where prices are headed so that you can sell at just the right time before losses start piling up. Before signing up with a broker, ask about what type of leverage is available (and what kind do they recommend) and how much margin is required for each trade size.
3. Beware of guarantees: If a broker claims he has developed the perfect system or offers guaranteed returns on investment, runs away! There is no way to guarantee profits in trading.
4. Check out customer reviews: While most brokers offer demo accounts for practice trading, you should never rely solely on a demo account to determine which broker is best suited for your needs. Instead, research customer reviews from reputable sources like independent blogs and forums. Look for negative reviews that may point out problems with withdrawals or issues with customer service representatives.
5. Make sure it’s regulated: A lack of regulation doesn’t necessarily mean a forex broker isn’t legitimate; however, many scammers try to fly under the radar by setting up shop overseas or operating outside government oversight entirely—which means investors have no one looking out for them if something goes wrong.
6. Don’t invest more than you can afford to lose: Trading foreign exchange markets involves significant risks, including complete loss of capital. This makes leveraged trading strategies particularly risky. Before investing in any foreign exchange strategy, read all information carefully and consult with a licensed financial advisor if necessary.
How Can You Spot A Scam?
- Sign up bonuses that are too good to be true;
- High-pressure sales tactics;
- Unethical business practices such as bait-and-switch advertising, price-fixing, or collusion among market makers;
- Deceptive advertising (i.e., Penny stocks that double in a day);
- Reversals or cancellations of withdrawals;
- Unofficial websites claiming affiliation with official brokerages or regulators;
- Complaints against traders who have been acting on inside information or engaging in unlicensed activity;
- Promises that you can consistently make money regardless of market conditions, i.e., guaranteed high profits;
- Unrealistic promises about your potential earnings. If something sounds too good to be true, it probably is.
How To Protect Yourself
The best way to protect yourself against scams is by being aware of what to look out for. Spotting a forex scam requires that you understand how these types of frauds are carried out so that you can recognize one as soon as it appears.
Here are some common warning signs of a fraudulent forex trader or broker:
1. They ask for your bank details before trading has begun
The scammer wants access to your bank account so they can steal money from it. They will claim that the reason they need your account details is so that they can deposit money into it – but in reality, it will be their own money which they will withdraw when you least expect it.
2. They want you to invest more than you can afford
Scammers know that if they get you hooked on trading, then you’ll keep investing more and more money – which means more profit for them. However, if you don’t have enough money in your account then there’s no way for them to make a profit from their scamming efforts.
To avoid this problem, always only invest what you can afford to lose!
3. Unprofessionally designed website
If you see a website with poor design or grammatical errors, then there is no chance of this being a genuine business. In fact, most fraudsters use such websites so that they can attract more customers by offering them free services.
If you want to avoid forex scams, first make sure that your broker is legitimate and regulated. Never make investment decisions before you fully understand what the product is and how it works.
If you learn how to spot a forex scam, you can protect yourself from losing your life savings to a dishonest trading company.