How To Avoid Falling Victim To Forex Scams : A Complete Guide
Before we get into the meat of the matter, let me tell you just how immense the scale of Forex trading is. Every day, almost one trillion dollars are being traded all over the world. That’s how big Forex trading is, and how much money is in this. But this also brings with it a problem. With every big money industries, scams are bound to come. That’s the reality of the world. There is always going to be unethical people who looks to prey on people who don’t know better.
And to further exacerbate the problem, Forex trading as a whole is largely unregulated. Sure there are regulation bodies for almost every country and things like that. But, there is no one single regulatory body that can oversee every Forex broker in the world and for an industry as global as Forex trading is, that is a huge problem. So in this article, we’re going to give you a guide on how to recognize Forex scams, the most popular type of scams in Forex, and how to avoid getting scammed in your Forex trading journey.
Tell Tale Signs Of A Forex Scam
The first thing we’re going to discuss in this guide is the tell tale signs of a Forex scam. These are the red flags you should be looking out for and avoid at all costs.
#1 – Dubious Background
The first thing you have to check before you take on anyone’s offer in Forex trading, is their background. It doesn’t matter if it’s a Forex broker, a money manager, trader, individual or a conglomerate, always ask and cross-check their background.
NEVER, and I repeat, NEVER agree to work with someone who refuses to provide you with their background. Even if they give you their background, always cross-check. If you have friends who are doing Forex trading, ask them if they’ve heard of them. If you don’t have anyone of the sorts, then a simple Google search will do.
#2 – Spam Asking For Personal Information
Another red flag that you should be wary of is when someone asks for your personal information. If someone you barely know or don’t fully trust asks for your personal information, get away from them as fast as you can.
A very popular type of scams involves asking you for your personal details, so they can use it in their other scams. Be wary if anyone you’re planning to work with asks for your;
- Full name
- Phone number
- Home address
- Banking details
#3 – Selling Trading Systems And Education Plans Without Any Proof
If anyone you’re planning to work with offers you any Forex trading systems or Forex trading education plans without any proof, run as fast as you can. This is a classic tell-tale sign of a scam.
Usually how these scams work is that they will offer you trading systems that they claim will guarantee you profits or trading education plans that will help you make profit. If someone offers you something like this, the first thing you should do is ask for proof that their system or their education plan works. Ask for their trading history. In most cases, they will try to evade the question altogether, while still trying to convince you to buy these scams.
These types of scammers are known as snake-oil merchant, which means that they are selling you something with no proven benefits.
#4 – Providing Guarantees
Let’s get one thing straight and out of the way first. In Forex trading, there are no guarantees. The fact of the matter is that even the best Forex traders in the world lose some, win some. There are going to be days where you win big, and there are going to be days where you lose big.
Which is why when you see anyone at all offering guaranteed trades with big profits, never take it. I can assure you, 10/10 of these types of trades are a scam.
#5 – Too Good To Be True
Which brings us to the last tell-tale sign of a scam, which is that if it’s too good to be true, then it’s most probably not true. Always remember this; if someone is offering you something that sounds amazing such as guaranteed trades, trading systems with guaranteed profits, why are they not using it themselves? Probably because it’s not true.
If it sounds too good to be true, then it’s probably a scam.
Popular Types Of Scam In Forex
So now that we’ve discussed the tell-tale signs of a Forex scam, let’s have a look at all the popular types of scams that are out there;
#1 – Robot Scams
Just like the name says, a Forex robot scams are scams that are run using algorithms or computer codes as technical signals to open and close trades. But here’s something that you need to know. Here, we’re going to make an important distinction. The usage of robots is very popular in Forex trading. Does that mean that all of them are scams? No. There are also legit robots. A good example of a legit one is the Forex Robotron.
But if you do your own research onto legit Forex robots, you’ll find out that although Forex robots do work, they only work within really tight ranges. Forex robot scams capitalizes on this lack of understanding by claiming that with their robots, your Forex trades can be fully automated. So how do you determine which Forex robot is legit and which one is a scam? Here’s how;
Over Promising – For the legit Forex robots, they come with multiple warnings and tutorials on how to use properly. After all, Forex robots are a tool. They are there to help you trade, not trade for you. But the scam Forex robots will claim that all you have to do is set it up, and it will do everything for you. Too often than not these robots not doesn’t work at all. And even when it does work, all it’s going to do is accumulate losses for you, thus further compounding your lost money.
Guarantees High Percentage Growth Returns – As we’ve mentioned earlier, in Forex trading there is no guarantee. So anything that provides you with any guarantee has got to be a scam. This goes for Forex robot scams as well, but with one problem. You see, Forex robot scams knows that no one will accept guarantees without any proof behind them, so that’s exactly what they did. They provide proof. Unsuspecting users might look at the proof and think that it’s evidence that the Forex robot actually works. But the truth is, the proof they provide is actually very suspect, as it is created by manipulation of data.
Using Unregulated Brokers – This is another common tactic used by Forex robots to fool unsuspecting traders. They show really good results but the problem is that they’re using unregulated brokers that no one knows. This creates two massive problems; the first one is that as our guide on choosing Forex brokers have mentioned, using unregulated brokers opens you up to a new level of scams. The second one is that using unregulated brokers might show good returns on their interbank trades, but their commission and spreads might be too wide, which will eat up your profits.
So these are the ways how you can figure out which Forex robot is a scam and which is legit. In the end though, nothing beats doing your own research and due diligence when it comes to Forex robots. Google the robots you’re interested in, and figure out which one is the best for you.
#2 – Signal Sellers
Where Forex robots might be a complicated scam to pick up on, signal sellers are a scam that is quite easily understandable. Signal sellers are simply sellers who claims that they can sell you signals for your trades, to make your trades more successful. In case you don’t know what signals are, it means that these sellers will literally sell you ideas. For a price, they will suggest what currency pair to trade, the direction, entry price, stop loss and target levels.
Usually, how signal sellers profit is varied. Some of them just sells you ideas for a price, some of them requires a subscriptions, and some of them even requires you to be tied to a specific broker, where they will be receiving kickbacks.
Just remember when it comes to signal sellers. If their signals are so good, then why aren’t they using it for themselves?
#3 – Fake Trading/Investment Management Scams
The last one, a fake trading investment scams are more of a straight up money scam, rather than a Forex trading scam. How it works is that they will offer you the service of managing your investment/trades. Which means that you can just lay back, and enjoy the profits/losses. But what actually happens is that they take your money and run away with it.
When you try to contact the company, they will claim that they’ve never heard of you and some even no longer can find the company.
How To Avoid Scams
So now that we know how recognize a scam, and we know all the popular types of scams in Forex, let’s talk about the most important part of this guide; How to avoid these scams. Here are a few things you can do to avoid Forex scams.
There are a lot of ways you can avoid getting scammed, but none of them works as good as getting yourself educated. The thing with Forex trading is that as an industry, it’s always evolving. And this goes for both the good and the bad sides of the industry. As the regulations and guidelines get stricter, the scams will get more and more creative and advanced as well.
The only way you really be sure, is to always do your research before jumping onto a program or a trading opportunity. With proper research and due diligence, you won’t have to worry about getting scams, cause you will always know what you’re getting into.
Too Good To Be True Almost Always Means That It’s Not True
This is a point that has already been mentioned earlier in the article. But we’re going to repeat it again, just because it’s very important. Always remember that in Forex trading, if it’s too good to be true, it’s most probably not true.
Sometimes it might be tempting to jump into investment opportunities that provides a quick profit, but always remember that Forex trading is not a get rich quick scheme. There is no formula, no hidden cheat for anyone. If they offer you something along these line, then run away the opposite direction as quick as you can.
Ask Hard Questions
Before you decide to jump into any investment or trading opportunities, always ask them (and yourself) some vital questions. These questions can be the difference between being scammed or being safe. Here are the questions;
- How binding is the contract?
- Is there customer service? And if there is, is it easily accessible?
- How can you contact them? Can they be reached by email, phone, and Skype?
- Is there a physical address to their office? (If they do, pay their office a visit)
- Are they regulated? By who? Can you cross check their regulations?
- Can they provide their performance history? Can you cross check their performance?
By asking these questions, you can easily identify and avoid Forex scams.
So there you go, our guide on how you can avoid Forex scams. Looking for more guides? Check out our page for more helpful guides!