One of the most important financial marketplaces is the forex market. Since daily trading volume is roughly $5 trillion, chances of ever-increasing Forex scams cannot be ruled out.
The Forex Market is the most liquid and volatile compared to traditional financial instruments. Since the early 2000s, many have been attracted to Forex due to the internet revolution. Traders have been making the most of it ever since. As the Forex market is open 24 hours a day, traders from Japan can trade currency pairs in the US market and vice versa. There are no physical boundaries for trading Forex. No wonder the daily volume of Forex trade is roughly $5 trillion dollars.
Since the market is quite lucrative, attracting many traders to try their luck, many scammers are out there to pounce on the unsuspected new traders. Since the knowledge of these new traders is quite limited, these scammers take undue advantage and rip off the unwary new traders.
These scammers operate in a certain pattern that a Forex trader should learn about. The best tool against these scammers is the knowledge of how they might connect to you or operate. We will look at some common techniques which these scammers widely use.
What is a Forex Scam?
A forex scam uses deception and unlawful practices, operated by the brokers or imposters who make a fortune by providing erroneous data to the traders, turning them into victims of financial misfortune.
These fake brokers or scammers are generally unregistered and target many regardless of their age and experience. The motive is quite straightforward: these scammers want to misguide you, take away your fortune, and then disappear without a trace, leaving you mentally and financially harassed.
You need to understand these scams and avoid them, thus saving yourself from mental and financial trauma.
Today these scammers use youtube, Facebook, and other social media platforms to lure in the unsuspected victim.
Types of Forex Scams
We have mentioned the types of Forex Scams that are most common and are frequently used by the scammers:
These scams involve system manipulation of a bid-ask spread. The system is rigged so that the traders lose and the dealer wins. These brokers pursue their victims to pump money and give a false assurance that they can make a huge profit if they never give up. This scam is quite prevalent in the US, and many fake brokers are still using these tricks.
Signal Sellers: Fake brokers assure that they have the information where traders can make a huge profit. This information will contain which currency pairs to buy and sell and when to buy and sell. Of course, you need to loosen up your wallets a bit for this premium information. In reality, these are just suggestions that may or may not be helpful to you. If anyone had broken the code of quick money, then why would anyone share it? At the rate at which these scammers preach which trade to go for, they would have been zillionaires by now.
Forex Pyramid Scheme:
This is one of the classic scams still prevalent even in today’s digital age. The scam revolves around the hunting for new investors continuously. The old investors are paid by the money invested by the new investor. The chain keeps on growing until there is stagnation in the chain and the money flow stops.
Automated Trading Programs:
Some reputed Forex brokers and firms market automated trading software. They use historical data and various algorithms to predict future price movement. This software is tried and tested and is quite accurate compared to a seasoned forex trader. Moreover, this software can be customized according to your trading style and financial aspirations.
However, some scammers market their automated trading software as being sold at a competitive price. Many traders, to save their money, fall victim to this scam. These softwares are untested and unreliable, assuring that the users incur losses.
Identifying Forex scams:
There are some tactics that these scammers employ to entice victims into their trap.
Risk-free investment: No business in this world is free of risks. If anyone asks you to invest in a risk-free opportunity, then remember that it is a scam.
There are no such spontaneous Forex venture opportunities. If you happen to come across it, it is probably a scam. So never entertain or give them your data or money.
If you are being pressured to invest in a golden opportunity, ignore the call. The caller will generally offer you some freebies or some discounts. Remember, all they want is your cash.
Many fake brokers assure you unrealistic returns. This is a scam; never believe them.
Web-based media adverts:
Many fake brokers make attractive websites and market these websites with luxurious goods and pictures. These brokers want you to open up a brokerage account where you go broke and they make a profit.
Social media adverts:
Scammers flood social media with their fake investment plans. Many people are active on social media, and scammers take advantage of these people.
The best way to prepare yourself is by increasing your awareness about the scams and their working. In addition, it would help if you also practiced identifying these scams with the information that we have provided for your benefit. It is essential to keep in mind that you are not obliged to sign up to a service only because the provider is urging you. No broker would put in that sort of situation unless they want you to make hasty decisions. Take your time to analyze before you respond.