Foreign trading or forex trading is the trading of different foreign currencies listed in a pair known as forex pairs. The parties involved in trading could be individual investors or multinational corporations. Trading of currencies takes place in the foreign exchange market and the parties make a profit through fluctuations in the exchange rates of currency. This constant price movement of currencies is the reason why forex traders find forex trading lucrative to gain profits in the short-term.
Though the foreign exchange market is the biggest financial market in the world, it is also highly unregulated. That means it has slowly become a haven for many forex brokers that lure forex traders with fraudulent investment schemes.
Is Your Forex Broker a Scam?
Forex scammers take advantage of the forex traders’ lack of knowledge about forex trading and try to defraud them with unbelievable investment opportunities. They keep evolving with the forex market and coming up with schemes that are nothing but a scam. Therefore, before putting your feet into forex trading, it is essential for you to fully understand different types of forex scams.
1. Robot Scams
This is the most common form of a forex scam. Forex robots rely on the past performances of currencies to place the trade in the forex trader’s absence. Forex scammers use this fact to persuade new forex traders that they can make maximum profits using their bot-based platforms. Ideally, forex traders should avoid falling victim to this scam as most of such platforms have never been tested.
2. Signal-Seller Scams
This is another popular scam where forex fraudsters promise potential forex traders with accurate information about favorable times to trade in exchange for a hefty commission. Forex signal selling is a practice where forex brokers predict the price movement of currencies based on market trend and their trading expertise. Forex traders use these cues to make a trade. But most of the cues are inaccurate and traders end up incurring heavy losses as their forex broker fails to authenticate its information.
3. Shady Forex Trading Scams
There are so many forex brokers that approach new forex traders through impractical advertisements. Most of these brokers are unregulated, but they try to convince forex traders to make investments in forex investment funds and assure them of higher returns. Anticipating maximum profits while not trading themselves, forex traders end up losing their investments just to find they have fallen victim to another trading scam.
How to Spot a Forex Broker Scam?
It is quite common among aspiring forex traders to become successful at forex trading. Even so, they should avoid being misguided by unrealistic expectations promised by the forex broker.
More common hints that your forex broker is a scam include misleading forex trading schemes, unregulated by any financial authority, and overstatement of 100 percent guaranteed returns. Apart from them, here are a few more tips to spot a forex scammer.
- Promises of little or no financial risks
- Claims of guaranteed and overnight success
- False records of success at forex trading
- Unresponsive to trading complains (poor customer service)
- Bad reputation for not allowing forex traders to withdraw funds
- Unable to provide any proof of their trading claims
- Ask you for your personal details (email, contact number, home address)
If you found your forex broker ticking any of the above, it is a sign that you are dealing with a scammer. Besides, you should consider taking some precautionary steps to avoid a forex scammer such as:
- Finding a regulated forex broker
- Doing internet research about the forex broker
- Reading customer reviews and testimonials
- Going through all the fine print of the contract
- Starting trade with a small deposit
- Understanding trading on margin
- Asking for the forex broker’s trading history
- Ensure you can trade when the market is volatile
- Inquiring forex brokers about their policies for placing trades
Forex trading is a legal financial activity across the globe. It allows forex traders to make huge profits in the short-term. However, a slight oversight of forex trading fundamentals can put new forex traders at risk. It is not that the forex market is full of scammers, but you must be better prepared to spot the scam and avoid being a victim of it.
The best way to do that is knowing how forex trading works and conducting due diligence on the forex broker. Remember, you are into forex trading to make money, do not waste this opportunity because of some unscrupulous forex broker. To avoid all the scams and frauds, you should check the list of Top Forex Brokers and choose one from it. Also, you can compare the top Forex brokers in UK.