Types of Forex Scams and How to Recognize Them
There are many scams associated with Forex targeting the public and retail traders. While the Forex market industry is increasing, the amount of Forex scams are also on the rise. Similar methods are also used in cryptocurrency scams.
Here’s how to recognize forex scams and stay away from them.
SCAM #1 – Unlicensed Forex Brokers
Retail brokers are regulated by regulatory authorities. The UK has the Financial Conduct Authority (FCA), Cyprus has the CySEC, etc.
However, retail Forex trading is not regulated in many countries and so any Forex broker that is operating in unregulated regions are doing so with a foreign licence from mostly offshore regulators.
SCAM #2 – Signal Seller Scams
Individuals that offer Forex signals often give out potential trades that contain a currency pair, entry price, stop loss, trends and target levels.
These are known as signal sellers in FX. This type of fraud can occur with unrealistic promotions and claims.
They may require you to pay high membership fee to access the markets. Or they may start off and use credit and financial information to commit other types of financial fraud.
SCAM #3 – Robot Scams
Forex robots are usually executing trades using some pre-established algorithms. These help traders overcome certain challenges that come with manual trading.
In fact, not all robots are scams but is better to stay aware of some factors while choosing an FX bot.
Although using trading bots can be beneficial it cannot provide unrealistic returns. Another instance can be using bots with unauthorized brokers. Even if the performance may seem profitable it may charge wider spreads and commissions.
SCAM #4 – Phony Trading scams
This scam is happening when a salesman tries to convince you to invest in a Forex fund using unreal of possible outcomes. Chances are these entities will never confirm the payment.
Another way to scam your money is by leading you to open an account for your although the broker has no regulation. After few trades the money from your account will most likely start disappearing.
How to stay away from Scams
Make sure you understand the advantages and the disadvantages. Select a trustworthy Forex Broker which minimizes your risk of being scammed. Start by going through regulations and reviews of the broker before you invest your money.