Are you interested in forex trading? Then it may interest you to know that the forex market is the largest finance industry in the world, with over seven trillion dollars trading daily. Therefore, one of the best things to learn in forex trading, whether you are a beginner or an advanced trader, is how to identify and avoid forex trading scams because a market with such huge financial transactions will attract many scammers.
Forex traders are always on the lookout for legit and reliable brokers because to avoid falling prey to forex trading scams you must ensure that the broker you are working with is not just reliable but also regulated by an appropriate financial authority. So in this guide, we will teach you how to identify and avoid forex trading scams.
Common Types of Forex Trading Scams
There are many types of forex trading scams, and you must keep yourself informed to identify and avoid them. Here are some of the most common ones you should note.
Signal Seller Scam
This type of scam has become prevalent, and it is unfortunate that many people still fall for it. When a person offers to inform traders about the best time to trade currency pairs on forex to make profits, it is called a signal seller scam.
It is not real, and they are most common with retail traders, pooled asset managers, and investment account companies. Such individuals charge traders, especially newbies, a daily, weekly, or monthly fee to give them fake tips and trading signals.
A Forex trading bot is a computer algorithm that automatically performs trades in the Forex market. However, since there are so many forex trading bots online, it becomes difficult to tell which one is genuine. That is why there are many cases of bot scams today. With this type of scam, traders are offered a substandard forex bot that is incapable of making informed decisions, and the traders lose all their money.
Remember that most people who fall prey to forex trading scams are those with the get-rich-quick mindset. So one of the most common types of forex trading scams is withdrawal fraud, where a trader cannot withdraw their fund because they have used an unreliable broker. Then, when they try to make enquiries, the broker either does not respond or gives an unreasonable excuse, and the trader will lose the funds.
Phony trading investment scams
In this case, a person or company will show you unverified results of their forex funds and tell you to let them trade for you. All you have to do is send them your investment; then, you can relax while you let them trade forex for you. But, of course, you will start hearing excuses after sending your money until you can’t contact them again.
Bid/ask Spread Scam
This is one of the oldest forms of forex scams. It happens when a scammer offers a huge bid/ask spread on a specific currency pair, which can be unreal. This makes it almost impossible for traders to make money on trades, and because of the commissions, the traders’ profits are canceled and given to the broker.
Although many financial institutions regulate the spread of forex, so many brokers are not regulated, so it is best to avoid such brokers when trading forex.
How to Prevent Forex Trading Scams
License and Regulations
Multiple financial regulatory authorities regulate all legitimate and trustworthy Forex brokers. So, before trading with any broker, check if any well-known financial regulatory body license and regulate them
Avoid Forex Management Funds
Although forex management funds have become popular, most are still scams, so it is best to avoid them. People who claim to be expert and experienced forex traders will promise to help you perform your forex trade, but they will run away with your investment. So it is better to learn forex trading and not pay people to do the work for you.
Avoid Unreal Opportunities
Yes, we know there is a lot of money to make with forex trading, but some opportunities are just too good to be true. There is no easy way to earn money. You must put in time and effort. So when you find someone promising you 20% or more profits from their platform, it is most likely unreal, and you must avoid such opportunities.
Ask Some Question
Note that there is no limit to the number of questions you are allowed to ask as a trader and a customer. So when choosing a forex trading broker, ensure you ask as many questions as possible to confirm every detail of the broker; don’t make assumptions and think certain things are placed without asking to confirm.
See also: Cryptocurrency Explained
If you are an advanced forex trader, remember that forex trading scams are not reserved for beginners alone, and if you are a beginner forex trader, be ready to learn and do the work to earn money with forex, as there is no shortcut to wealth.
One of the easiest ways to fall prey to forex trading scams as a beginner is a get-rich-quick mentality. Thinking you can have someone else do all the work while you relax and earn profits, or looking for one opportunity that can make you rich overnight. Whether you are an experienced or beginner forex trader, you should learn to stay updated with market trends and take information like this very seriously.