The forex market is a legitimate place to make money and profits. However, not everything in there is good. Forex trading scams exist, and you should learn to spot them to avoid them.
In this one, we’re going to dissect different broker scams. Among them are signal sellers, dishonest broker, and others. Let’s kick this off now.
Signal Sellers
Forex trading platforms nowadays follow algorithms. Thanks to the new technological advancements, these algorithms can provide signals to traders.
The signals, then, give them ideas about the next price movement of the asset. These systems let the traders position themselves ahead of the curve. It’s like an early warning device that tells you when to buy or sell.
Now, some brokers who commit forex trading scams take advantage of this system.
Signal sellers simply offer a system that, they say, identify good times for buying or selling. This system can on their forex trading platforms.
You can do it manually, where you put the trading info and they provide you a signal. Other times, it’s automatic. Automatic systems will put on a trade when a signal shows itself.
Some sellers depend technical analysis to justify their signals, while others base on news. Many use a combination of both.
The common ground is that they claim these signals offer you good clues what to do next. Of course, their signals come for a price. You may either pay per signal or it’s a part of their brokerage services.
Criticisms of Signal Sellers
Most often, it’s easy to criticize such systems. You can simply ask, why would sell signals on widely available info? You would think it’s much better for them to use this unbelievable system for their own advantage.
Of course, there are others that really do provide signals to their clients. But the difference is that these scammers usually disproportionately tout their systems as the best.
Another important this is this: is it really possible to predict the next move in the market?
One way to work your way out of this scam is to try their signals using demo accounts. Take some time and see whether it’s really as efficient as they claim it to be.
Dishonest Brokers
One of the forex market’s unique characteristics is that it has no real central regulatory body. The spot forex market, for one, is totally on its own. There’s no regulator for it.
That’s why it’s easy to see how some brokers try to take advantage of this by not dealing fairly with their clients. It’s not really uncommon for a broker to defraud a trader.
Luckily, there’s a way to avoid such brokers.
You can pick a forex broker that also deals with stock market trades. The stock market, unlike the forex market, follow regulatory bodies like the Securities and Exchange Commission. Another regulatory body is the Financial Industry Regulatory Authority (FINRA).
But don’t misunderstand that. You can still trade with a forex broker, as long as it also handles stocks.
The forex trade doesn’t go on any regulation, but the stock trades do. A broker that deals with stocks follow regulations from the SEC and the FINRA.
They wouldn’t risk losing their license for other securities. So, they probably wouldn’t defraud you as their forex trader.
Phony Forex Investment Management Funds
First off, what’s a forex management fund?
This type of fund or trading account where you let an account manager to trade on your behalf. You deposit funds and then the manager does the job.
The goal of this account is to alleviate your difficulty of in terms of making decisions for your trade. You’re basically free to use your time for other things. Maybe you want to spend time with your family, or you want to go jet skiing in Tibet.
This is ideal for those who have another career to pursue. You don’t have to personally deal with the trading process. Sounds tight, right?
Unfortunately, this can be another of those forex trading scams.
It’s easy to see where the problem lies in here. The fund purports that the manager is “highly skilled” and will take care of your account. Then, they ask you to basically give up control of your money.
That sounds problematic right off the crack. Most of the time, you know very little about the fund manager.
Forex trading scammers usually describe these managers with a record of success, which may be false. It’s also super hyped up on their websites.
There’s a huge chance you’ll end up with nothing. The fund manager may get away with it and live on your money.
