Before I give any other methods, let me state the 2 absolute most important things you need to avoid getting ripped off. These are EDUCATION and RESEARCH. If you don’t understand these, then the rest of the advice I’m about to give will not be nearly as useful.
Too many people get into forex with a dream of making big money very fast. Yes, it is possible to make a lot of money very quickly trading forex, but more than 90% of all traders lose. If you don’t educate yourself about forex trading, you WILL lose money, and you will lose it quickly. Educating yourself about forex trading won’t guarantee that you make money, but it will certainly slow your loses and arm you against the legions of people selling “You can get rich quick in forex if you’ll buy my product right now before I raise the price!” type products. A few of these are worthwhile, but most are not.
One very easy way to avoid getting ripped off is to not buy anything at first. If you are new to forex, you probably haven’t even decided if you want to scalp the 1 minute charts, trade the hourlies, swing trade, or carry trade. If you don’t know what these terms mean, put your wallet away and don’t buy anyone’s “guaranteed profits” products until you at least understand the basic terminology.
To get educated, there are many places you can go. Felix is adding educational sections to the FPA forums. Also, dig through the old postings in the various folders of the FPA’s forums. So many questions have been asked and answered. If you want to follow the Daily Trading Signals, visit the Daily Trading Signals archive and look at how Sir Pips not only predicts market reactions for the coming day, but also how he discusses what happened the day before. Once you’ve read through the collected wisdom of FPA’s forums, don’t forget to check the educational material on many other websites. Many brokers have basic forex courses available for free.
Whatever you do, don’t spend even 1 penny until you’ve gone through at least some of the tons of totally free material available on the FPA website and elsewhere on the web. There are plenty of people who will charge you anywhere from $10 up to many thousands of dollars for materials that turn out to be a low quality ebook or a painfully bad set of videos to cover the simplest material that you can easily find for free on the web.
Ok, assuming you’ve successfully educated yourself about the basics of forex trading, now you hopefully have some idea of how you would like to trade. Some people want to place a few trades per day (or only a few per week). Others want to make dozens of trades per day. If you haven’t found something for free on the web that suits your style, now is the time to consider shelling out some cash. Before spending anything, you should do some research.
A good place to start is FPA’s review pages for forex products and companies. New products come out every day, so you may see ads for things the FPA doesn’t have reviews for. If one of those products really tempts you, use the “Submit a Site” button from the correct category and one of the Review Moderators will probably create a page for it. You can also start a discussion thread in the “Has Anyone Heard Of?” discussions folder.
If you find something interesting that is reviewed, don’t buy it just because it has 4 or 5 stars. Read the reviews! Recently, there was a trading room with a 5 star rating that turned bad. FPA’s ratings are a simple average, and there were so many 5 star reviews that it took a long time for it to drop to 4 stars, and even longer for it to drop to 3 stars. If a product suddenly shifts from getting almost all 4 or 5 stars to almost all 1 or 2 stars, this is a pretty strong indicator that something has changed (and not for the better). Another reason to read reviews is that some reviewers are MUCH more informative than others. If someone has live-tested some software for 3 or 4 months, I’d personally give that person’s opinion a lot more weight than someone who used it for 3 days and then posted a 5 star rating with a promise of an update later.
Although I firmly believe that FPA’s ratings are the best on the web, it is not a bad idea to run a web search and see if other review sites and other forums have any additional information on a product.
Assuming you’ve done all of this, you aren’t quite done yet.
You’ll need to select a product that fits you. Some signals come at a certain time of day and are set and forget. Others can come at any time of day or night. One time I almost signed up for a very highly rated trading room, but then saw that they primarily traded the London open (which is the middle of the night for me). Some trading methods are profitable, but have very large drawdowns that might be a bit too stressful for some traders (like me!). Some software only works with MetaTrader. If your broker uses it, fine. If not, then you will have issues. Even if it is a great product, you’ll waste your money if it doesn’t fit your schedule and trading style.
A little work with a whois site can show you how long a website has been around. Be very cautious if a website has endorsements claiming that a product has been successful for years when the product’s website only hit the market a few months ago. This doesn’t guarantee that the product is a scam, but it is a major reason to be cautious and ask a lot more questions before buying the product.
See if the product has any sort of performance record. Some do, some don’t. Remember, even if it has a record that is independently audited (definitely a plus), your results will still vary depending on your exact entries, exits, and spreads. If you don’t believe this, read where I report my results from testing signals from Intelli4x.com. Overall, I’ve usually been very lucky and do better than the “official” profit reports (but sometimes, it goes the other way and I make less). Your broker’s spreads, as well as your exact entries and exits will make it almost impossible to match even a 100% accurate performance record pip for pip. If there is a performance record, see if any reviewers have made comments on how accurate or inaccurate it is.
Check and see if there is a moneyback guarantee. If you contact the company and they say they’ve never had anyone ask for their money back, ask them why they don’t offer a guarantee since this should put them at no risk if they are telling the truth. Anyone claim that a moneyback guarantee isn’t needed because everyone has always loved the product should be a major red flag. There are some products that cost many thousands of dollars that have absolutely no guarantee. Maybe these products are good, maybe they aren’t. I’m not going to risk my money to find out.
If there is a guarantee, check the reviews to see if there have been any issues getting money returned. Sometimes a return takes awhile, but it should happen. Also, read the terms of the guarantee. Some EAs will only give you your money back if you show them a live account statement for an extended period. Even trading nanolots, this could easily cost you more than the price of the EA. If they won’t accept a demo statement showing it’s not profitable for a refund, think very carefully before buying it. Also, beware of guarantees that just don’t give you enough time to fully evaluate the product.
Free trial periods are also good. Like guarantees, they need to be long enough to evaluate the product. For most signals services, trading rooms, and strategies, I’d say that 2 weeks should be the absolute minimum for a free trial or guarantee.
Consider the price. If you can barely scrape up $500 to start your forex trading career, then spending $100 or more a month on a forex signals service or a trading room probably won’t be a winning proposition for you. Buying a $1500 education and strategy course would also not be the best idea if you are doing forex on a budget. Unfortunately, in the forex world, price and quality are not tightly linked. There are products ranging from complete scams all the way up to amazingly well performing ones in all price ranges.
I hate to mention this, because this may tend to unfairly condemn some very good products. Look and see if the product has an affiliate program. Products that pay customers (or even non-customers) a large commission to resell the product tend to get very high reviews. Some of these reviews may be 100% legitimate, but some may be from people who are much more concerned with their ability to point out how well rated the product is so that they can sell it to others. Some products offer commissions as high as 75% of the price of the product. If the commission is that high, you have to take the 5 star reviews with a very large grain of salt. I see absolutely nothing wrong with getting a cut if I love a product and introduce a friend to it, but when the cut starts to get too big, I worry about the accuracy of reviews here and other info elsewhere on the web. I’m sure some of these products are great, but it is so much harder to get unbiased opinions of them.
OK, let’s assume you’ve found a product that meets your needs, fits your price range, is well rated, has nothing suspicious in its reviews, has a good guarantee and/or free trial period, and doesn’t have any other extensive negatives. This is good. You probably aren’t going to get ripped off. Congrats, your potential purchase has cleared the initial scam avoidance test, but there’s still a lot more you can do to protect yourself.
Email some questions to customer support and see how long it takes for them to answer (or if they answer at all). Some products don’t really need a lot of support, but others are very complex. If you can’t get an answer out of a company before giving them money, they aren’t too likely to trouble themselves over you once they have your money in their bank account. Check and see if they’ve got a contact phone number. If so, give them a quick call, just to make sure it is a real number.
Consider carefully how you make your purchase. It’s nice when a company offers you multiple ways to pay, but some payment methods offer better protection than others. Wire transfer really isn’t much better than handing someone an envelope full of cash. Unless you can prove fraud in a courtroom, you are not likely to be able to get money back from a wire transfer if a company’s product fails to perform and they aren’t willing give a refund. As far as various e-currencies and e-metals, I don’t have any information about what sort of dispute resolution or fraud protection they do or don’t offer. PayPal does offer some buyer protection, but sometimes places too high of standards of proof on the purchaser (as one of our members found out when he bought an EA that didn’t work as he expected). So, what does this leave?
Overall, I have had excellent results with credit cards. This may vary a bit depending on the issuing bank, but Visa and MasterCard both impose very high standards on the banks, and can be contacted directly if the issuing bank gets lazy. Another very useful bit of information is that you can often request a chargeback when complaining about something bought with a credit card. Chargebacks cost the company you are complaining about a penalty in addition to the amount that is refunded to you. Make sure to explain why you are requesting a chargeback. Valid reasons would be things like the company failing to deliver the product, failing to honor a moneyback guarantee, or a product description that is so innacurate that it could be could be considered fraudulent.
Products sold via ClickBank come with a default 8 week guarantee. Sellers may offer guarantees beyond this, but can’t have anything less than 8 weeks from the initial purchase (recurring subscriptions are a little more complicated). Products offered via ClickBank and paid for with PayPal or a credit card would then give you 2 layers of consumer protection.
If you get a product or service with recurring billing, make sure to CC at least one of your own email addresses if when you sent the email to cancel (don’t even think of only telling someone to cancel via the phone or in a chat – email and request an acknowledgment). That will give you a copy of the email with all headers, thus giving more proof that you did email the cancellation in time. Make sure to send you cancellation to all the addresses you have for the company (and again, request an acknowledgment). If you do get charged after canceling, don’t scream scam right away. Contact the company first and give them a week to fix it. If they don’t, then it’s time to talk to your credit card company, ClickBank, or PayPal.
I can’t promise that following all of this advice will save you from being scammed 100% of the time. If you do follow my recommendations, you should improve your odds of not wasting your valuable time (and money!) on the products that aren’t right for you or are scam. Also, you should have a better chance of recovering your money of you do get caught in a scam.
Don’t forget. With any new software, trading room, strategy, or signals service, test them with a demo account and then a very small amount of cash at first. Read my article on Risk Management for more details.