The simple fact is that the Global Forex market is HUGE. It’s the largest financial market in the world, with over $5 trillion traded every single day… 24 hours a day, 5 days a week. That is several times larger than global equity markets.
What this also means is that every day there is likely to be tens of thousands of new ‘wannabies’ ready to get on the fast track to wealth by trading Forex. This situation is a magnet for Scammers who are very proficient at separating naive traders from their money. In recent years increased regulation has helped to clean up much of the industry, however new scams still appear from time to time.
It certainly pays to be suspicious of all Forex offers; however there are a few simple steps you can take to ensure that the people you are dealing with are genuine. Taking these steps will help you to filter out the majority of scams; saving you time, money and frustration in the process.
- Use your intuition. If the site’s offer seems too good to be true then it probably is. Scams will often make outlandish claims like “guaranteed success”, or “secret trading formulas with 1,000% returns in your first month”. This sort of appeal to greed should raise a red flag with you, so don’t even bother communicating with them. Look elsewhere… because there is no such thing as a ‘free lunch’; especially in investing.
- Forex trading forums can be very helpful when you are looking for initial information about industry players; particularly when deciding on a broker or platform. Seek out other traders for their experiences with a particular broker. Also, Google their product or company name to see what’s been posted online. When scammers are active, bad news travels fast.
- When choosing a broker, make sure they are Regulated by at least one well-known authority. When brokers operate from ‘tax havens’, then expect the Regulation of their activities in that legal jurisdiction to be soft. That’s probably why they operate from there!
- If the broker you are investigating is ticking all the boxes, then the next step is to start checking out the people behind the company. What does their LinkedIn profile say? Do they even have one? If not, then that’s a bad sign.
- Now it may be time to start speaking to the people behind the company. Are they professional in the way they respond to your enquiry for information? How they respond will tell you how they treat their customers.
- Ask to ‘road test’ their standard demo account before you commit your money. This will never be a problem with legitimate operators. At the end of the day, your objective is to get a feel for the people on the other side.
One of the more sophisticated Scams you may come across involves;
- Individuals or companies that market Forex Systems online. In particular Signal Sellers or Robot Trading. The Scam is to get the victim to sign up to a weekly or monthly fee. In exchange they receive a ‘system’ that claims to identify favourable times to buy or sell a currency pair based on their professional recommendations. These ‘systems are often not tested and do not yield any profitable results.
- Their advertising claims a long list of success in trading with the ‘system’, along with an equally long list of testimonials from individuals who claim the system has made them incredibly wealthy! All you need to do is hand over your money and join in with the other winners!
Recognize these schemes (Scams) for what they are… an emotional appeal to Greed and the Fear of missing out.
If you follow these steps before you commit to paying for any Forex services you will be well armed to avoid the traps you encounter on your journey.