Forex scams will exist as long as the Forex market exists.
Whenever another swindler scheme is revealed, scammers find new loopholes to help them take your money away.
Is there no solution?
While it seems Forex scammers are here to stay, you can make sure you don't fall for their tricks.
Forex scammers prey on the weak, desperate and uneducated.
This means your best weapon against them is knowledge.
Learn the basics of the Forex market and read up on some advanced techniques.
Once you familiarise yourself with the market, you stop being an easy target.
How Forex scams work
As we have previously discussed in our Trader's Blog, investment scams may take many different forms.
Some of the scams are even named after their creators - like Ponzi scheme, which comes from infamous scammer Charles Ponzi.
But one thing is common:
...Forex scams offer a too-good-to-be-true investment opportunity, to make you part with your money.
If you lack trading experience, swindlers will try to exploit your optimism and fears.
After all, nobody wants to lose.
Here's where Forex scammers step in and make you an exciting offer.
You have to understand that Forex trading carries extremely high risk.
Losses are inevitable.
Once you accept that, it will be that much harder for you to fall for a scam.
Spotting a Forex scammer
The most important giveaway of a Forex scammer, is a guarantee of unusually large profits with little or no financial risk.
First of all:
...there's no such thing as a 100% guarantee.
And if there was then there's no way traders would share it with other market players.
Some of these offers may sound very attractive, especially to trading beginners.
But as the saying goes, the only free cheese is in the mouse trap.
The bottom line is:
...if something sounds too good to be true…
...it probably is.
Remain safe and don't run after empty promises.
Be especially wary of software that has found a secret formula.
Do not install any programs until you are certain they won't damage your computer.
Another giveaway is that scammers never register with any regulatory authority.
Remember - true brokers always provide proof of their legitimacy.
If you suspect that a Forex agency is lying about their regulation, you can:contact a regulatory authority, which may provide a list of regulated companies, and a list of cases opened against regulated companies.
This will help you understand what Forex broker scammers to avoid.
Additional steps: Forex scams protection
Be skeptical of Forex brokers that provide incomplete information about their performance history.
In the Forex market, transparency and accountability are key.
Pay attention to customer testimonials on the website.
In case of a scam, there may be no testimonials or they may be very unconvincing.
Usually, Forex scammers go the easiest route, by writing fake testimonials.
Even though all companies want to make a good first impression, you can tell when something sounds too perfect.
Again, look for impossible promises.
Forex scammers often make unsolicited telephone calls to convince you to invest.
This is all part of their high-pressure sales technique.
They may even ask you to send them cash immediately by overnight express, Internet, email or some other unsafe payment method.
Scammers may also ask you for personal information, like your:full name phone number home address.
Please, don't give away your money or personal details to someone you don't fully trust.
Lastly, be suspicious if brokers don't provide you a written risk disclosure statement.
And even if they do, read these statements thoroughly because the devil is in the details.
How to avoid Forex scams
The best way to avoid investment scams, is to take your time.
Don't rush with your decisions - assess all the pros and cons first.
Finding a reliable Forex broker is not an easy task, but you'll benefit in the long run from investing your time.
The first step you should take when you come across some Forex broker or agency, is to google their business name.
Look for customer reviews on reputable websites.
If there are none or they are fake-sounding, you should stay away from that service provider.
Additionally, you can browse through scam reviews and see if a Forex broker is as reliable as claimed.
Also, find out if there are any outstanding legal actions against the broker.
For example, you can:visit Forex forums and see whether there are any complaints about fund withdrawals, and if so contact the user who posted the complaint and ask for more details.
Perhaps the user was mistaken or confused, but it never hurts to ask.
A proper background check will minimise your risks, though you should never limit yourself to it.
Take a closer look
Identifying a Forex scam, can be time-consuming and difficult.
For example:comparing the regulations of the regulatory authority, with the terms on the broker's website, to find inconsistencies and anomalies in terms.
If you don't trust your own judgement or you just don't have time, ask the advice of a licensed financial advisor.
Additionally, ask for business registration proof before registering with a broker.
Read through all the fine print when opening an account.
Sometimes scammers use account incentives against the trader, when it comes to withdrawing funds.
For example:if you get bonus funds and wish to withdraw them, a Forex scammer may deny you that right due its terms and conditions.
And don't forget that when you go live trading - always trade a small volume for a short period first and then attempt a withdrawal.
If everything goes smoothly, it's safe to deposit more funds.
A demo account is another good way to know a new broker.
If you don't get offered this option or are discouraged from demo trading, it's another indication of a Forex scammer.
Questions you need to ask to forex broker
Remember that you have every right to ask questions.
A few proper questions, can determine whether you are dealing with a trustworthy broker or a Forex scam artist.
First of all, know your rights.
What can you do when you realise a broker's offer is not for you?
How binding is the contract?
Secondly, research the contacts.
How easy is it to reach customer service?
Can you contact the broker by phone, Skype or email?
Do they list a physical address?
Do they use actual names?
...and this point needs repeating…
...check the company's registration and business background.
Are they a registered company?
Can they provide performance history?
Keep in mind that all the information you receive from a potential new broker, must be in written form.
Never rely on phone conversations or oral statements.
Forex scams final thoughts
Before you try to make profits, make sure you fully understand the risks.
Assess how much you can afford to lose and never risk the money you need to survive or support your family.
Finally, find out who to contact when you encounter a problem - before you have a problem.