TOP FOREX SCAMS TO LOOK OUT FOR IN SOUTH AFRICA

By Chadd

In this article, I will be making our South African traders new and old aware of what exactly the top scams are that are used by these so-called forex gurus and hopefully help my fellow traders avoid these frustrating business models and do what it actually takes to be successful and excel in trading the global markets.

So now that we've got that out of the way, let us now uncover what the top scams are that need to be avoided at all costs or at the very least do the necessary research to establish the amount of risk involved when investing in these gurus business models.

The first and most widely used scam WikiFX needs to highlight is that of account management or mutually funded accounts, these types of business models are actually legal and can be very lucrative when investing with well-established businesses such as hedge funds and investment firms. This business model in Forex or even stock trading is made up of a team of traders who sit on a trading floor and generate or are allocated funds from various investors like you and I. Ultimately they trade all the funds to turn a profit and usually provide decent returns of around 10% and 12.5% per annum with the 2021 financial year seeing average gains of around 12.3% across leading hedge funds and investment firms, these firms usually earn by taking an agreed-upon percentage of the profit gains.

As previously stated, this is a legitimate business model but the scam is first introduced when promises and commitments are made to potential investors and in the end, those promises can not be met, the first trend to take note of in the South African forex industry is the promise of unrealistic returns, ask yourself, if a fully staffed and professional hedge fund could produce a fantastic 12.3% average return on investment for its investors then what makes you think that one or two individuals who you found on Instagram can honestly produce consistent gains 80% or more per month! With some even committing to those gains on a weekly basis! In Forex we have come to understand that this is a pipe dream and definitely not a sustainable business model in the long term so be very wary of this first warning sign that these self-proclaimed gurus claim to do. Moderate gains over an extended period of time are the safest, most practical, and most profitable approach to investing, if it worked for Mr. Warren Buffet, it will most definitely work for you and me. Another way this business model is exploited by scammers is in the form of a good old fashioned Ponzi scheme whereby old investors are paid “dividends‘’ with the money generated from fresh investors and this only remains sustainable as long as there is constantly recruiting and an influx of new investors, as soon as there are no new investors the payouts begin to depreciate until the dividends eventually stop altogether, the main warning sign to pay attention to is the emphasis on heavy affiliate marketing in the same fashion as a pyramid scheme, getting paid or earning for every person you recruit. Having to pay a joining fee to gain access to the fund should be your cue to run away as fast as possible. In these instances, you should pay close attention to withdrawal policies and exit clauses because a Ponzi scheme will not work if people withdraw their profits because they need that money to pay ”dividends. In the coming articles, I will be sharing in more detail about how exactly people are falling victim to these scams and who exactly to approach with caution or staybwlaway from altogether when looking to make some passive investments.

This brings me to my next point of discussion, the latest buzzword on almost every scammer's lips is that of forex robots, this is not so new to the industry and has emerged in the last 5 years or so, and has been growing in popularity since it was first introduced to us. Once again I must mention that there are legitimate trading bots and software available for the method of trading but will definitely not carry a cost of less than R50 to R100 000.00 depending on the company you are working with, Mr. Greg Secker from Learn To Trade offers he's software called Smart Charts for a whopping $3999.00 which when converted to Rand is around R62,384.40 at the time of this article. This should be the first indication that you are working with and using a professional piece of trading software, but paying a mere price of between R1000.00 and R5000.00 for automated trading that offers returns anywhere between 50% to 100% weekly or even monthly should prompt some valid questions and concerns, the price of some of these bots are a huge red flag in its own, ask yourself why an individual or business sell a forex robot that cheap and promise such handsome returns, 50% on an R100 000.00 investment will generate R50 000.00 to R200 000.00 monthly returns which makes absolutely no sense when selling such a product with such earning potential for only R5000.00. Such a product will lose certainly be priced according to the potential gains it will generate, another warning sign is the promise of the robot's trading accuracy, as experienced traders we at WikiFX know that forex robots are developed around the traders' or developers manual and already existing trading strategies and methodologies and I can confidently say that No Forex strategy is 100% or even 90% accurate, in fact, some of the best financial publications quote retail trading FAILURE rates as high as 95%, at best a trading strategy will provide a 40% to 60% accuracy stats and will remain profitable based on proper risk management, so if the average forex robot is based on human experience and strategy how can we realistically expect a 90% to 100% accuracy rate for a forex robot？ This is unrealistic and should be questioned, as always WikiFX has got your back and we will investigate further and findings will be made available on who and which products to avoid and as usual empower YOU the trader to make sound financial decisions.

Always make sure you invest with those companies or firms that have years and years of experience in the sector, are fully licensed and qualified to manage your money, work with this who have a good reputations and great client feedback in the financial sector, and always research-proven track records on client investments.

Kind regards and profitable trading to all.