How to Spot Forex Scams？

Overview

1. What is a forex scam？

2. Forex scams: what common types exist？

3. What are red flags of forex scams

4. How to spot forex scams？

5. How to avoid forex scams？

6. What should you do if being scammed？

7. Conclusion

A Brief Introduction

Forex world is considered a lucrative and magic place, one in which both investors and con artists harbor fantasies of amassing enormous wealth. This article focuses on a series of key issues of forex scams, such as What is a forex scam？ How to spot and avoid forex scams？ What to do if being scammed, to help you smooth trading curves in your forex journey.

What is a forex scam？

With over $6 trillion worth of transactions taking place every day, the Forex market offers enormous potential for profit, but it also comes with a significant amount of risk due to the market's use of leverage. Since anyone can open a forex account in a matter of minutes, vulnerable people are drawn to the possibility without giving it proper attention.

Forex scams occur when fraudsters deceive unsuspecting investors into parting with their money in unreliable foreign currency schemes. Investors are regularly promised a once-in-a-lifetime opportunity to make astronomical profits immediately. Investors are often left with nothing once the scammers have taken their money and vanished, leaving them with little recourse.

Scammers know well that finding and taking advantage of the market's best trading opportunities is the most difficult component of the entire trading process. Investors who lack trading experience feel that if they find the “Magic Weapon” trading technique that would allow them to consistently make a profit from the market, and they will have arrived at the beginning of the road to financial freedom.

Forex scams: what common types exist？

When it comes to forex scams, con artists use a wide variety of deceptive strategies to steal customers' money. You should be aware of six common forex scams:

1) Forex broker scams

To deceive individuals into investing in fictitious forex funds, scammers will pose as legit forex brokers or investment platforms that already exist.

Scammers love to clone a legit forex broker's name and registration number and some scammers claim that the numbers they are using are incorrect because they are outdated. Scammers may also create up lookalike websites to deceive investors into handing over their money to them.

2) Forex robot scams

A forex robot is a computer program that can purchase and sell currency for you based on an algorithm. Forex robots can be evaluated and assessed by an impartial agency to ensure that their program works.

Untested or bogus software, sold by some criminals, might perform trades at random, resulting in losses for investors. You should always conduct as much research as possible to prevent becoming a victim of a robot scam.

3) Trading signal scams

Using what they describe as “market analysis,” signal sellers claim to be able to predict when the ideal times are to purchase and sell currencies. Investors are typically charged a fee for access to this data.

Fraudulent signal providers that charge investors money and then disappear are known as signal seller scams. A common claim made by these signal providers is that they will ensure profitable trades and significant returns for their clients.

4) Forex pyramid schemes

The primary goal of a forex pyramid scheme is to increase the number of new members in an investment club by luring them in with promises of expert advise and market data.

Members of these programs pay a monthly fee and are rewarded for bringing in new members by paying them a commission.

Instead of profiting from forex trading, this fraud relies on membership fees. In a pyramid scheme, as more people join, you advance up the pyramid and essentially “earn” money.

Most schemes are shut down and all the money is taken by the leaders when they can no longer attract new members or when membership begins to decline rapidly.

5) Managed forex account scams

Managed forex accounts are available from some investment firms, where a skilled forex trader invests currency on your behalf, with a certain amount of commission or fee charged.

Managed forex account scams occur when con artists pose as forex trading experts while taking advantage of unsuspecting investors' hard-earned cash. Be sure to do your homework before putting your money into any financial service or platform. To prevent getting caught out, always check the FCA's registration to determine if the company is permitted.

6) Forex Ponzi scheme

Forex Ponzi schemes are used by scammers to advertise fictitious forex funds that promise a high rate of return in a short period of time.

It's common for these schemes to simply ask for a little initial commitment and then pay those investors the promised returns, all to create an appearance of success.

Once a sufficient number of people have invested into the plan, the scammers disappear with the money, leaving investors with nothing.

What are red flags of forex scams？

Scam brokers make money by enticing in traders with the promise of assured returns, only to charge them excessive fees, profit from their trading activity, and take money from their accounts until the traders realize what is going on and leave.

It's important to know what to watch out for when choosing a forex broker online or if you're concerned about your present broker:

1) Promises of high returns

Profiting from forex involves some degree of risk. Unsavory forex brokers may claim that their platform may assist you make assured profits.

To be on the safe side, stay away from forex brokers whose platforms make grand claims about how they will make you rich through forex trading. These platforms are often designed to earn money off of unsuspecting traders. This broker is probably a sham organization that isn't subject to local regulations or laws, and it imposes excessive fees to siphon off the profits of traders through a virtual platform provided for forex trading.

2) Lack of Funds Safety

Regulated forex brokers are required to take certain security measures to protect their clients funds. In addition, many brokers will also take additional steps to ensure fund safety and build trust among their existing and prospective investors.

Most reputable forex brokers keep their clients' money in segregated banks. In the absence of a separate account, the brokerage has access to your funds and can make any necessary expenditures, balance adjustments, or other commitments with them without repercussions. Whats more, the brokerage could even run away with your money in the case of bankruptcy.

Therefore, you should be wary of any forex brokerages that do not guarantee that your funds will be kept in a separate bank account.

3) Wide Spreads

Spreads on the USD/EUR currency pair are typically two to three pips wide. When approached by a forex trader who claims to give spreads of up to seven to eight pips, be cautious. Wider spreads are offered, more money is taken from you by forex scams.

Fraudsters in the forex industry prey on their victims by employing sophisticated lingo in their scams. By using language like “disclosures about risks and conditions of usage,” they can restrict their obligation if investors experience losses.

4) Bonus promotion

Margin trading carries a significant risk of loss due to the erratic nature of the forex market. As a result, major authorities require brokers to post risk disclosures on their websites to alert potential customers to the dangers of trading forex and CFDs online.

If a broker is spotted promoting bonuses like a $50 bonus on account opening, risk-free trading, or an 80 percent return on the purchase of trading signals, this is a red flag.

A trader's attention will be diverted by these false promises of benefits. Regulators in most of the world's major countries prohibit brokers from making any offers.

5) Unable to Withdrawal

If you attempt to withdraw money from your account but are unable to do so, it is possible that it is time to start worrying about the return on your investment. If a broker offers you a hazy explanation or an imprecise apology when anything like this occurs, you need to reconsider your investment, or better yet, get out of it before you lose even more money.

6) Poor Customer Service

Forex traders rely heavily on the quality of their interactions with customer service representatives. Is it difficult to get in touch with a person when you need customer service？ What kind of response do you get from the broker in terms of responding to your questions or concerns？

Poor communication can sometimes be an indicator of poor customer service. However, this could be evidence that your broker is solely interested in making money off you. Scam brokers aren't interested in making sure you're happy with your experience.

How to spot forex scams？

Avoid being a victim of a forex scam by keeping an eye out for these warning flags:

1) So called risk-free investing

Investing always involves risks, therefore any investment organization that claims to offer risk-free investment options is most certainly a fraud.

2) Unachievable Returns

Many Forex scammers out there guarantee unrealistically big returns on your initial investment. Fraudulent companies that promise fast money are almost always scams.

3) Time pressure

As soon as you see a firm attempting to push you into making a hasty investment, you should be suspicious. To get you to contribute right immediately, some con artists offer incentives like bonuses or discounts.

4) Advertising on social media

Scammers are increasingly exploiting social media to promote bogus investment schemes. Investors are frequently duped into making purchases based on the appearance of high-end goods shown in photos and videos.

5) Offers received uninvited

It's quite likely a fraud if you're contacted about a forex investment opportunity out of the blue. Don't give the company any of your private information or send any money if they ask for it.

How to avoid forex scams？

Forex scams can be avoided by following a few guidelines:

1) Conduct in-depth research

Before making any investments with a forex broker, make sure that the broker has a valid regulatory license. Millions of forex traders around the world use WikiFX (a global forex broker regulatory inquiry tool) to locate trustworthy brokers and steer clear of scams. Educate yourself about the foreign exchange market's vocabulary, as well as the reputable resources available to help you with trading.

2) Use a demo account

Make use of a reliable broker's demo account before putting real money on the line. Consider all of your options carefully before committing any real funds.

3) Talk to professional traders

You might also consider consulting with financial experts or perhaps employing a financial advisor who can educate you and help you construct a comprehensive financial strategy.

4) Check out customer feedback

Visit well-known websites and look for consumer testimonials. If there are none or they sound bogus, you should steer clear of the service provider you're considering. Additional information can be found by searching for shady Forex brokers in scam reviews. You can, for example, look for complaints about fund withdrawals on Forex forums and, if you find any, contact the user who made the complaint to get additional information.

What should you do if being scammed？

If you suspect that you have been the victim of a forex scam, you should move promptly to take corrective action. If any of the following apply to you, you must make immediate contact with your bank:

1) You have completed a transaction by making a payment using a debit or credit card.

2) Made a payment via bank transfer.

3) Disclosed confidential or private information.

You should also report the scam to Action Fraud and regulatory authorities so that they can investigate it and, if at all feasible, try to get your money back. This can also help other people avoid falling prey to the same scams that you have.

Alternatively, you can use WikiFX, a sophisticated regulatory investigation tool for forex brokers that includes a Rights Protection Center and aids over 12,000 victims, with a recovered amount reaching $1,697,000 in one month's time. If you can provide proof that you were defrauded, WikiFX will do all in its power to get you your money back.

See more details in the video:

Conclusion

Overall, if you want to avoid falling prey to a fraud associated with foreign exchange trading, it is recommended that you collaborate with a regulated broker who has a solid reputation in the industry, a spotless track record, and who has received positive feedback from both former and current investors. It is difficult to resist the draw of quick returns; nonetheless, it is wise to err on the side of caution and be more careful in the process of screening potential investments.