How to Spot a Forex Scam
Did you know that people lose over $5 billion every year due to fraud?
While we may think this is the normal number, it’s actually on the rise. Social media and the digital economy have brought us many new opportunities. Unfortunately, it has given scammers new opportunities as well.
Investment and forex scams are some of the fastest-growing scams. These scams can be incredibly dangerous, with people losing huge amounts of money by simply trusting the wrong people.
In today’s post, we will take a closer look at forex trading scams. Below, we will explain some of the most common scams to look out for along with some tips on how to avoid them.
What Are Forex Trading Scams?
Over $6 trillion in forex is traded every day. This provides traders with a unique opportunity to make money trading forex and even investing in forex products such as options and futures contracts. While this is a legitimate way to invest in the economy, there are a few risks as well.
As with most investments, there is the risk of the market reacting in unexpected ways. However, there are also brokers and untrustworthy forex operators seeking to take advantage and scam people out of their hard-earned money.
These forex trading scams can range from an untrustworthy individual to an entire fraudulent broker that’s running a larger, more complex forex scam.
The Tell-Tale Signs of a Forex Scam
Almost every forex scam follows a similar pattern. To help you spot scams faster, here are some clear indicators to look out for.
Investing in the stock market or in forex comes with risks. However, forex scammers will often advertise their services to you as a risk-free investment. This is a classic way that scammers try to reassure people that may be skeptical about working with them.
Social Media Adverts
While social media is a great marketing tool, it can also be equally effective in the wrong hands. Social media has enabled just about anyone to create fake profiles and reach out to unsuspecting people. If someone were to reach out to you on social media, be sure to look them up.
When investing in the market, you can make some serious money. However, slow and steady always wins the race. Scammers know that realistic numbers aren’t flashy enough and will try to exaggerate your potential returns.
This means that if someone offers you returns that sound too good to be true, it probably is.
Scammers will often try to pressure you into making decisions quickly. This way you won’t have time to fact-check them or ask others for advice about your decision. They will often tell you that the opportunity is time-sensitive and that’s why you need to act fast.
Professional services will take their time to advise you in the right direction. This way you can rest assured knowing that your investment is in safe hands.
The most common way scammers operate is by sending out offers to thousands of people at once. This may often sound like the perfect opportunity but is usually just phishing. If you get an offer from someone you don’t know, it may be best to ignore it.
Some of the Most Common Forex Scams
Forex scams come in all shapes and sizes. Here are some of the most common fraudulent forex scams to keep an eye out for.
The Point-Spread Scam
One of the oldest tricks in the book is based on computer manipulation of bid-ask spreads. This scam manipulates the spread to encourage forex traders into making specific trades. This typically occurs with unregulated brokers that will also limit your ability to withdraw your funds.
Untrustworthy Signal-Seller Scams
A very popular forex scam is the signal seller. While professional and trustworthy signals can help guide you on the forex market, some individual traders will claim to offer the same advice privately.
These unregulated and unverified signals can often be a complete waste of time and money as the signal seller will ask for money upfront and disappear shortly after. These scammers can sometimes even offer monthly and annual programs to lock you into long-term financial commitments.
Forex Robot Scams
Forex robots are software programs that will automatically buy and sell currency. These robots will work according to a set algorithm that aims to predict and beat the market consistently. While these software solutions may seem legitimate, they are not regulated or evaluated in any way.
This means that you will need to blindly trust that the robot is being accurate and is programmed to make you money and not just lose your money on paper. If you are thinking about using a forex robot, be sure to do thorough research before making your final decision.
In this case, it may be advisable to get a third party to look into it on your behalf as well.
Forex Broker Scams
Different countries may have different laws to regulate their financial industries. Despite this, most financial brokers and institutions will need to be registered and licensed in some way before being able to handle money for clients.
Forex broker scams will often lie about their credentials to gain your trust. Once they have your trust, they will often accept large deposits as if you were to invest on their platform. However, by the time you realize that the broker is less than legit, it may be too late to get the money back.
Pyramid schemes are often used by forex fraudsters to raise money. These scams will require you to invite friends and family to also invest in order for you to benefit. This is an effective way to encourage the pyramid to grow before the organizers can take off with the funds.
These schemes are designed to grow but are very carefully designed. Some forex pyramid schemes will refer to themselves as multi-level marketing companies to navigate the laws that prevent them from taking advantage of the public.
Forex Ponzi Schemes
Forex fraudsters use Ponzi schemes to convince people to invest with them. They will often use non-existent funds to guarantee high returns for people in a short period of time. They may ask for a small amount at first but can quickly convince you to rope in friends and family.
Once enough money is raised, the scammers will take the money and run.
Managed Forex Account Scams
Some forex brokerages or companies will try and get you to invest with them. While this may sound like a good deal, they will often include policies to lock your money with them. In some cases, they may even seize control over your entire forex account to invest on your behalf.
When these brokers invest on your behalf, you have no control over what they invest in. This often leads to people losing all of their money with no proof of where it went and if it was actually lost and not just stolen.
Trusted forex companies will never try to control your investments. They aim to guide you but never lock you out of your own account. Professional services are there to help you through extensive training and accurate forex signals.
Social Media Gurus
Social media is a great way for businesses to market their products and services to a wide audience with just a tap of a button. While this is useful to legitimate businesses, it’s equally as effective for scammers.
The most notable social media scammers manage to gather tons of followers and direct them toward their own personal products or services. This manages to raise quite a bit of money before these so-called financial gurus disappear.
Rewards and Promises
Another common forex scam is to promise impressive returns and plenty of rewards for investing with them. This can be for both small and large amounts but is designed to encourage you to invest immediately. A common tactic is to offer a monetary reward for signing up and joining their program so that you feel like it’s a better deal.
Most brokers will make their money on the spread. This means that they will make factions out of your trade. However, some forex scammers will manipulate the price of specific currencies and financial indicators to increase their profit margin on every trade you make.
This is why you should always seek out professional and trusted guidance when investing in the forex market.
How to Avoid a Forex Scam
The first thing to know about forex scams is how to spot them. Here are a few basic rules to keep in mind to help you spot and avoid forex scams.
Most scammers will lie about the potential returns and benefits of investing with them. This is why you should always do your own research to make sure the claims are true. No matter how great or realistic it may sound, always double-check information before making any decisions.
Partner Only With Trusted Forex Companies
If you’re thinking about working with a particular person or broker, look them up. If it’s a person, feel free to look through their social media, LinkedIn, or personal website. You should also ask around to try to find people who have worked with them before.
When it comes to forex businesses and brokers, an easy way to filter out potential scams is to look through their registrations. Check to see if the business is registered and if they have the necessary financial licenses to provide you with the forex services you’re looking for.
Don’t Be Afraid to Ask Questions
Scammers often try to intimidate you into trusting them. They often use big words to sound impressive while also confusing you in the process. However, when it comes to investing your hard-earned money, don’t be afraid to ask questions.
If you don’t understand something, don’t be afraid to ask questions and read up on forex for yourself. You can even consult with a third party for a second opinion to make sure that you are making the right decisions.
What to Do if You’ve Been Scammed
If you ever find yourself as the victim of a forex scam, there are a few things you can do to mitigate the damage. Here are a few things you should do as soon as possible.
Contact Your Bank
If you made any payments or transferred money directly from your bank account, you should contact your bank immediately to let them know what happened. If the transaction has not cleared yet, you may be able to recover some of your money.
Report the Scam
You should also take some time out to report the scam to the local authorities so that they can investigate and try to recover some of your funds. This can also help spread the word about the scam and hopefully prevent others from making the same mistakes.
Learn to Spot and Avoid Forex Scams
With the right information and guidance, you can easily make a decent living trading forex. However, it’s important to be aware of forex scams. These scams come in all shapes and sizes, so it’s important to do your own research and only trust reliable forex companies with proven track records.
If you have any questions or want to join a forex community that can help you grow, you’re in the right place. Feel free to visit our website for more information and to sign up for our membership program.