Forex Trading Scams: How to Detect and Avoid Them

If you are new to the forex industry, you may find it overwhelming.

You may also be prone to forex trading scams due to the industry’s loose regulations.

The forex trading industry has a daily volume of over $5 trillion.

Just as it is seen in an unrestricted marketplace, scammers are lurking in the shadows.

They are trying to scam newbies through series of forex trading scams.

It is possible to make good returns from Forex; however, you need to be careful when you come across offers that are too good to be true.

You may think you’re lucky, but you could end up burning your finger.

In this article, we will take a look at how you can spot forex trading scams so that you don’t fall prey to them.

But before that, you must understand what you’re trying to get into.

What Is Forex Trading?

Forex trading (also known as foreign exchange trading) is synonymous with the currency exchange that you do while you travel abroad; a trader purchases one currency and sells another.

The exchange rate depends on the forces of demand and supply.

The foreign exchange market is open 24 hours a day from Monday to Friday.

Currencies are traded on the foreign exchange market.

All forex trades are carried out over the counter (OTC); this implies that, unlike stocks, there is no physical exchange in forex trading.

A global network of banks and other financial institutions coordinate all forex trading activities.

Most forex trading activities occur between institutional traders; for instance, people working for banks, multinational corporations, and fund managers.

These traders may be speculating about or hedging against the fluctuations that are likely to occur in the future exchange rate.

For instance, a forex trader may buy U.S.

dollars (and sell GBP) if he believes the dollar will be stronger in value and therefore can buy more GBP in the future.

Why Forex Is Prone To Trading Scams

The main reason why Forex is susceptible to trading scams is that the industry is not very well regulated.

The whole system relies on brokers registering themselves with self-regulatory bodies such as the Commodity Futures Trading Commission (CFTC) or the National Futures Association (NFA).

The volatility of the market also makes it ideal for forex trading scams to thrive.

Forex scammers often offer innocent newbies 100% profit by making use of a ‘secret trading formula.’

Banks, investment managers, and fund managers that are rich enough to hire Ph.D.-qualified forex traders are the ones that usually make consistent profits from their trades.

Inexperienced newbies that are just entering the forex market may search for reputable places where they can learn about the secrets of the business.

They do this so that they can be like their ‘successful forex trading mentors’ with huge profits.

New forex traders need to remember that forex trading is not a get-rich-quick scheme.

They also need to realize that for them to profit from a game, another person needs to lose.

4 Tips For Spotting Forex Trading Scams

1. Lack of regulation

When you are approached by a forex trading company or professional, the first thing you need to check is if their name is on the Financial Conduct Authority (FCA) register.

You should also check if they are on the warning list.

If the company is on the warning list, you don’t need a soothsayer to convince you to avoid them.

Also, if the business is not on the FCA register, and are not vetted by the authority, you need to ask why they are not scrutinized by the regulatory body.

Even if they don’t have the intention of scamming you, it is risky with a firm that is not regulated because you are not protected by the Financial Services Compensation Scheme.

In other words, there is little chance of recovering your money if any malpractice occurs.

2. Promise of huge profits with low risk

One of the most popular ways through which new traders fall into forex trading scams is by taking up offers that promise them huge profits with little or no risks.

That is a false promise that entices beginner traders.

The truth about forex trading is that no way is guaranteed to make you profits in a trade.

Every profit is tied to a specific amount of risk.

The higher your risk, the higher the profit that you’re likely to earn.

If you see any offer that promises to give you a huge profit with little or no risk, then you need to ask yourself this honest question; if someone had access to a strategy that is guaranteed to pump huge profits into his account with little risk, why would the person make the strategy known to everyone? Don’t forget, if anything sounds too good to be true, then it probably is.

3. Signal-selling scam

Another forex trading scams are the signal-selling scams.

This occurs when a company or an individual promises you a system that will help you identify the best times to trade.

They will use this false system to entice beginners in exchange for a fee.

The thought of becoming wealthy overnight will also make the newbies fall into their traps.

Although there are legitimate signal sellers; however, most of the signal sellers will take your money and disappear into thin air.

4. Unprofessional emails

Another way to spot forex trading scams is unprofessional emails.

Email marketing is an effective digital marketing tool that is widely used these days.

If the tone of the email you receive sounds unprofessional, then it’s most likely a scam.

You should also run away from forex trading emails that request your personal information.

Forex traders usually buy email lists from the dark web.

They then bombard these lists with hundreds or thousands of emails that to scam them.

Ensure you have access to the background information of the sender of the email.

If the sender is a company, ensure it is regulated by checking online.


Forex trading scams are not going away anytime soon.

That is why forex trading enthusiasts need to be watchful and stay away from offers that sound too good to be true.

The four points discussed in this article will help newbies spot Forex trading scams.

Most of these scams look legitimate due to the genuine opportunities that are in the market.

Be cautious whenever you come across any Forex trading opportunity.

Once again; if it is too good to be true, then it’s most likely not true.

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