FX trading

Forex trading scams

 The following Forex scams list current and past types of scams involving Forex scams.

signal seller

Signal seller scams are scams in which an individual or company sells information about which trades to make and claims that the information is based on professional predictions, guaranteed to make money for inexperienced traders. They usually charge a daily/weekly or monthly fee for their services but do not provide any information to help traders make money. They often take numerous testimonials from supposedly legitimate sources to gain traders' confidence, but actually do nothing to predict profitable trades.

high yield investment plan

High Yield Investment Plans (HYIPs) are often just a form of Ponzi scheme, where high levels of returns are promised on a small initial investment in what is actually an exchange fund. However, in practice, the initial investors receive returns from the funds generated by current investors, and a constant influx of new investors is required to keep funds flowing. Once there are no longer investors in the scheme, the owners will often close the scheme. and take any remaining money.

Manipulating bid/ask spreads

These types of scams have decreased over the years, but they still exist. This is why it is important to choose a Forex broker that is registered with a regulatory agency. This type of scam usually involves spreads of around 7-8 pips, instead of the usual spreads of between 2-3 pips.

Fraud through software

Forex robot scammers lure newbies with the promise of huge gains with little effort or knowledge. They may use false or misleading numbers to convince customers to buy their products. Their promises are flawed because no robot can adapt and thrive in all environments and markets. Professionals often use software only to analyze past performance and identify trends. All software should be formally and independently tested, but caution needs to be taken when trusting the reviews themselves, as these reviews can be paid for. If their product did exactly what they claim it does, they wouldn't sell it but would exclusively use it themselves.

Escrow account

These accounts may be a form of Forex scam, and there are many examples of escrow accounts. These scams usually involve traders taking your money and instead of investing it, use it to buy various luxury goods for themselves. When the victim eventually asked for a refund, there was not enough money to pay it back.

Ponzi schemes and pyramid schemes

This is a very common form of kinship fraud. They promise high returns for a small upfront investment. Early investors often do receive some form of return on their money and are incentivized by this success, and then they recruit friends and family into the scheme. However, the reality is that the "investment opportunities" do not actually exist and their initial returns are funded by funds paid in by other members of the scheme. When the number of investors starts to drop, the scammers shut down the scheme and take the funds.

boiler room scam

This type of scam involves a scammer, usually getting people to buy stock in a worthless private company with the promise that their stock will increase significantly when the company goes public. They rely on using a "sense of urgency" - suggesting that the opportunity will be lost if they don't act quickly, thereby preventing targets from properly researching the opportunity. Often, however, the company does not really exist and may have a fake phone number, office, and website. Once the scammers make all the money, they disappear along with everyone's investment.

How to spot a Forex scam?

One of the most important things an individual can do to avoid being scammed is to actually learn to trade correctly in the Forex market. The difficulty, however, is finding a trustworthy Forex broker/teacher you can trust. Amateurs must know that a broker actually makes the money he/she says he/she will, and due diligence is key here. The Forex market is not a casino, but a very serious market with trillions of currency units traded every day. Use a demo account and learn to make long-term profits first before trading live. Please note that, as with any professional skill, it can take years to master Forex trading properly. Any claim that "you can make money fast" should be avoided.

Paul Belougour, managing director of a retail foreign exchange trading company, even said, “If it’s your hard-earned money—money you can’t afford to lose—then never, ever invest in foreign exchange.”

Don’t just take the claims made at face value, take the time to conduct your own analysis. Inexperienced traders should be critical of their own methods, analyze statistics and create their own functions that have been tested on demo accounts with success. This takes time to achieve, but for inexperienced traders it is a better option than trusting automated computer programs. Don’t rush into investments that are “too good to be true.”

Other things one might want to check is the authenticity of the claims the company makes or sells expertise/courses. To do this, check the location/jurisdiction where the business is registered, as many Forex scammers will operate from locations where they believe local laws will make it difficult for them to be prosecuted internationally.

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These FAQs answer common questions about the Forex market: