Are you looking to prevent being caught in a forex trading scam? You did well to do some research, and we prepared this information to help you ask the right questions. With the emergence of social media and messaging apps, forex trading scams are becoming rampant and more challenging to detect. Unsuspecting traders are falling victim to fraudsters masquerading as experienced traders. Many innocent investors do not know how to distinguish between a scammer and a genuine broker. This guide explains a few signs you can use to protect yourself and your investments.
Unregulated forex brokers
You cannot trade forex without a broker. Most jurisdictions require brokerage companies to be registered and have a license. If the firm has no registration details, it will likely be a scam. The first step to protecting yourself from scammers is finding a licensed broker. A site like FXList has quite an extensive list of reputable brokers who can guide you through your forex journey. You can read and compare reviews to determine the right firm for your trading needs and check their credentials.
Fake reviews
Many scammers create the illusion of success by using fake testimonials and reviews. They will post them from allegedly successful forex traders to attract unsuspecting investors. They can go as far as lifting photos of high-profile traders from their social media accounts or posting non-existent awards on their websites to mislead would-be investors. Be sure to check what’s being said about a firm outside of its website, and if you notice that a broker has won numerous awards you have never heard of, it is probably a scam.
Guaranteed returns
While forex trading might be the largest financial market globally, it does not have guaranteed returns. Market movements are drastic and ever-changing. Many fraudulent brokerage firms promise traders various investment plans with guaranteed returns, from 50% to 200% of their initial deposit. Reputable brokerage companies do not make unsubstantiated claims. Additionally, they do not guarantee that you will make a profit by joining them. They only provide valuable resources that can help you become a successful trader.
Cryptocurrency payments
Scammers will likely ask for money before you execute your first trade. They will demand that you convert the funds into cryptocurrency before transferring it to them. While some brokers allow investors to deposit funds into their accounts in crypto, sending your money to an individual rather than your forex account can prove costly.
Related article: How to Tell If a Crypto Is a Scam or Legit?
Once you transfer the funds, you will not get them back. Blockchain transactions are anonymous, do not have anti-fraud systems, and are irreversible, making it impossible to recover your money. Be sure the firm you are considering offers multiple payment options, not just crypto.
Untested trading systems
Scammers might claim to be expert signal sellers and advise you on a favorable time to execute your trade. They may also claim to have a trading robot you can use to execute trades automatically. While reputable firms may use similar tools, you should be wary of firms that are completely hands-off in their system. Use that as a sign to dig further into a broker’s credibility.
Bottom line
Forex trading scams exist despite concerted efforts to weed them out via tighter regulations. Forex trading can be a profitable career if you find a reliable broker to guide you. Be sure to research and create a shortlist of options before choosing so you can compare firms and verify their legitimacy.
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Photo credit: The feature image is symbolic and has been done by Christopher Isak with Midjourney for TechAcute. The infographic in the body of the article has been done by Statista.
