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Forex Scams: How to Identify & Prevent Them


Foreign exchange trading, often referred to as Forex, is the largest financial market on the planet. With trillions of dollars traded daily by corporations and investors. Courtesy of the internet and computers. Forex has become accessible to absolutely anyone through brokers, many of which can be scouted online.

Due to surges in Forex trading, particularly with ordinary folk looking for legitimate ways to rake in extra money. Fraudsters have been closing in, hoping to lure traders into sham investments known as Forex scams.

What are Forex Scams?

Put simply, a Forex scam refers to any type of foreign exchange trading scheme used to defraud a currency trader. Convincing them that high profits can be expected by trading in the market.

How to Identify a Forex Scam

It’s one thing to be aware of Forex scams, but the importance of being able to detect them can’t be stressed enough. By arming yourself with knowledge on how they operate, the chances of evading a scam can drop significantly. Here are some key characteristics to look out for:

  • Guaranteed Success, Big Profits. When it comes to any kind of market trading, absolutely nothing – zero, zilch, nada – can be guaranteed. The Forex market in particular is anything but certain, so there’s no reason why moment-to-moment changes won’t affect your interests just like everyone else’s. So, with that in mind, never believe anyone who tries to convince you of guaranteed, sure-thing, failure-proof returns or specific results, because you’re dealing with a scammer.
  • Vague Background Info/Proof. The main role of a scammer is to convince you that a knowingly empty chest is full. So, these fraudsters are going to come equipped with the ‘good stuff’, showing charts that emphasise profits; for all you know, however, these could just be demo trading accounts, with no bearing on any real trading whatsoever. If you receive vague, lacklustre information regarding profits and losses, along with the broker’s/product’s background, then why the secrecy? It’s all pointing toward a Forex scam.
  • Out of Nowhere Marketing. Unsolicited contact is generally perceived as being suspicious in nature. And when it comes to unsolicited marketing linked to foreign exchange trading, the feeling should be the same. If it’s out of the blue and or offered in a pushy, persistent manner, then it’s almost certainly a scam. Never cave into purchasing products or services due to pressure tactics, and approach with extreme caution if you’re ever asked to give out personal/financial information.

Types of Forex Scams

While new ways to defraud unsuspecting victims are being constantly developed by cyber criminals and con artists, there are four main types of Forex scams that tend to remain most prominent:

  • Pyramid Schemes. Illegal Forex pyramid schemes make their money by recruiting new paying members. Scheme owners can become wealthy, not by trading Forex, but by profiting from ‘investors’ who pay to join the scheme. The second layer of recruits hires more investors as does the third layer, hence the pyramid structure, meaning those at the top always benefit the most.
  • Ponzi Schemes. Instead of paying a fee (as with Pyramid schemes), you ‘invest’ money into a Ponzi scheme, which is, essentially, a bogus investment management firm. Scheme owners entice investors with a ‘Forex money manager’, usually hyped as being an all-knowing genius of Forex. There are in fact real Forex money managers who trade a pool of clients’ money and charge fees/percentages of profits; the key difference with Ponzi schemes, however, is that, well…there is no investment. Fraudsters pay out early investors not from any return on investment, but from money gained from later investors, meaning that, so long as there are new investors, the scheme keeps rolling.
  • Signal Scams. These are subscription services to receive buy and sell alerts for the foreign exchange trading market. Close to being identical to Robot scams (discussed below), Signal services differ in that they offer a subscription service to receive buy and sell alerts. As with Robots, there are in fact real Forex signal services that provide useful services, but require buyer discretion in most cases. Trading Signal services is best used as a measuring stick for trading opportunities. The takeaway question: Why would a signal provider peddle the service when they can just take the signal themselves?
  • Robot Scams. Forex Robots are computer algorithms developed and programmed to place trades in the market. Metatrader, which features EA (Electronic Advisor) robots, is currently the most popular Forex trading platform. It should be noted that legitimate, money-generating Forex robots do exist, as do those which, despite their developers’ best intentions, are unable to generate money. A Forex robot can therefore become part of a scam when big returns are promised by developers who make sales despite robots being unfit to generate money.

How to Prevent Forex Scams

When it comes to steering clear of the sticky web that is cyber crime, fraud and identity theft, preventative knowledge can go an awfully long way. It is, after all, far easier to avoid loss than it is to recover from it, especially when heartbreak and finances are involved.

Here are several ways to prevent becoming the victim of a potential Forex scam, no matter how it may find you:

  • Too Good to be True. Anything that seems wildly unbelievable usually is, and you should keep this in mind when sizing up a potential Forex scam. Remember, big profits/specific results can never be guaranteed. Not in any market. Ever.
  • Don’t Send PII. If you’re asked by a stranger, whether by email, text or over the phone, to give out PII (personal identifiable information), don’t do it. Unsolicited contact is a strong indicator of an outright scam.
  • Pressure Tactics. If an ‘opportunity’ is in any way being aggressively pushed in your direction, making you feel suspicious/uncomfortable, you’re most likely dealing with a fraudster. Trade with a clear head, and never be forced.
  • No Proof, No Dice. Don’t proceed without proof of results by verified trading statements. If you’re being ‘promised’ results, the seller needs to prove they have the results to back it up. Results can be verified using trustworthy verification/strategy analysis websites/services.
  • Investigate, Research. Leaving things to chance creates more potential for disappointment, failure, and even ruin. Do your homework by checking listings of registered investment firms and registered investment managers (usually available from your country’s/region’s stock market regulator).
  • Learn Your Craft. By investing some time in learning how to trade and how the Forex market operates, you’ll be doing yourself a huge favour. You won’t be guaranteed financial success, sure – but you will be more knowledgeable, dialled in, and as a result, better at identifying scams.