The foreign exchange or forex market continues to be one of the biggest and most traded financial markets. In 2022 more than $6 trillion will be traded daily on the forex market. Unfortunately, bad actors and scammers inevitably are drawn to such a big market. Here we will discuss what exactly a forex scam looks like and how to spot and avoid them.
What is a Forex Scam?
Each day millions of people travel abroad, whether for business or pleasure, contributing to the massive trade on the foreign exchange markets. However, it is central banks, international companies, and day traders are the most significant contributors to the forex market. Over the last few years, all forms of trading, including forex and other avenues of day trading, are more accessible than ever. The downside is that it creates more opportunities for criminals and scammers to take advantage of forex traders, whether newcomers or seasoned investors. The following are some common techniques used by fraudsters:
- Automated Robot Scams: Forex robots work much the same as other robots, such as chatbots. Using intelligent programs and codes, they can open and close trades automatically. There are plenty of legitimate automated robots for forex out there, but this is also a popular tool utilized by scammers. Don’t commit to anything, and do your research before investing in a trading robot.
- Fake Brokers: Often, a bogus broker will set up their website in a way that mirrors a genuine forex broker site. So carefully check that what you are looking at is legitimate and not a “copy” website. One major thing to look out for is if the broker is regulated. Before signing up for anything, carefully check which brokers with ZAR accounts are regulated and credible.
- Signal Scams: Brokers or sellers give suggestions and advice on when is best to trade. When it is profitable to either buy or sell currencies, and what pairs to trade. Scammers take advantage of people’s trust, promising guaranteed success and big payoffs, taking their fees and disappearing. Not all signals are scams, and there are genuine and experienced traders who choose to sell signals.
Infamous Forex Scams
There are numerous other forex scams to look out for, such as forex Ponzi schemes, managed account fraud, and pyramid schemes, so it is vital always to do your own due diligence.
Some of the most infamous forex trading fraud in recent history were the Black Diamond and the BlackfortFX Ponzi schemes. Fraudster Keith Simmons ran a forex Ponzi scheme for two years, claiming that the Black Diamond trading platform was fully regulated and would yield incredibly high investment returns, scamming $35 million from their victims. The BlackfortFX scam was thought up by Lance Jack Ryan and Jimmie Kevin McNicholl and earned the two more than $8 million New Zeland Dollars (NZD). In both cases, eventually, their fraud was uncovered, and the scammers were sentenced to prison time, but not before their victims suffered the consequences.
How to Safeguard Against Forex Scams
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The good news is that if you educate yourself and take your emotions out of your trading decisions, you can spot and protect yourself from these common types of forex scams. Firstly, there are some key indicators to look out for when trying to spot either a legitimate forex broker and how to spot a fake:
- Uninvited messages:This applies as a general rule, but especially when trading, be alert to emails or messages on social media platforms looking for your personal details. A broker or agent might approach you looking for this information but never give your personal data to someone you don’t know and trust. It is likely a scam.
- Too good to be true:If a broker offers investments that seem too good to be true, it most likely is. Any broker, adviser, or fellow trader promising get-rich schemes should be avoided at all costs.
- Social media:Anyone can easily fall victim to the seduction of Instagram influencers showing off their flashy lifestyle and promising that you can live the same life. But social media platforms are littered with scammers and are not the place to get your investment advice.
- No backup:Look out for traders or brokers with no credentials or proof of their trading validity and history. Never give your assets to unregulated or unauthorized brokers. If something goes wrong, you will never recover your losses.
Create your own checklist of simple assessments before signing up for any trade, investment, or platform, including:
- Don’t ignore your gut or overlook clear red flags.
- Ask for background information and do an online investigation to ensure someone is legitimate.
- Confirm that you are dealing with an authorized, regulated broker.
- Make sure they can back up their claims with real data and evidence of successful trades.
- Double-check the website or platform to ensure it is not a copy or imitation of a legitimate broker.
- Do some homework and read online reviews or forums before investing your money.
- Take advantage of trial periods, where you can test out a broker or platform before handing over any money.
Conclusion
Avoid becoming a victim of a forex scam. Don’t let anyone pressure you into get-rich-quick schemes. Always do your homework, ensuring that you always use a regulated broker. There are plenty of trustworthy investors, advisors, and brokers out there. It is all about separating the scammers from the experts.
