Forex Currency Trading Scams

What is Forex

Forex (a short form from FOReign EXchange) is an international financial market founded in 1976. Forex trading involves central banks of different countries, global companies, commercial banks, and various traders which perform a currency exchange.

People trade the main convertible currencies on Forex to each other. A benefit of Forex is that anyone can start using it, even those who don't have any economic qualifications. There are two things to consider: first, traders never buy or sell physical currency. Second, buying and selling occur in all currency transactions. The most popular pairs are EUR/USD, USD/JPY, GBP/USD, USD/CHF.

In general, trading is the process of buying and selling currency to make a profit. The price of one currency is linked to the price of another, so transactions are always made with two currencies simultaneously. Your profit (or loss) depends on the change in the currency price difference.

The market works 24 hours, digests any volume of transactions, and grows in volume annually. The average amount of transactions on the market is 4-5 trillion US dollars, exceeding the capacity of trading on the most potent American stock market.

Is Forex a Scam

Some people believe that Forex is a fraud, especially if a third-party carries out all the trading processes. Like any high-income business that attracts many people, Forex happens to be the object of fraudulent transactions and deception. However, earnings without cheating are quite real.

One should understand that the tricks of Forex companies are easy to calculate. Obscenely lucrative offers from dealing centers can serve as a symptom of Forex fraud. Of course, the terms of cooperation should be profitable, but it is necessary to realize that they are real.

What Forex Scams Exist

Specialists and tech support work hard to decrease the number of scams on Forex. However, still, there are many cases of it, including the most common ones:

Signal Seller

The signal seller scam works by a person or company selling information on which trades to make and claiming that this information is from the professional forecasts. They say it's a guaranteed way of making a profit, and this scheme often works for inexperienced users.

The signal sellers usually charge customers a daily/weekly or monthly fee but don't offer traders any useful information. They have a block of users' reviews that might convince investors in their credibility. However, in reality, they have nothing to offer to their customers.

Pyramid Schemes

Financial pyramids (or the Ponzi scheme) exist since the last century, and they have become one of the most common Forex scams. They promise a high return with small investments, and at first, investors do gain some profit. This profit is a motivation to invite investors' friends and family to join this scheme.

However, when the number of investors starts to drop, the scheme ceases to exist. So, getting rich on pyramid schemes is real only among the scammers who start it.

Boiler Room Scams

This type of scam suggests investors buy shares in companies. These companies usually never exist, and they provide customers with fake telephone numbers, fake websites, and fake offices.

They say that the situation is urgent, and the companies shares will increase substantially in the immediate future. So investors have no time to think and do proper research and entrust their fonds to the scammers. Once the scammers have received the money, they disappear with everyone's investments.

Software Scams

Trading and earning profit without any participation can lure inexperienced customers. Therefore, different software tools for Forex have appeared recently. They offer software that can forecast the market and suggest you the best options to trade.

Professionals do use some software, but it only helps to see past trends and predict future ones based on them. However, there is no such tool to forecast market trends automatically. And if there was, do you think that they would share it so easily?

Managed Account

There are many examples of these scams when an unexperienced user finds a so-called "manager" for their account who can trade instead of them. However, finding a real manager can be quite a challenge. Many fraudsters use the trust of trading newbies, and instead of investing money, withdraw it to their accounts.

How Not to Get Scammed

The most important advice to avoid being scammed is to use a demo account. Demo accounts will help you understand the basics of trading, the variety of instruments you can use, and show you all the scenarios: from a massive profit to an enormous loss.

However, learning to trade without a teacher or a trustworthy broker will take years. When searching for the one, avoid the ones who will promise you to learn in a week, and get money quickly. Be aware that it can take years before you master your skills to a professional level.

One more thing: check the authenticity of the company making the claims or selling the expertise/course. For this, check the jurisdiction where the business is registered since some scammers trade from locations where local law doesn’t expose them to prosecution on the international level.