Forex (Foreign Exchange) is the market where currencies are traded. As one of the world’s largest financial markets, daily trading volume on this immense marketplace tops $6 trillion – however it also attracts unscrupulous operators looking to scam traders out of their money.
While many old scams have subsided due to enforcement actions taken by the Commodity Futures Trading Commission (CFTC) and self-regulatory National Futures Association since 1982, new ones continue to surface each day. This article offers guidance on identifying and avoiding the most prevalent forex trading scams so you don’t fall prey.
Unauthorised brokers
One of the easiest and most frequent ways of losing your money to unauthorised brokers is opening an account with them, only to then lose it through high-pressure sales tactics and promises of huge returns that rarely materialise. This type of scam may take place over phone calls, email correspondence or messaging apps such as WhatsApp and Telegram – it even happens sometimes when people join trading groups on social media which then bombard them with high-pressure calls from unknown members within these groups.
These scams typically involve unauthorised brokers using celebrity images to lure in unwitting investors, then making claims about their past performance and providing fake screenshots of trade histories to convince the investor that they are legit. Once invested, scammers take their money away either without investing it in the market or divert it away for personal gain.
When they experience losses due to fraudulent forex brokers, traders should contact their regulatory body, who will try to recover those funds and seek legal advice from experts in this field. Traders who have lost money should report it immediately in order to recover it as quickly as possible.
Scams that Mimic Reputable Firms
Many forex brokers are legitimate; however, scammers can take advantage of the reputation of well-established firms to lure unsuspecting traders in. Therefore, it’s crucial that traders conduct extensive research before choosing a broker; make sure it is regulated by a trustworthy regulator, has excellent online reviews and complies with all relevant regulations as well as its client agreement to make sure there are no suspicious clauses, such as restrictions on withdrawing funds or excessive fees that might tripped you in by scammers!
Scammers may take advantage of retail traders by employing complex terminology or exploiting weaknesses, so make sure your forex broker provides clear terms and conditions with no surprises, asking any pertinent questions you have and challenging any statements that do not make sense to you. It would also be wise to research how to become a successful trader before investing your money so as to make informed decisions where best to place it and avoid being exploited by scammers.