Forex trading is an expansive field that gives users international exposure. These markets are governed by regulations that curb and control misleading brokers. However, with the vast market, forex scams still find a way to trick the traders and run their practices.
If you’re a beginner at forex trading or aren’t familiar with how these scams work, this article can be of some assistance. However, learning about such frauds is as crucial as understanding how the forex market works. Just as the adage goes, prevention is always better than cure. While it is commendable that you are attempting to become acquainted with the numerous forex scams, it is also prudent to be aware of forex broker scam recovery firms that will assist you in recovering your funds. By performing early assessments, these companies aid in the recovery of funds. The next steps are to gather evidence and address corrupt practitioners. These companies go to great lengths to recover money from scammers on behalf of their victims.
Hence, in this article, we’ll be covering the types of forex scams and how they work;
- Types of Forex Scams
- Failures Led by the Broker
- Manipulating Trader’s Behavioral Pattern
- The Signal-Seller
- The Forex Trading Robot
Types of Forex Scams
- Failures Led by the Broker
There are instances where the brokers fail to predict the market accurately. It then leads to losses to the traders, which is entirely the Broker’s fault. However, a significant reason could be that the Broker has focused more on getting commissions than assessing the client’s trade.
The trading failure could either be a glitch on the buyer’s part or a fake loss. By artificial losses, we mean the cheats who take away money and show losses as a cover-up. While these brokers lure the audience with their features and skills, such as stop-losses, limits, and more, most of them never put these features to use. They might even encourage the traders to invest more funds to increase their commissions.
It is also wise to know if the brokers you come in contact with are regulated or not. It’s better, if you check if they are trustworthy or not by visiting the licensing page of the Securities and Futures Commission (SFC) website
2. Manipulating Trader’s Behavioral Pattern
Trading is an activity that involves a lot of ups and downs, especially with the market being so unpredictable. A rollercoaster of emotions is guaranteed for the traders dealing with varied emotions, alongside the profits and losses. Unfortunately, many of these scam brokers use the trader’s weakness.
For instance, if the economy faces a recession, the traders are likely to panic and make hasty decisions. Further, the inexperienced traders and beginners are more inclined to be influenced by their sentiments. Consequently, most of them tend to follow the herd.
Their decisions are triggered by fear of losing, making the market volatile. When they seek trading support, the deceitful brokers exploit their emotions to make big money. While they assure risk-free trading, zero losses, and high returns, the market participants easily believe them.
3. The Signal-Seller
Modern-day scams are innovative and advanced. One popular forex scam is the signal-seller. They recommend buying or selling in currencies to make favorable returns. These services are exchanged against daily, weekly, or monthly fees. They claim to give you expert advice to turn you into a wealthy person.
Additionally, they promote their trading skills, extensive experience, and positive reviews posted by their users. The paid reviewers affirm that the Broker is excellent at what they do and transforms your life with a fast income. Although that isn’t the truth, traders fall for the idea of stability in a volatile market.
Many of these signal-sellers cheat an endless number of traders off their money and eventually vanish. They might even help a trader make money initially to retain their trust or get them to invest more money. The scam has been spreading wildly ever since its origin. Not all signal sellers are dishonest; some execute their services diligently. A trader needs to conduct a background study to ensure that the signal-seller is genuine.
4. The Forex Trading Robot
Another peak into the modern-day scam introduces us to the forex trading bots. It has been a scam in the market for decades yet keeps upgrading with time. The fraud primarily revolves around an automated system that has been built to predict accurate details about the forex market.
The scammer also promotes its system by ensuring precise results and its ability to raise funds even when you’re sleeping. While the practices of robbing money remain the same, the terms used are different. The system is known as a “robot” as it is established with the help of computers and is 100% automated. Unfortunately, many of these systems are never sent for testing or are rejected after the review.
The evaluation process of a forex bot comprises testing the trading system’s optimization code and other parameters. If the principles and parameters are incorrect, the system will bear the wrong signals. These are the buy and sell suggestions that might be random or set up to be faulty. Thus, the traders seeking a gamble might lose a hefty sum.
Again, legitimate and tested bots do prevail within the forex markets. However, every trader must research the provider or bot before purchasing their services.
Now that we’ve listed out the major forex scams, you can check whether your Broker shows any similarities with these scams. It’ll help spot the fraud and keep your funds safer. A piece of advice would be to verify your Broker before putting your money out there.