Though Forex is an exciting business proposition a budding trader should be aware of the scams that run rampant here. It is believed that the spot forex business deals with more than $1 trillion dollars every day.
With the futures contracts and currency options added to this— the amount traded each day could well go beyond another couple of trillions dealt with every day. Scams or frauds are not uncommon with so much money floating around. Here’s a lowdown on the various forms of Forex scams:
The Various Forms of Forex Scams
Fake Investment Funds
Earlier there were various High Yield Investment Program or HYIP funds that had sprung up all over the place. Some these programs could be likened to Ponzi schemes where the yesteryear traders got paid by the future investors. However, mostly, when these funds start running short of prospects, they generally shut down with whatever money they have acquired.
These perhaps have made the best use of the traders’ eternal quest for the “magic key” to success in Forex. These signal sellers actually promise you that they can guide you on which trades you should choose by selling you relevant information about the same. They charge you a weekly/monthly or daily fee for the same but, in reality do not offer you any useful services.
There are many software providers who claim that they will carry a diagnosis of the forex market on your behalf. In reality, they cannot actually do so. Some of them might even sell at a high fee while you can find them for free.
How can you avoid online trading scams?
As a novice investor, you might as well be overwhelmed by reports of forex scams floating around. However, do not fret. Try to adopt a systematic approach towards the elimination of chances of being swindled.
- Try to avoid brokers who promise very high returns on your investments- easy forex is not a reality- a genuine broker will always inform you about the risks
- The broker should reveal all the relevant fees and the spreads for currency pairs must be clearly stated and fixed
- The broker should be regulated properly by a the respective state authority
- Opt for brokers who have real offices though they are conducting transactions online
- Do not opt for brokers who lack a decent reputation in the market or do not have secured online payment system
Try to keep these points in view while choosing your software or broker and always be guided by the fact that there is no “magic key” to success in Forex.