Trading Scams to Avoid
For the good or for the bad, forex has become the biggest of all financial markets. With more than $5 trillion being traded each day, it is the focus of a lot of attention. Through forex, people going away on vacation can trade currency or big businesses can trade currencies amongst themselves. It is a market that never sleeps, so there is a chance to make money every hour of the day, five days out of each week. Around the world somewhere, depending on the time zone, there is a market open for business. While opportunities for making money exist, success doesn’t come easily. It takes a lot of hard work, learning, studying and experimenting to get to a point of profit. Knowing this, there are traders with no scruples whatsoever trying to trick forex newbies out of their hard-earned money. You can be sure that every place where there is money to be made, there is someone waiting to offer you such a good deal that you can’t resist. So the point here is to understand how to spot those scammers and to resist falling into their schemes.
Identifying Forex Scams
The sheer volume of trades and profits generated in forex draws more than its fair share of scammers with every kind of trick in the book. There is no accountability to this unregulated spot market, so tricksters are able to offer chances to earn huge fortunes in a short amount of time. Although there are tried and true old scams you can identify, the new ones popping up every day need a keen eye and clear mind. To avoid the older scams, shy away from offshore retail brokers with no CFTC, NFA or country of origin regulations. They are like pop-up stores in that they can appear, take your money, and then disappear into the night. One of the more modern schemes is the signal-seller scam. Pooled asset managers, retail firms, individual traders or managed account companies put up a system that you can pay them for by the day, week or month. They will try to convince you that they are able to identify the best times for buying or selling specific currency pairs. With their professional recommendations, you can get rich quick. Naturally, they portray themselves as experienced traders with excellent sense for trading. They’ll of course try to sway you with several testimonies written by clients telling the story of how they went from rags to riches through this scheme. What do you need to do to buy in? Fork over a whole bunch of money. What do you get in return? Expert trade recommendations. After they get your money, one of two things will probably happen. Either they’ll disappear or they’ll give you a tip now and again, as incentive for you to continue sending them money.
There are automated systems that promise to make the best trades and profits for you while you sleep. Also known as robots, these systems can work well if the trading system has gone through adequate testing of its parameters and optimization codes. If the system is faulty, it will use your trading account to put forth random buy/sell signals. But even if the system is worthy, pay attention to the cost of buying into it. Systems can range from a few hundred dollars to thousands of dollars.
Bottom line with any trading platform is “buyer beware.” There is no shortcut to becoming a successful day trader. Always listen to that voice in the back of your head that says, “This is too good to be true!”