Forex scams are, unfortunately, quite common. However, the good news is that they’re easy to identify once you know what you’re doing and are aware of what to look out for. The easiest thing to be on the watch for are those who guarantee extremely large profits for little or zero financial risk. If there was a way to achieve this kind of thing, no trader worth their own salt would share it with others. Success in forex relies on you understanding the markets and educating yourself on how to trade. Anything that sounds too good to be true most likely is.
So, how can we identify forex trading scams? Let’s take a look.
A Lack of Background Information
Whether it’s a money manager, an educator, a trader, or a broker, you should never work with anyone who refuses to provide you with some background information. You want to know that the person or platform you are working with is legitimate and has a history to back this up. Anyone who dodges this question or who cannot provide basic information is someone you want to avoid.
If you’re unsure of a person or platform’s credentials, you can always do a search online to find out more about them. LinkedIn is a great place to find out more about individuals, while sites like InvestinGoal should be your one stop shop for brokers. This FBS broker review on their site, for example, explains that the broker in question is not a scam and that they are regulated and licensed. Finding out this information takes seconds but could save you from losing a lot of money.
A Request for Personal Information
Data is a high-value commodity and some scammers pretend to be forex traders and brokers in order to extract this from you with the intention of selling it on. They will often ask for personal information like your home address, your phone number, and your full name without explaining what they are going to do with this information. If this happens, you should be wary, and avoid handing over any information to someone you don’t fully trust.
While GDPR has gone some way to reduce the likelihood of this happening in Europe, there is no such law in the United States. If someone does ask you for personal details, ensure they provide you with a risk disclosure statement explaining how your information will be used. When signing up to a forex broker platform, you’ll also want to check what your data is needed for and how it will be protected. In some cases, you’ll have nothing to worry about, but it’s vital that you take this step to ensure your safety.
Opportunities That Sound Too Good To Be True
While legitimate social trading platforms like eToro have made forex trading easier to get into and understand, there are still plenty of scammers out there promoting opportunities that sound too good to be true. Anyone who says that you can receive a large reward for a minimal investment is not someone that you should trust unless you know them personally and are aware of their trading history and their motive for helping you.
Both forex and CFD training requires patience, a good understanding of the markets, and the education to know when to trade and when to hold off. Easy money is not something that can be achieved without these three factors, and it’s certainly not something that will happen overnight. Yes, a lot of people do make good money by trading on the forex markets, but these traders have put in time and effort to get to where they are today.
Inconsistent or Illegal Terms and Conditions
Finally, it’s also important to ensure you look at the terms and conditions of a broker before you choose to trade through their platform. Some broker platforms, in particular, do a fantastic job of making their sites look legitimate, but when it comes time to withdraw the money you’ve made, you find you are unable to do so. Many hide stipulations in their terms and conditions that restrict the amount of money you can withdraw or make it very difficult to do so. In many cases, these conditions are illegal, but in others, it’s something you agree to when you sign up on the platform.
If you are ever unsure as to the terms and conditions on a website, don’t be afraid to speak to a financial advisor for advice or to compare the terms with those of the regulatory authorities. You should make sure to read through all of the fine print when opening an account and also search online for bad reviews of the provider. Furthermore, attempting to make a small withdrawal early on is advised just so you can see how easy the process is.
It is possible to make a good living from forex, but if you’re new to trading, it’s wise to keep the above advice in mind. Know how to look out for trading scams and work with a legitimate broker and platform instead.