Traders and investors across the globe need to understand what to look for in their partners. With plenty of scams out there, you can protect yourself with a little bit of knowledge.
Despite efforts to reform the Forex industry, many scams remain. Evolving with the times, scammers continue to invent new ways to fool even professionals into accepting their legitimacy.
Yet, even with regulators stepping up across the globe, many cases fall through the cracks. Some of them are complete fly-by-night schemes intended to milk you for one large transaction. Others fake their competence, luring you in over weeks and months.
We see this happening both with people claiming to be so-called ‘Trading Professionals’ as well as with brokers. Each has their own niche in the world of Forex scams. They leverage greed and desire to manipulate their victims.
However, with just a little bit of knowledge, you can combat them by spotting alarming patterns ahead of time. There are some easy, common sense approaches that you can follow to steer clear of these vipers.
The trader that’s too good to be true
We all laugh at the infomercials where some guy stands in front of a nice car and a mansion, talking about how he made millions in the real estate market. It seems both cheesy and fake.
No way you would ever fall for that!
Except, that’s essentially what you find with so-called gurus. They lure you in with all the promises of riches in glory fit for a king. They claim how easy it is to make money, and how quickly you should be able to become a millionaire. Quite often, they will present their ideas in very simple terms that make sense at face value. Sometimes, their strategies may actually work.
The cold hard truth is that trading isn’t something you perfect overnight. Many professionals take years, and sometimes several blown up accounts before they manage to turn a consistent profit. Sure, there are plenty of traders to make quick fortunes in the market. More often that’s a function of lucky timing than a strategy or trader who can outperform at such a substantial level for extended periods of time.
Where we often struggle is when they straddle the line between believability and plausibility. What they offer almost seems too good to be true, but still fits within the realm of reasonable.
However, it’s a little easier to spot these traders than you might realize. There are some simple clues that tell you everything isn’t on the up and up.
Some of this may seem obvious. However, these scam artists are good at what they do. They find ways to get you emotionally caught up, causing you to take leave of your senses.
That’s why one of the best things you can do is take time with anyone who claims to be a great trader. Good ones will be able to answer your questions over a course of days or weeks. Scammers will want to move on quickly. By taking your time, you disconnect the emotions from the decision-making process.
When in doubt, always talk it out with a friend or a trusted professional.
Bad side of brokers
The history of Forex is littered with the bodies of brokers that came and went. Quite often, large swaths disappear when you see outlier moves in the market they fail to hedge.
But it doesn’t take a black swan event to make brokers disappear. There’s plenty that work at the fringes, seemingly legitimate, and then gone the next day. Additionally, there’s plenty of brokers who are legally legitimate but don’t operate in the interests of their customers.
So, with that in mind, let’s cover some of the things to look for with broker scams.
Again, just because a broker isn’t working in your best interest doesn’t make it a scam. However, there is a lot of gray area. Scams attempt to do things that are illegal in most cases. Yet, what’s illegal in one country may be legal in another.
That’s why the governing bodies are critical. Knowing that your broker is accredited by an institution with high standards gives you peace of mind.
Even taking all of these things into consideration may not be enough. That’s why it’s always helpful to have someone you trust that can help you along the way.