Spot A Forex Scam are offered by unscrupulous traders, with the lure of making huge fortunes in a short time. The foreign exchange market moves more than 6.6 billion dollars a day (as of 2019). With this enormous amount of money floating around in a spot market through regulated and unregulated entities, it is challenging to spot a Forex scam.
If you’ve taken the time to research and learn about the forex market, you should already be clear on whether Forex is legit or a scam.
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What Types Of Scams Exist I Forex?
Unscrupulous traders offer forex scams with the lure of making huge fortunes in a short time.
And while scams were popular a while ago, they have ceased thanks to serious action by the Service Futures Trading Directive (CFTC) and the National Futures Association (NFA).
- Some scams persist, and new ones keep popping up.
- That is why it is essential to spot a Forex scam. These are some :
- The Exaggerated Spread Of Scam
- An old way of scamming in Forex was differentiating points or the Spread that the broker or Forex Broker charges.
- It is based on computerized manipulation of bid-ask spreads.
What Is A Spread?
The SPREAD or the Spread of points between the offer and the offer is the commission the broker charges for a transaction process him.
- These spreads usually differ between different money sets.
- When those point spreads differ widely from the brokers’ average, the scam happens.
- For example, for EUR/USD, the expected Spread is 2 to 3 pips; dishonest brokers can charge spreads of 7 pips or more.
WHAT Is A PIP?
ACCORDING TO MARKET CONVENTION, a PIP is the smallest price program at a given exchange rate.
Since most major money sets are price to four decimal places, the minor change is to the last decimal place.?
Four or more pips on each trade can cause any profit resulting from an excellent transaction to be eaten up by commissions.
This scam has died down in the last ten years but beware of retail dealers not delimited by the CFTC, NFA, or your country of origin.
These trends still exist, and it’s easy for companies to pack up and disappear with the money when facing legal action. Many have been sent to jail for these computer handlings.
But the majority of perpetrators have historically been US-base companies.
The Signal Seller Scam
A popular scam today is the signal seller.
Signal sellers are retail companies, asset managers, managed account companies, or individual traders that offer a signal system daily, weekly, or monthly fees.
What Are Forex Signals?
Forex Signals aim to identify favourable times to buy or sell a currency pair based on professional recommendations.
Which, in theory, could make anyone rich.
They promote their long experience and business skills and the testimonials of people who attest to how good the service is and the great wealth that this service has generated for them.
- All the innocent trader has to do is hand over X dollars for the privilege of trading recommendations.
- Many signal-selling scammers collect money from a certain number of traders and then disappear.
- Some will recommend a good operation from time to time to give the perception that the signal service is good and thus continue to generate money for them.
- This new scam is slowly becoming a more significant problem.
But while there are signal sellers who are honest and make trade recommendations as intended, it pays to be sceptical.
The ” Forex Robots ” Scam
Forex Robots are a persistent scam, old and new, that comes in the form of automated systems developed to trade Forex.
- These scammers promote their system’s ability to generate automated trades that generate great wealth even while you sleep.
- Today, the new terminology is ” Forex robot ” because the process of buying and selling is entirely automatic by computer.
- Many of these systems have never been formally review or tested by an independent source.
- Examination of a forex robot should include testing trading system restrictions and optimization cryptographs.
- If the parameters and optimization codes are unacceptable, the system will generate random buy and sell signals.
- It will leave unsuspecting traders to do nothing but gamble with no certainty of success.
- Although there are proven systems on the market, forex traders should do some research before investing money in these systems
Other Factors To Consider
Traditionally, there are pretty expensive automatic trading systems (or robots), costing $5,000 or more.
It can be seen as a scam in itself.
Today, no trader should pay more than a few hundred dollars for a proper system.
Be especially wary of system vendors who offer programs at exorbitant prices justified by guaranteeing phenomenal results.
Instead, look for legitimate vendors whose systems have been appropriately test to generate revenue potentially.
One way to spot a forex scam when choosing a broker or trading system is to be sceptical of the promises advertise in promotional material that guarantee a high level of profit quickly.
There are other warning signs of a scam. And it is when brokers do not allow the withdrawal of money from investment accounts or when there are problems within the trading platform.