Forex trading is getting more popular every day as investors trade their favorite currency based on the ongoing exchange rate. When it comes to the trading of digital currencies, the exchange rate can be volatile, which can cause gains and losses from buying and selling currencies. Forex trading has been going on for a long time through the trading of goods and services.
However, the only change in the modern history of trading is that people can easily trade currencies other than goods and services. The trading of forex has reached a stage where it’s globally targeted by scammers and cybercriminals. These scammers have many ways to convince traders to fall into their trap of making a huge amount of money with little risk.
How Do You Spot These Scams?
The trading of forex is not well regulated, as the system depends on brokers. The nature of the volatile rate of trading forex makes it an easy target for scammers. Scammers often utilize a quick method of convincing traders that they have a secret method of making a 100% profit.
It’s true that experienced traders have their way of generating a lower amount of profit through trading. But for inexperienced traders, they're always eager to start making money immediately without struggling to gather the experience required for making profits thereby falling for scams.
As a new trader to the forex system, you need to understand that forex trading doesn’t generate profits immediately. So you need to be determined and gradually work towards your goals for you to make a profit. For someone to make a profit from a trade, another person will need to take the loss.
To easily spot scams, you need to totally understand how the forex scams work by asking yourself questions like:
Is the Broker Regulated?
Brokers provide all the necessary systems needed for trading forex. There are both regulated and unregulated brokers in the marketplace of trading forex. Regulated brokers are managed by a governing body, which makes them safer, unlike unregulated brokers.
Unregulated brokers have no legal rule guiding them, and that makes it a perfect tool for scammers. Imagine a broker where you cannot do anything if your money got stolen because there's no legal authority guiding it, especially in Thailand. You can read more on News Thailand.
How do you know if a broker is regulated? As a trader using broker platforms, you need to know how to check if a broker is regulated or not. In most cases, checking the bottom page of a broker website will provide you with the information necessary for determining if it's regulated. If a broker has no information indicating that it's regulated, that's a red flag and you should avoid such brokers at all cost.
Is Every Regulatory Body Trustworthy?
It's true that a regulated broker indicates the regulatory body information at the bottom page of their platform. That doesn't mean that a broker is trustworthy. There have been a lot of scam activities from brokers who claim to be registered to a regulatory body that's not associated with forex trading.
There are a few legitimate regulatory bodies that you should know as a forex trader. These regulatory bodies have been the major system used by trustworthy brokers.
Here's a list of trustworthy regulatory bodies:
- The Financial Conduct Authority from the United Kingdom. (FCA Regulated)
- The Cyprus Securities and Exchange Commission from Cyprus. (CySEC)
- Australian Securities and Investment Commission from Australia. (ASIC Regulated)
- Financial Services Agency from Japan. (FSA Authorized)
- Monetary Authority from Singapore. (MAS Authority)
- Security Futures Commission from Hong Kong. (SFC Authorized)
If you are a beginner at forex trading, you should endeavor to check the information regarding the regulatory body. Research on the regulatory body to ensure its safety. If possible, check the registration number on the broker website to verify legitimacy.
What Attracted You to the Broker? Is it Bonuses or Quick Profits or Promotions?
Scam brokers always implement the strategy of convincing traders that they provide the option of allowing them to make more than their initial amount. Most brokers will claim that with their service, you will be able to turn $50 to $250 in a day. They might even claim that they have a success rate of 100% in generating return profits from trades.
You have to understand that all of these claims are fake and scams. Independence of the brokers, they can't offer you an 80% return on profit signal regardless of what you are trading CFDs, binary options, or forex. Legitimate forex brokers do not promise returns to traders at all. Whether a trader makes profits or losses depends on their ability along with the strategy utilized.
Scams are known to often advertise bonuses, rewards, and promotions like getting a car from being the best trader on their platform. However, you should understand that no matter how hard you try, you are not going to get any car. A legitimate broker does not promise you anything for trading on their platform.
Does the Broker offer an Account Opening Bonus and Rewards?
Yes, you heard it right. Most brokers used the account opening bonuses and rewards to lure traders to their platforms. With just huge bonuses and rewards, a lot of investors might be convinced to make use of the enticing offers while forgetting the fact that they are scammers. For example, most brokers promise you that opening an account with $5,000 will get you an extra $5,000 like FBS.
And the funniest part is that they don't always provide more insight on the type of bonus they are offering to customers. Most of these bonuses and rewards are subjected to other terms that the investor knows nothing of, until after registration. You should desist from registering on any broker that promises to offer whooping bonuses or rewards to investors.
Conclusion
There's a lot of forex trading scams going on throughout the internet nowadays. But with the above tips, you learn about the current trending forex scams and how to avoid them.