Lesson 8: Ultimate Tips to Avoid Forex Scams

While there are legit forex companies out there, you need to be wary of the lurking risks of scam brokers and service providers. 

Throughout this module, you've surely learned one thing: scam services are real. If you're new to the financial market, you can expect these brokers and service providers to target and victimize you.  

Here are some effective tips to keep you safe from these forex scams.

Lesson Highlights  

• Common forex scams promise easy money and high returns to attract traders who want to grow their investments as quickly as possible.
• Transacting with brokers or service providers regulated by a regulatory body mitigates the risk of investment losses caused by unethical practices of brokers and service providers.
• The most common trading scams in forex involve trading signals, robot traders, and forex-managed accounts.

#1. Don't Fall for Easy Money and High Returns 

Remember, if it sounds too good to be true, it's likely not true. Remember that easy money often leads to financial ruin instead of the promised high returns. 

Forex scammers often market their services and products as easy money and high returns. That's how they catch the interest of their target victim.  

However, you can battle this by knowing the dynamic of the forex market. In the financial market, getting high returns and easy money is impossible. You should know that even professional traders don't see the market as an avenue to get easy money. 

#2. Research The Broker's Regulation and Registration 

If you're in the market for a new forex broker or service provider, you must first check their legal compliance. This should include which regulatory body their service is under and where the business is registered.  

These authorities monitor financial companies' conduct and operations to safeguard investors' interests. 

Choosing a regulated and registered broker and service provider reduces the likelihood of you getting scammed.  

Also, this ensures you are protected if you encounter problems with a broker or service company. You can escalate your issues to regulatory authorities and have them handle them.  

#3. Avoid Trading Signals

While trading signals are legitimate, there is still criticism about their accuracy and how their respective company markets them. 

Basically, trading signals are alerts or indicators that suggest profitable trading opportunities in the market. However, the forex market is dynamic as it changes every time depending on different factors.  

So, the problem with trading signals is the reliability of the trading signal to perform in the live market. It can't adapt to the changing nature of the market, so it's risky to rely on a single set of trading signals because it will not work best for all trading environments. 

Constantly and religiously relying on a set of signals may result in significant investment losses and potential financial ruin. 

#4. Beware of Managed Trading Account

Although offering convenient and hassle-free trading, hiring an account manager is risky because you entrust your investment to a stranger. 

While there are legitimate account managers, they're more of an exception than a norm. 

But if you're looking for one, make sure to ask the following questions to ensure your money is in safe hands; 

1. Can you provide details about your past performance as an account manager, including your average annual returns over the past several years? 
2. What is your investment strategy or trading approach? Are you a discretionary trader, or do you use algorithmic trading systems? 
3. Are you licensed or registered as an investment advisor or portfolio manager with the relevant regulatory authorities? 
4. How frequently do you provide updates on account activity and performance? 

#5. Beware of Trading Robots 

Like trading signals, the scam in trading robots is how forex companies market the robot.  

Automated trading systems or trading robots promise to generate profits with little to no effort on your part. However, many of these systems are ineffective or outright scams. 

Remember, the main criticism of trading robots is their inability to adapt to the ever-changing market. They simply rely on technical and historical data, so they won't be able to trade the news.  

This lapse of trading robots is crucial because the forex market moves with the news releases. In the case where your trading robot fails to react to the market news, you subject your position to the risk of losing money. 

If you want to hire a trading robot, choose a sophisticated and intelligent one so you won't risk your money. But you should know that it would cost tons of money.  

Throughout the module, you've learned the common scams you can encounter and the effective ways to avoid such scams.

Remember, more than 80% of online traders lose money not because of market volatility; their investment losses are due to unethical practices of trading companies.