As the largest financial market in the world, unfortunately the forex market breeds a number of unscrupulous organisations designed to separate you from your well-earned cash. While you may be aware that they exist, it’s often difficult to tell from the off when you’re being conned – meaning you could run into financial problems later down the line as a result.
While there has been a significant crack down on individual scams in recent years, they still exist and, without knowing what to look out for, you could be in danger of starting out your trading career in a negative light. So, in this blog post, we’re highlighting the key points made by Greg Secker over on his Youtube video, detailing the 5 most common forex scams around today and how you can spot and avoid them.
Anyone – be that a broker or forex training company – offering guaranteed profits in excess of 100% or more, should immediately be viewed as a huge red flag. As any experienced trader will tell you, the currency markets are random and profit is most certainly not guaranteed – as such, anyone who claims they can offer you guaranteed profits in this type of unpredictable markets should send warning lights your way.
Regulators have been warning us about this tactic, which sees beginners invest their capital only to quickly lose it through lack of strategy and appropriate forex mentoring, for over two decades. To challenge companies offering you this, ask them to show you a minimum of three years’ worth of audited results – ensuring you are able to view figures month-by-month from this period. To find out what these should look like, go to FX Capital where you can request access to view Learn to Trade’s results.
Check their marketing
Forex trading holds connotations of lavish lifestyles, fancy cars and expensive watches – an idea that many scammers use to advertise their deceitful services and organisations. While, as in any industry, these things can be achieved with time, training, dedication and hard work, this doesn’t happen overnight and many new traders fall victim to this type of untruthful visual marketing technique.
This concept of plastering online advertisements with imagery associated with luxury has been happening for decades, and it typically a tactic employed by startup organisations or solo forex mentors looking to profit from others’ lust for a quick and easy idyllic lifestyle. These sorts of companies usually disappear after about five years. So, before allowing yourself to be enticed by these sorts of marketing campaigns, do your research, checking the organisation’s track record, length of service, how clear their documentation is and who their associations are.
A scamming technique that’s grown in popularity over the last 10 years is trading signals that come through via SMS platforms such as WhatsApp, giving novices an easy way to start trading with minimal investment requirements.
This type of forex trading for beginners preys on the lack of knowledge such traders have about the market, meaning they don’t understand that their trades aren’t actually being put on the market. Instead, these scammers are essentially betting against you, by using tighter spreads that are in fact tighter than the actual underlying market – meaning they’re giving you a signal to buy or sell something that they know has a high probability of going against you, which they then profit from once you’ve confirmed with them to buy or sell.
Social media marketing
This type of scam helped contribute to the £30 million stolen or scammed in the crypto and currency markets last year. Taking the form of Instagram, Twitter or similar posts, these types of advertisements and forex companies are completely unregulated and target young investors blinded by the idea of making some extra money.
This form of scam highlights the importance of checking companies on the FCA website, enabling you to see at a glance which companies this regulatory body is warning traders against using. It’s important to remember that, should you choose to use their services with this in mind, you won’t be protected by the Financial Services Compensation Scheme (otherwise known as FSCS).
Reviews are a common way to check the authenticity and trustworthiness of a product or service provider, right? Wrong. In the congested currency market, competition is rife – as such, positive reviews are often left anonymously by companies themselves and negative reviews can be submitted by direct competitors in an attempt to put themselves one step ahead.
This digital world extends the opportunity for people to scam you, so, to combat this, get back into the real world and interact with real people – after all, the best way to gauge the reliability of the company you wish to trade with is to meet with organisations yourself. Don’t hesitate to ask to meet a training company’s graduates and traders, asking also for them to show you their trading account – allowing you to put a face to a name and feel at ease before opening up your account and signing on the dotted line.
In general, an effective way of deciding what is and what isn’t a scam is to answer the following questions: are they willing to provide you with auditory results and do they have company premises that you can visit? If the answer to both of these questions is no, then this should flag up to you as an immediate warning signal. Remember, application and implementation of a trading plan combined with a sound risk management strategy is where potential profitability lies and, in the forex trading market, there are no shortcuts.
To learn more about forex trading, visit our blog or explore Greg Seckers’ Youtube channel, here.