Is Forex Trading Really Just a Scam? | Advanced Forex Strategies

Is Forex Trading Really Just a Scam?

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Is Forex Trading a Scam?

Is Forex Trading Really Just a Scam?

If you’ve ever transacted business in a different currency or bought something from a different country; you’ve engaged in forex trade. Forex is a financial market through which currencies are exchanged. So, forex trading is not a scam. However, there are a lot of scams associated with forex trading especially the retail forex market. Regulators have significantly scaled up their vigilance over the activities of scammers in recent time, making it increasingly difficult for them to operate. Deception is a problem in every industry. But it is more prevalent in the retail forex market because it is a recent industry with little or no regulation. As with any poorly regulated new industry, there are dishonest people looking to take advantage of you. It is your duty to protect yourself if you wish to participate in forex trading.

Why scam is prevalent in the Forex market?

Some factors peculiar to the forex market make it a fertile ground for scammers. Two most important ones are:

  • decentralized exchange system
  • poor government regulation.

As you already know, the forex market is decentralized. That is to say that there is no central exchange through which your transactions are processed. So, whatever transactions you make are between you and your brokerage firm and between them and their liquidity provider. A broker can give you a quote they like and say it’s what their liquidity provider allows. Since there’s no central exchange, different banks (liquidity providers) can quote whatever they like. This situation has given dishonest brokers an avenue to defraud their clients with false spreads under the cover of the magic words, “what the liquidity provider allows”.

The other issue is that of poor regulation. Recently, the UK and US financial regulators have significantly improved their vigilance on the activities of brokerage firms. But that is not enough as some of those firms have opened offshore clone firms through which they can evade the watchful eyes of the regulators. In, addition, the other products associated with forex trading such as signal selling, expert advisors selling, and copy trading are still a free-for-all market.

Nature of Forex Scams

There’re several ways you can get scammed in your forex trading journey. The three major ones are:

  • dishonest brokers
  • unqualified signal sellers
  • forex investment management funds.

Dishonest Forex Brokers

As much as there are several good brokerage firms, there are dishonest ones too. The dishonest ones try to lure you with their too-good-to-be-true offers. You have to identify them and avoid them. They take the opportunity afforded by the poorly regulated forex environment to lure the weak, desperate and naïve with their exciting offers. They are neither registered with FCA nor CFTC. Most of them operate from the island countries and claim to be a member of registered UK firms. Always check with FCA and CFTC for the registration status and business history of any broker you which to invest with.

Check out these Top Brokers.

Unqualified Signal Sellers

A signal seller is someone that analyses the market, identifies potential trade opportunities and sells that information for a daily, weekly, monthly, or yearly subscription. A true signal seller should be a trader him/herself with a third-party- verified track record of consistent success. It doesn’t make sense to claim to find favorable market opportunities and just sell it without trading them. Any supposed signal sellers with no third-party-verified proof of trading history and consistent success is a scammer. If you must buy signal, always try to verify the status of whomever you’re buying from. Another developing scam in this signal selling industry is a pyramid scheme whereby if you refer someone, your subscription fee is reduced and as you grow up the pyramid, you start earning commission from your referrals. This is a sure sign of a scam.

Suspicious Forex Investment Management Funds

While there are some good forex investment funds out there, a greater number of them are scams. They offer you returns that are too good to be true so as to lure you to part with your money. You have to be very careful about whom you give your hard earned money.

How you can avoid being scammed

Forex trading is a legitimate business which can be very profitable if you treat it as such. Just like any other business, before getting involved in forex, you have to do your due diligence in every aspect of the business.

To avoid getting scammed, here are some of the things you must do if you wish to participate in forex trading.

Educate yourself first

Read a lot about forex to learn the language and understand how things work. Know the regulatory agencies and where you can find the information you need. In other words, get to know your prospective business environment.

Learn the different ways you can participate in the forex market such trading by yourself, investing in a managed account, and copy trading. Then decide which way you want to follow and learn about it in greater details. Open a demo account and practice even if you don’t want to trade by yourself. You will at least be getting familiar with the market and the platform. If you’re to trade by yourself, you must develop a trading plan and practice until you’ve mastered it.

Search for legitimate brokers

Take your time to search for registered and honest brokers. Check with FCA and CFTC to be sure the brokers you’re considering are registered and have a good business history. Don’t rush your decisions; finding a reliable broker is not an easy task. Beware of cloned firms.

If you must buy signal or copy trade, go for third-party verified signal providers.

If you ever want to engage the activities of signal providers, you must ask about the firm’s or the individual’s verified performance track record.

If you must invest in a managed account, verify the broker and the trader.

They must be externally audited and third-party verified. Myfxbook is a legitimate third party. Also, check customer reviews. Do not deposit more funds than you can’t afford to lose. In conclusion, forex trading is not a scam but there are lots of scams in the industry. If you do your due diligence, you will avoid getting scammed.

 

 

 


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