Common Forex Scams

Forex trading can be a lucrative endeavor, but it can also be very risky. One of the main risks traders face is fraud.

These are the most common types of Forex scams that can occur during your trading career:.

Selling signals

You have seen traders on YouTube (and elsewhere) promising insider information about which stocks to buy and sell to make lots of money

This is usually based on little or no research and a complete lack of knowledge on the part of the buyer (i.e. you).

Selling signals make money for one person: the person who gets paid for the "stock tips".

Don't get us wrong: not every "standard tip" sells signals. But generally speaking, anyone who offers a "secret list" of "guaranteed money-making stocks" in exchange for a weekly or monthly subscription fee is engaging in fraud and may be guilty of selling signals.

Improper promotion of unfair advertising ("Holy Grail" advisors, "Holy Grail" signals, expensive online courses, etc.). Promoting get-rich-quick schemes can damage Forex's trading reputation.

High Yield Investment Programs

HYIPs often, but not always, promise above-market returns and (usually) guaranteed safety.

Think Bernie Madoff when considering Forex fraud in this area.

Since traders cannot guarantee above market returns without losing capital, these traders often pay off old scheme members with money from new members or subscribers. HYIPs are not necessarily Ponzi or pyramid schemes, but can be structured as such.

To avoid this, remember: if it is too good to be true, it often is.

Manipulating bids and offers

This means that your unscrupulous Forex manipulate trades in such a way that they make money and you probably do not.

Boiler room trading

This involves collusive trading and getting away with your money. It is as simple as that. In Forex, it is as simple as taking your money and not executing the transaction, but with regard to stocks, boiler room trading usually involves trading to raise money for a company that has not yet gone public, and then keeping the money raised from investors for yourself.

You can avoid being scammed by knowing the ins and outs of the Forex market. Knowledge is power, and if you are pre-warned, you are pre-warned when it comes to Forex scams.

Conclusion

Forex trading is a complex and dangerous business. It is important to be aware of the potential risks, including fraud.

Following the tips outlined here will reduce your risk of falling victim to scammers. Remember, however, that even the best protection cannot guarantee 100% safety.