Foreign currency exchange scams are designed to cheat investors by persuading them that a particular system or technique will make money for them. As soon as a company approaches you with trading software or techniques that they claim will make unbelievably high profits with no possibility of any losses, you should immediately be alert.
The US Commodity Futures Trading Commission, along with the New York Times warned traders about these unscrupulous tricksters who were preying on the vulnerable. The Wall Street Journal stated that unsuspecting individuals lost in excess of $15,000. There are a great number of scams out there and investors should be careful in this market. The fact that there is no central regulatory association governing this financial market has opened the doors to fraudulent behaviour in the forex trading market.
The Types of Foreign Currency Exchange Scams
A very popular method of scamming is where traders are offered high profit margins provided they invest a big initial lump sum. Some unscrupulous brokers often trade a client’s account quickly and without regard to the client’s profitability in order for them to charge high fees.
There are brokers who offer trading software that they say comes with a guarantee of massive returns on investment. The forex trading market is an extremely volatile market and you should expect to not only show profits, but losses as well. If a broker or any other person suggests that you will remain in profit all the time by using specific trading software, you should be cautious. Genuine robot and trading software will not only indicate profits, but will also indicate to you the percentage of potential losses you may suffer due to the market uncertainty. This percentage varies between five and ten percent. You should not be offered 100% profit ratios as it is simply not possible.
An alternate brokerage scam is the calculation of commissions. With this, the broker will increase his income by running through trades on your behalf. For this reason you should ensure that your broker has an untainted reputation. Take time to delve into your broker’s past records and check all reviews, positive and negative, that have been offered by genuine clients, not the ones that some brokers post about themselves.
What are the Warning Signs?
The first signal for you to become suspicious is if your broker stops withdrawals from your account. You should have the facility to get in and out of a trade quickly if there is an unexpected event where you wish to do this. The trade station you are dealing with should have sufficient liquidity to carry the trades. If you feel uncomfortable about any of these factors, you should leave the brokerage. When choosing a broker or trading software, be on the alert for excessive promotional material or any promises where you are guaranteed remarkably high performance levels.
You can keep up to date with the most current scams by visiting trading forums and websites. This market is a perfect opportunity for scammers due to its liquidity. These scams are practiced all over and are not limited to particular countries or software. Be aware all the time whilst trading and do not hesitate to turn your back on guarantees or promises of unrealistic returns on your investment.