What is Forex trading?
Forex is the single largest traded market globally, with up to five trillion traded each day
and is considered decentralized because there is no central processor for trades – in other
words, there is no entity that acts as a central exchange like the NASDAQ or the NYSE.
Instead, orders are completed by millions of traders using millions of various forex brokers
around the world.
Foreign currency trading is one of the most leveraged markets in the world as well. In the
US, regulations limit a person to 50:1 leverage. In other countries, they have zero limits
on leverage. It is not uncommon to see some non- US brokers offer 1000+:1. Due to these
factors and a few others which we will discuss, this is why scams can be so prevalent within
the foreign exchange market.
Is Forex trading a scam?
In the investment world, forex is the wild-west of traditional financial instruments.
However, most of the participants are massive institutions line banks that help companies
manage cross-currency rates for payroll or buying goods. But it is by far the most
accessible and cheapest investment for anyone to make. A futures broker may require a $5,000
minimum investment; whereas many firms in the foreign exchange markets require as little as
$1. Day trading stocks in the US requires a $25,000 minimum balance; forex does not require
this.
The ease of access to significant leverage, and the fact it is open 24 hours a day all make
it the most appealing market. But this also attracts many of the bad actors. Some countries
regulate forex markets – but not always to the same degree as the US. Many countries have
little to no regulation and allow anyone to open a brokerage account in their country. There
are many, many bad brokers around the globe – so it’s often best to stick with brokers that
are based in the US, EU, or UK.
Key points
• Using a regulated broker ensures that: your money is safe, the data and information
provided by the broker are compliant with industry standards, and the broker is operating
legitimately and ethically.
• The forex trading space is rife with services and individuals bent on defrauding new
traders. Avoid bad brokers, false education programs, performance history lies, and
fraudulent automated trading systems.
• If you’ve been the victim of a Forex scam, we can investigate the fraud and provide you
with the information you need to potentially reclaim your losses.
How to spot a Forex scam
The scams that exist in the investment world are many. One of the hardest things for new and
aspiring traders to overcome is the vast amount of wrong information, bad actors and
blacklisted scam brokers trying to take advantage of you.
Here are some of the different types of forex trading scams:
Broker’s Leverage
The US and EU (more recently) have limits of around 50:1.
If you see a broker offering 500:1, 1000:1, or anything beyond
a conservation amount, stay away. This is a predatory action.
Avoid any broker that is not clear about margin requirements.
Broker’s Leverage
The US and EU (more recently) have limits of around 50:1.
If you see a broker offering 500:1, 1000:1, or anything beyond
a conservation amount, stay away. This is a predatory action.
Avoid any broker that is not clear about margin requirements.
Broker’s undisclosed parameters
Avoid requirements for a minimum Stop Loss or Profit Target.
Avoid requirements where you must have a trade open for a
certain amount of time before you can exit.
Avoid anyone that doesn’t allow you to create your own risk
management profile.
Broker withdrawal rules
You should be able to withdraw your money from your brokerage
account at will – but some don’t allow this.
Avoid minimum requirements for volume traded before you can
withdraw.
Avoid anyone that doesn’t disclose their withdrawal rules.
If a broker advertises a bonus on deposits, make sure that you
can withdraw the bonus within a reasonable amount of time – it should be clear what the
requirements are for you to withdraw the bonus.
Broker’s spread
The spread is the difference between the Bid (buying) and the
Ask (selling) – This should be clearly defined or be avoided.
Avoid brokers that don’t warn you of regular increases in the
spreads, such as at the end of the day or during certain holidays.
Avoid any broker that is not clear about margin requirements.
Signal Sellers
Forex signal sellers are individuals who want to sell you
signals or advice – they want to tell you what pairs to buy or short, when to exit for
profit, where to put your stops, etc.
Avoid brokers that don’t warn you of regular increases in the
spreads, such as at the end of the day or during certain holidays.
Millions of signal sellers out there are all selling you on
their success with messages like, “3,000 pips a week!” – a pip is how you measure
movement in the exchange rate. The average pip range that the EUR/USD moves a day can
vary between 30 to 50 pips.
Avoid people or companies that promise or allude to a
guarantee of profit. Avoid entities that promise unbelievable returns like: “90% win
rate!” or “188 winning trades, 12 losing trades!” or “MASSIVE GAINS”.
Broker spam
Avoid sites that have side advertisements and banners
promoting a single broker.
Avoid anyone or anything that recommends a single broker.
People who promote a single broker generally have some
agreement with them. Many non-US brokers offer various incentives for people to find new
customers. They may offer the seller a cut of your deposit or a rebate on any trade you
make.
If someone tells you about a broker or if a site is promoting
a broker – ask if they have an IB (introducing broker) agreement with them – this must
be disclosed in the US when asked.
Educational services
Be wary of the myriad of free or paid trading education
opportunities.
Many sites look incredibly professional and may even link
certificate organizations without their permission.
Check for quality educational providers from the CMT
Association (Certified Market Technicians Association), IFTA (International Fellowship
of Technical Analysts), or STA (Society of Technical Analysts).
Even by professional US brokers, a significant amount of the
education provided is decades out of date.
Automated Trading or Artificial Intelligence (Bots or Robots)
It is best to avoid anyone selling forex robot trading
systems.
AI systems have existed since the 1990s for retail investors –
but nearly 100% of them fail.
The current buzzword for investment scams is ‘AI’. Avoid
anyone that claims they use Artificial Intelligence. There are only two known private
hedge funds that have anything close to authentic self-learning AI. They are not selling
their bots to anyone.
Think about this logically: If you created a profitable AI
(virtually a money printing machine), would you ever tell anyone about it? Would you
sell it? Probably not – your advantage disappears when others have access to that kind
of a tool.
Automated Trading systems are a common way fraud is committed
by forex scammers.
Flashy advertising or false lifestyles
Avoid any service or individual who has ‘high lifestyle’
imagery, such as girls in bikinis on a yacht, Lamborghini or Ferrari in the background,
massive mansion or house, or a private jet.
A good rule to follow for any investment or speculative
endeavour: if it looks or sounds too good to be true, it probably is.
What can I do after a Forex scam?
Dealing with the aftermath of a Forex trading scam can be challenging, especially if you
worked with an unregulated broker. But there are still ways you can come out of this messy
situation. At AFX Retrieval, we have a proven track record of investigating cases regarding
investors who have fallen victim to Forex fraud.
Our expert team will investigate your case, analyze the evidence, and provide you with a
comprehensive report outlining our findings. This report will empower you to understand the
scam, gather crucial information, and take the necessary steps to pursue retrieve your
losses.
Get in touch with us for a free consultation to learn about how our Investigation Report can
help you get back what’s yours.
