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FOREX Scams

FOREX Trading Promotion Scams

The most widespread scam is simply fooling people into trading FOREX. By creating an illusion that FOREX trading is easy to learn and might be an exciting activity people are manipulated to give up their hard-earned money to brokers or banks. Many brokers have based their business on the well known fact that vast majority of newbie traders will lose much of their initial deposit in a couple of trades. To become a successfull FOREX trader takes a lot of time and effort and it is pretty geeky. If you are not going to spend a few hours a day next couple months to years studying the background and exercising trading on a demo platform or you simply don't like anything geeky, run away from FOREX before you lose all your money!


FOREX Broker Scams

The ever increasing popularity of FOREX trading and the character of the market attract also unscrupulous crooks to establish a brokerage and rob people of money. There are many ways to cheat clients from simply stealing the deposit and not picking up the phone anymore to more subtle tricks decreasing the client's chances of winning trades. As a prevention avoid all dealing desk brokers. Also, if the broker in question is not registered or regulated by any national agency, then DO NOT deposit your money with them. Stay away from non-regulated firms!


Automated Trading Systems/Expert Advisors

These scams encompass Expert Advisors (also famously known as EAs) and other automated trading systems. In the FOREX world, a "robot" is a program that strictly uses technical signals to enter in trades and lets the human sleep while he "makes" money. With a push of a button, the FOREX robot runs continuously, making trades signaled by mathematical algorithms applied to past price history. The problem is that FOREX robots and their pre-wired thinking do not compensate for ever-changing market conditions. The have been developed with historical data and their future performance is unknown. As a result, losses may occur and they can be huge if not closely watched or managed. The scam isn't the FOREX robot itself but how they are marketed. Scammers will often try to sell these robots and automated systems as the "holy grail" of trading. And they sell them at "affordable" prices ranging from $20 to a few thousands of USD. However, if the creator is making big bucks with the system, why would he/she try to sell it and share the profit? And why for e.g. only $20?! The only real profit for these fraudulent people is the revenue generated from the sales of these EAs.


FOREX Signals

FOREX signal services do everything a robot does except the actual execution of trade entries. Besides possibly using an automated program, a "professional" trader may generate trading signals (for a fee, of course) for clients to act upon. However, you may be paying for a signal in which you do not know the causes for and how the "professional" came up with it. You have no idea what the basis for the trade is, just that the "professional" is telling you that it's a good time to buy or sell. In the end, you are relying on the analysis of a third-party sources that is not your own. In a typical FOREX signal service, the programmer creates a set of technical indicators and rules and the program runs to those specifications. If price action satisfies the conditions of the signal service, then an alert or pop-up will show up for the user to react. It is ultimately up to the user to decide whether or not to take the signal and trade it. While this may sound more beneficial as you have a choice on whether or not to take a trade, the signal service is still programmed to a constant set of rules. Like we mentioned earlier, the FOREX market is in a constant state of change. While the FOREX signal service might have been profitable in the past, there is no guarantee that it will be profitable in the future. One other thing to think about is if the FOREX signal service is so profitable, why would the creator want to share the profit? Like FOREX robots, the scam isn't the service itself, but the way it's marketed. You may see ads from scammers that promise you'll make a zillion dollars with their signals. If that were true, they most likely wouldn't be running a FOREX signals business. Instead, they would focus on trading and make a zilllion dollars for themselves.



FOREX Managed Accounts

This scam operates by having an investor "invest" with a "professional" trader, who trades the investor's capital for a percentage of the profits. This can sound appealing, especially to beginners who have no idea what they are doing or don't have the time to learn. However, the problem with this is that the user is placing complete trust of his/her money into the hands of a complete stranger. In many cases of managed accounts, the client capital was simply stolen. Not all FOREX managed accounts are necessarily bad though. Some do have many years of trading experience and are well-qualified in trading real money, but that's more the exception than the norm.




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