More than $5 trillion gets traded on the forex market every day. With such an amount in play, scams also abound. Sometime between 2008 and 2010, the various governments started taking action and setting up rules and regulations that would protect traders.
The reaction was in response to the high number of traders who lost millions in the early 2000s thanks to scams. In the US, for instance, between 2001 and 2007, more than 25,000 people lost roughly $460 million due to forex exchange frauds.
Due to the laws, the past couple years have seen FX scams reduce, but not eliminated. Legitimate brokers such as Rakuten broker are numerous, but scammers are also getting smarter by the day. They particularly use technology to their advantage. Here are some things to watch out for that might help identify scams.
Err on The Side of Caution When It Comes to Forex Trade Signals
It pays to be skeptical. That should be the rule of thumb when considering forex trading signals. A forex trade signal provider could be an individual or a firm that vows to give you all manner of signals that will ensure you make a killing on the forex exchange. It could be tips on the best times to trade, or the best currency to trade per time or the kind of leverage to take.
Some of these are actually legitimate; experienced traders who have traded for years and can provide accurate signals more frequently than not. However, most are scams aimed at getting your money then disappearing. There is a particularly clever tactic where they give you a couple accurate signals to lure you in, and just when you are convinced they are legitimate and you shell out the sign-up money, they disappear.
The trick—if you feel you need to use a forex signal provider—is to err on the side of caution. Distrust all until they prove you wrong.
When Looking for a Broker, Scrutinize Seemingly Unimportant Things On Their Website That Might Actually Point to Fraud
These days, having a beautiful seemingly legit website is rather easy. Do not be charmed by a killer website that might end up being a scam. Here is a good example—a broker who is using a free blog. At that point you need to ask yourself, how is it that a broker purporting to help you earn millions cannot afford $50-$100 to host their own blog. The point of using a free blog is anonymity since they do not have to register for a domain.
Second, you need to watch out for obviously fake videos or testimonials. The basic idea is to analyze their marketing materials keenly. Adrian Shiroma is one such scam that conned people out of thousands yet their marketing materials were obviously fake.
A robot is an automated forex exchange system.
This is an old scam that has persisted. The scam preys on beginners who are afraid to trust their instincts and instead opt for a system that promises to make them money as they sleep.
With machine learning evolving as fast as it is, there are numerous legit forex trading automated systems, however, there are just as many fraudulent ones.
Experts suggest testing the parameters and optimization codes of a system before deciding to assimilate the system into your trading strategy. Invalid parameters generate random buy and sell signals that can lead to losses.
All the tips above boil down to one key thing; caution. Doubt any broker or signal provider that does not offer proof of legitimacy. Doubt any broker or signal provider offering a 100% guarantee. Forex exchange cannot have any guarantee other that at some point you will lose. Finally, be skeptical of brokers who do not have a well-written risk disclosure statement. A risk disclosure agreement is meant to protect both the broker and the investor. If one does not exist then chances are, you are dealing with a scam.
If you forget anything else, please remember to be cautious.