Sat. Jul 13th, 2024
Proven Ways to Avoid Foreign Exchange ScamsProven Ways to Avoid Foreign Exchange Scams

The foreign exchange market is a global financial market that deals in currencies from different countries. It is a decentralized market where foreign exchange traders convert the currency from one country into another in order to make a profit. Profits in the foreign exchange market are dependent upon the traders’ accuracy to predict when the value of a currency will be stronger.

Though the exchange rates in the foreign exchange market are highly volatile, some people prefer investing in Forex rather than the stock market as this financial market is large, and unlike the stock market, it is nearly impossible for fraudsters to influence the worth of a currency here. Still, some scammers manage to defraud currency speculators and perpetrate forex scams for their own profit.

Here are some things you should know before trading in the foreign exchange market,

  • Fictitious brokers claiming to be registered with regulatory bodies,
  • Brokers imitating legitimate websites,
  • Pro Tip: Refer to sites that list blacklisted brokers,
  • Newbie traders: Primary targets,
  • Forex Robot Scams,
  • Signal Scams,
  • Pyramid Scheme,
  • Ponzi Scheme,
  • Refusal of withdrawal request,
  • Managed account recommendations

Fictitious brokers claiming to be registered with regulatory bodies:

As foreign exchange is a decentralized market, currency speculators need a broker to trade in this system. Though it is not illegal for brokers to not possess a license issued by a regulatory body, dealing with a broker who maintains a license is always preferable. Regulatory bodies compel these brokers to follow certain guidelines. Moreover, regulatory bodies offer traders accountability on behalf of their registered brokers. If any currency trader makes any allegation against their registered brokers, traders can expect that they will take responsibility for it. However, some foreign exchange brokers claim themselves as regulated and licensed brokers when they actually are not. In this case, currency traders can ask brokers for their name and license number, and search them on the websites run by the regulatory bodies, whom the broker claims to be regulated by.

Brokers imitating legitimate websites:

There are many brokers or financial service companies that help currency speculators sell and purchase currencies in the global financial market. One can easily find them on the internet. Unfortunately, some fraudsters mimic these legitimate financial service companies and their websites to trick currency traders. They imitate their domain name, logo, and also designs used by these websites to fool their audiences into believing that they are legitimate and renowned brokers. After making the traders believe that they’re reliable, they disappear with the money that traders deposit for trading purposes. Some fictitious brokers even mimic the license number of legitimate and regulated brokers. Therefore, one should research before they resort to brokers on the internet for foreign exchange trading.

Pro Tip: Refer to sites that list blacklisted brokers:

As one can find plenty of foreign exchange brokers on the internet, organizations which list out fictitious brokers are also available in bulk. These organizations create a list of brokers who are alleged of their wrongdoings. Search for the name of the brokers you are dealing with on these websites before opting for them for currency trading. Avoid dealing with the broker if you find their name or license number in the list.

Newbie traders: Primary targets:

If you are dealing with foreign exchange brokers for the first time, you need to be careful about every decision you make. Newbie traders have been the main target of fraudsters. As they do not have much experience in this field, they tend to fall into the traps laid by scammers more easily. It is advisable for the new currency speculators to count every step they take.

Forex Robot Scams:

A forex robot is a program whose job is to analyze currency movements in the global financial market and to notify consumers when it is profitable to exchange a currency. It can be considered as a financial advisor that makes decisions regarding foreign exchange on your behalf. However, a forex robot scam can occur in many ways. One is when a forex robot cannot analyze the currency movements and past events properly, and cannot deliver their service correctly, thus leading to the consumers suffering significant losses. Another is when fraudsters claim to be selling forex robots while they garner money from consumers, but do not provide them with the promised services and even run away with their money.

Signal Scams:

There are many companies that provide notification alert services to currency traders depending on their global financial market analysis. One just needs to subscribe to them in order to avail of their service. These paid subscriptions can be monthly or weekly. The purpose of these signals is to suggest to their subscribers the best time when they can buy or sell a currency in order to make a profit. Some fictitious signal providers do not alert their subscribers based on analysis, but they set default signals to notify them. This situation in the foreign exchange market is considered a forex scam.

Pyramid Scheme:

Pyramid schemes can be considered as passive income schemes as one can earn money with little or no work put towards this scheme. Fraudulent forex brokers lure traders with this scheme. In this strategy, people just need to make a one-time deposit while joining and convince others to do the same. Those who promote the scheme make a profit with every new member they add to the Pyramid as the initiator promises to give them a share from the deposit made by every joiner. A pyramid scheme is not sustainable in nature and fails in the long run. A currency speculator needs to be wary of brokers who propose these schemes as it is an illegal practice.

Ponzi scheme:

The Ponzi scheme is a strategy where the director of the scheme earns profit by exploiting people’s trust and investments. In this scheme, foreign exchange experts convince people to invest with them by ensuring them high returns. Scammers tell these investors they are generating the returns they have promised from the foreign exchange market, but in reality, they pay the previous investors from the funds deposited by recent investors. As mentioned earlier in this article, currency speculators need to remember that the value of a currency in a foreign exchange platform is extremely volatile. Therefore, when someone is guaranteeing high returns at low or no risk, chances are high that he or she is a scammer perpetrating forex scams.

Refusal of withdrawal request:

Fictitious foreign exchange brokers lure currency speculators to work with them and make them deposit through their websites. Then they freeze their account when they want to withdraw money or simply deny their request. Scammers do not receive their calls or even reply to emails when traders try to contact them.

Managed account recommendations:

Currency speculators have much less control over their money when they try to get access to foreign exchange platforms through a managed account. As traders have less control over managed accounts, if a broker wishes, they can leverage these funds for their own profit. This is why some fictitious brokers suggest their client’s trade through managed accounts. Brokers of managed accounts are even able to keep traders away from tracking down their money.

Conclusion:

To prevent these threats, scammers put forward; traders must approach foreign exchange brokers with skepticism. The best way to restrain forex scams is to verify the brokers’ legitimacy you are dealing with. Moreover, if you still get scammed, remember that there are many websites available on the internet that extend hands to help victims to recover their lost funds. You can search for them on the internet and seek help.

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