While forex trading isn’t a scam, this industry has come under the scrutiny of many skeptical investors. Forex scams commonly involve new investors who do not understand the complex trading methodologies. Let’s dive deep into the world of forex trading and the scams that create an entry barrier for most investors.
What is forex?
Forex trading is quite like stock trading, except for the fact that you trade on different currencies, not stocks of a company. The trading mythologies in forex are more complicated than in regular stocks, which means that you have to be extra careful. If you are not trained enough in forex, you could end up losing all your money.
Scams have been common in this industry but due to increasing regulatory pressure, the number of frauds has decreased over the years. You, as an investor, should still be on the lookout of scams and frauds.
The most common forex frauds
Signal sellers are the most common scams in this industry. Newbie investors often fall for these tricks. Using signals is like walking on a double-edged sword. You could hit a profitable trade every once in a while, but it isn’t likely to happen before you lose a few good investment dollars. Signals are often created by people who keep track of news or use advanced technical analysis.
It is not necessary that signal sellers are using these methods effectively to sell a trade. You may be following a signal seller who is using unscrupulous means to dupe investors into making certain trade decisions. From a more rational point of view, why would an individual want to sell a technique that helps him earn big profits in the stock market?
Not all signal sellers are frauds. However, differentiation the grain from the chaff could be a tiring and often futile experience. Another way you can be duped is through forex investment management funds. These so-called ‘funds’ often just take investors’ money, providing them management services. The truth is that these people are often taking away your money to fund their expensive lifestyles. The investors are almost always at a loss while the fund managers have a gala time.
Be alert, be safe
Forex trading is a legitimate way to earn money. However, you must understand that it is not a cash cow. While you have a huge upside potential in terms of profits for forex trades, it is not necessary that you will make huge gains instantly. It would demand extensive study of all forex pairs you are trading in as well as a penchant for avoiding frauds to make any significant gains.
As a rule of thumb, avoid anyone who offers you advice that ‘sounds too good to be true’. People who engage in excessive self-promotion often do not have given good advice. Once you understand this, it will be easier to select the right brokers, signal sellers and advisors. Make sure that you have gathered ample knowledge about forex trading on your own to make significant gains.
Good luck for your next forex venture!