How to Avoid Forex-Related Frauds And Scams
FOREX trading provides the potential for large profits in a short amount of time with a small capital outlay. These attractive features are the very thing that can attract scam artists and hucksters to this arena to prey upon the unwary novice trader. Although FOREX trading provides the opportunity for fast profits, it can also result in fast losses. You don't want to compound this by being taken advantage of by unethical people or companies, so it is important for you to be vigilant and knowledgeable.
One reported scam involved a firm that gave seminars on how easy it is to make money in the Forex market. The unwary investor opened an account based on the promises given in the seminar. He received bogus statements showing big gains in his account. After attending another seminar with more promises, he borrowed a large amount of money and invested it with the firm. The Securities and Exchange Commission subsequently filed a complaint against the firm and the assets were later seized. The investor lost almost all of his money.
If you encounter a Forex firm that guarantees large returns with low risk for a foreign currency trading strategy that they developed, it may be a scam. The reason Forex trading can be very profitable is because it also carries a very high risk of loss.
Another reported scam involves a firm advertising an employment opportunity. In reality, they are trying
to attract individuals with capital to trade using their systems. The employment ads appearing in newspapers and through the Internet, state that a foreign currency trading firm is looking for individuals to teach them how to trade the foreign currency market using firm capital. Those who reply to the ad are convinced by the firm that they will make a fortune trading currencies if they participate in the firm’s training program. During the training process, which often occurs on a demo system, the novice traders are encouraged and told that their demo trading records show that have made significant profits, that they are ready to make real money and would be very successful. Despite the firm’s assessment of the novice trader as a brilliant newcomer, no firm capital is provided to the trader, instead the excited novice is told to use their own capital to trade using the firm’s platform. In addition to various fees imposed on traders using the firm’s platform, the Forex firm makes money as an introducing broker. Each time the novice trader trades through the firm’s system, a good part of the spread charged by the broker is shared and goes into the firm’s coffers. After a few months, the novice trader loses their investment and leaves. The Forex firm, having made money from the novice’s trades, moves on to new traders, eager to become rich trading foreign currencies.
When you select a broker, do your homework first to make sure it is a legitimate company that provides the tools you need. There are some easy preliminary checks you can make, such as looking at where the company is located. Don't deal with companies located in countries whose financial industry is unregulated. Check to make sure they have valid licenses to operate. Checkout watchdog organizations for information on the company. It is beter to get a broker by personal recommendation of a customer who has been with them a long time. Otherwise try to find reviews on the company or other information available through the internet that rates them in some way. Also evaluate the professional nature of their services and offerings. Find out how long they have been in business. Some operations pop up and then disappear quickly.
Be wary of opportunities that sound too good to be true. Scam artists will often target specific groups of people that often fall prey to their schemes, such as people who may have just acquired a large amount of
money recently and are looking for safe investment opportunities. Retirees are also frequently targeted as they get access to their retirement funds. Scam artists tout their opportunities as low-risk, high-return investments. It is important to understand that high-return investments are not generally low-risk. Ethnic minorities are also targeted through ethnic newspapers and television infomercials.
When you start trading FOREX, start with a demo account so that you can learn and get experience at trading without risking your money. When you have learned more and feel more confident, start risking your own money only in small amounts at first, gradually working up to larger amounts using the profits you have made.
Be wary of individuals or organizations who entice you with claims of huge profits or make it sound to easy. Be cautious of companies who claim that it is risk-free or low-risk. You will most often see unrealistic claims from people or companies who are trying to sell you their latest strategy for making big profits.
One good piece of advice in dealing with companies doing this is that the more enticing their claim is, the more caution you should use in investigating it.
Always remember that it is better to skip an opportunity that you are not sure of rather than risk your hard-earned money in it.
The bottom line is to always do your homework on any opportunity that you desire to pursue and take action cautiously and only when it is warranted.
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