The forex market is a legit market where various world currencies are traded. It is therefore not a scam in itself. In the absence of this market, it would be difficult for you to exchange the money you need to sell exports, go on vacations, import goods and conduct international business. Although the market is legitimate, scammers have found their way in, usually targeting inexperienced traders just getting into the market.
They see the potentially large profits that traders make daily from this decentralized exchange.
The FX market is a ‘zero-sum’ market. It ultimately means that for a trader to realize a profit, another must incur a loss. Therefore the foreign exchange market does not independently add value to the market. The majority of the movements within the market are orchestrated by huge well-financed banks and corporations.
Because of this dynamic, the undercapitalized trader tends to get the shorter end of the stick. Large banks and corporates trade in forex daily, so if you intend to make significant profits, you’ll have to study and understand this market over a considerable period. The market complexities provide a golden opportunity for scammers who use them to their benefit.
They usually maliciously withhold crucial information about the market’s realities from inexperienced newbies. They will often claim they have info, software, or tricks to bring novice traders quick success.
Since the forex exchange lacks a centralized governing body, the chances of individual traders falling prey to scams are higher. Here are a few of the most common scams to watch out for.
The promise of fast and easy money can be alluring, especially now that everyone wants to earn passive income. In forex trading, you have scammers promising that robots will do the hard work for traders. These systems are supposed to trade and make sound decisions automatically. They are not vetted or tested by independent bodies to confirm that they work.
You don’t want to rely entirely on a system to make crucial decisions about your money. Furthermore, computers cannot predict the impact of world events on the forex market, nor are they error-proof.
Forex trading has been popularized by increased multi-level marketing schemes centered on this kind of trading. Most people are skeptical about MLM businesses, which trickles over to MLMs in forex. Some MLMs ask members to pay membership fees in exchange for educational material and daily forex trade signals. Others may incentivize you to recruit people to earn tiered commissions.
Such businesses are more interested in recruits than trading, which lets you know that they are disingenuous. No one needs to pay or join an enterprise to trade in forex.
Forex brokers are companies that grant individuals access to trading platforms where they can trade currencies. Everyone needs a broker to sell and buy in the exchange. Unfortunately, many dubious brokers will find ways to slap you with high fees or take your hard-earned cash. Some are unregulated, so they have no one to answer to.
Ensure that you do adequate research before choosing a broker because if you, unfortunately, work with dishonest ones, there isn’t much to do in case they scam you.
If you are interested in the forex market, don’t allow the scammers to dissuade you. It is still possible to avoid them, and the best way is by educating yourself on the market. Learn about the forex market and the terminology. Lastly, seek legitimate resources to guide you when trading.