Home » 7 Common Forex Trading Scams and How To Avoid Them
You’d be surprised how many ways there are to trick people into handing over their money. Forex (or foreign exchange) trading is a massive market, with the average daily volume exceeding 5 billion USD in some locations. Because of this, scammers have taken notice, and they’ve come up with all kinds of schemes to take advantage of new traders looking to enter the market.
In this article you will learn about 7 common forex trading scams and how to avoid them. Given the recent rise in popularity of digital assets like Bitcoin, Ethereum, and Ripple – not to mention initial coin offerings (ICOs) – it’s no surprise that scammers have once again begun preying on individuals interested in investing in these markets. As with most investments, it pays to do your research before getting involved with any company or organization offering Forex or cryptocurrency-related products or services.
1. Currency Mixing/Stration Scam
A variation on the classic Nigerian Prince scam, this scam sees scammers attempt to lure in potential victims by offering to “mix” or “stratify” their funds in order to make them “untraceable”. They’ll offer to mix your funds with their own, or they’ll mix it with funds from other victims, in the hopes that you’ll never be able to recover your money. How to Avoid It: Avoid dealing with anyone who offers to “mix” or “stratify” your funds. This is a sure sign that you’re dealing with a scammer. Instead, do your best to learn how to properly protect your funds from scammers.
2. Fake Broker/Exchange Scam
A variation of the fake broker scam involves scammers setting up fake websites for well-known brokers. They may also create fake account applications for trading that ask for your personal information. They’ll then use this information to steal your money or personal identity. This can be especially dangerous if the scammers decide to target high-net-worth individuals. They may use their connections to attempt to steal money from large institutions such as banks or investment firms. How to Avoid It: It pays to do your research before signing up with any online trading platform. Check out the company’s reviews, research the owners and management team, and read through the Terms of Service. If anything seems off, don’t sign up with that platform.
This scam has become increasingly popular in recent years, especially among those who’ve been unsuccessful at trading digitally. Scammers will post ads online offering to trade USD or other national currencies for bitcoin or other digital currencies in an effort to lure in unsuspecting victims. They’ll then abscond with the victim’s funds. How to Avoid It: Avoid dealing with anyone who offers to trade national currencies for cryptocurrencies. Instead, learn how to properly buy, sell, and store digital currencies like Bitcoin and Ethereum.
4. Leveraged Forex Contract Scam
Some scammers will attempt to sell leveraged forex contracts to unsuspecting victims. They’ll paint these investments as a great way to turn a small investment into a large one quickly. However, in reality you’re entering a contract that you have no chance of ever being able to exit, given the massive amount of capital required to close out the contract. If you’re ever offered a leveraged forex contract, walk away. There are no legitimate brokers who will offer this type of contract to new investors. How to Avoid It: Avoid any investment offering a guaranteed rate of return. Instead, learn how to trade forex and grow your funds through legitimate trading strategies.
5. Advance Fee Fraud
Advance fee fraud, also known as the Nigerian Prince scam, is one of the oldest scams in the books. Scammers pose as bankers, investors, or other high-net-worth individuals who promise to give you money, but only if you pay an advance fee to cover expenses like “taxes” or “legal fees”. Scammers will often pose as employees of well-known banks or investment firms as a way of attempting to legitimize their scheme. Advance fee fraud is one of the most common types of scams involving cryptocurrencies. How to Avoid It: Avoid dealing with anyone who asks for an advance fee for anything. It’s a surefire sign that you’re dealing with a scammer.
6. Bitcoin Investment Scam
Similar to the peer-to-peer trading scam, scammers will attempt to convince you to invest your money in Bitcoin or other digital currencies in hopes of making a quick profit. They’ll promise high returns with little risk, but they’ll never actually give you the Bitcoin or other digital currencies you invest in. How to Avoid It: Avoid dealing with anyone who promises you high rates of return with little risk. It’s a surefire sign that you’re dealing with a scammer.
7. Final Words: Protect Yourself and Only Hand Over Your Money When You Know What You’re Doing
The best way to protect yourself from scammers is to do your research before investing in anything. Make sure you understand what you’re investing in, who you’re investing with, and how you plan on growing your money. If the investment sounds too good to be true, it probably is. Avoid handing over your money until you’re absolutely certain that you know what you’re doing. The forex and cryptocurrency markets are extremely risky, and it’s possible to lose your entire investment in a matter of hours or days. As long as you keep these scams in mind, you should be able to avoid getting scammed while trading forex or digital assets.