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Beware of Forex trading scams

Beware of Forex trading scams

Economists consider the foreign currency exchange market (forex) as one of the vestiges of a real free-market.

And by this, they mean the forex market is a place where all suppliers are price-takers, there are low barriers of entry, and there is no chance for monopolies or other market inefficiencies to exist.

Those advantages along with its high liquidity make trading forex a very lucrative business. Unfortunately, that also means there is an incentive from bad agents to scam those who are seeking for a better life. And while, historically, forex has not been regulated, things are getting better.

That said, it is still important to know if and when you are being scammed. After all, that name of the game is making money, not stealing money. Let's see the different ways in which you can be scammed, and how to deal with them.

Signal Sellers

As the name suggests, signal sellers are firms or traders that guarantee to know when to open or close a position. For a rookie forex trader, this may sound like a fantastic idea. However, there has been a constant argument among economist, financiers, and traders about whether that is possible or not.

So far, the consensus is that there is no consensus. Therefore, before you give your hard-earned cashed to a signal seller, go to MetaTrader or any other reputable source and use a dummy account to see if it works for you.

Firms or Management Funds

On the internet, everything and everyone is available at all times. That means that there are hundreds of mutual funds, brokerage firms, and management funds promising you endless wealth. And while you can spend hours checking every single one, there is a simple way to get an overall idea of whether or not a firm will handle your money with the care it deserves.

The first trick is to check the returns promised. If a firm promises a 100% return after a year, then run away. That is an impossible accomplishment. The second trick is to check the firms that are part of your local Forex Agency. If you live in the US, you can check it by going to the Background Affiliation Status Information Center (BASIC) created by the National Futures Association (NFA). If you are not, then a simple google search should point you to the proper agency in charge of overseeing forex firms.


Even the most reliable firm will have some bad apples in it. It is an unfortunate reality, but human nature is such that it is hard to see who is being dishonest until it is too late. That sentiment extends to private or individual forex traders.

Regardless of whether or not you know the trader, make sure to check the person's credential. Additionally, double check that the trader also engages in stock trading and that it has a trading license. The risk of being defrauded is much smaller when a trader risks losing their trading license by committing fraud.

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