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With the rise in popularity of Forex trading as a way to invest extra capital and make money, there has also been a rise in the number of Forex scams that you need to watch out for.
Knowing what to look for to spot a Forex scam is just one part of the solution — you should also know what NOT to expect when you get into trading Forex to avoid being the next victim of one of these Forex trading scams.
What Is Forex Trading and How Does It Work?
Forex is a combination of the words “foreign” and “exchange.” Forex trading is the buying and selling of foreign currencies, which are traded in specific currency pairs, such as the Euro and the US Dollar (EUR/USD). All Forex trades are made through Forex broker platforms.
In order to make money, you might buy Euros at the price of $1.18 USD, then sell them when they are worth $1.21 USD, but there are many different ways to trade Forex. To find out more about Forex trading, such as how the different Forex markets work, read this article.
Because of the high-risk nature of Forex trading, many people wonder “is Forex a scam?” Forex trading is legit, but the internet is full of Forex scammers who target new, usually naive, investors and steal large amounts of funds from them. These scammers usually pose as legit Forex brokers, but they are either completely fake or are using shady tactics to make money off their clients.
What To Look Out for When Spotting Forex Trading Scams
A Return on Investment That Is Too Good To Be True
Most investment scammers lure their victims in by promising unrealistic returns on their investments.
Consider that a realistic profit on Forex trades (for experienced investors) is somewhere in the range of 1-5% ROI. So, if any Forex broker offers you “guaranteed” returns that are much higher than this, they are very likely running a Forex scam.
Negative Reviews Online, No Certifications, and Illegitimate Proof of Success
Before you ever send money to a Forex broker, do thorough research about them to ensure they are the real deal. Start by typing the name of the company into Google, followed by the word “reviews” to pull up reviews from past clients. If you see any negative reviews, especially suggesting that the broker is involved in fraud, run the other way.
Additionally, you should only work with certified, registered brokers in your local area. Many Forex scammers operate offshore from where you live, and are not properly licensed or regulated in any way in your home country.
Finally, many scam brokers will try to gain your trust by showing you “proof” of their trading system’s success. These might be screenshots, spreadsheets, client testimonials, or other types of data, but you have no way of knowing if what they’re showing you is real. No matter how professional a broker’s site looks, don’t believe everything you see or read on it.
Pressure and Unreasonable Deadlines
Fraudulent Forex scam brokers also tend to use high-pressure sales tactics and aim to get you to make trades under tight deadlines in order to make themselves as much money as possible.
Remember that, at the end of the day, any broker you work with is providing YOU with a service, so your trades should always be on your terms. Legit brokers make money on fees and commissions no matter what, so they shouldn’t need to pressure you.
The Inability To Contact Anyone That Has Used Their Services Before
The most secure broker platforms to use are ones that you can obtain personal references for. If you don’t know anyone who has used a certain Forex broker before, and you can’t find any real information about them on forums or review sites, there’s a higher chance that they could be scammers.
A Trading System That Costs More Than a Few Hundred Dollars
Most legit Forex brokerage platforms only charge a small monthly fee up front, and then charge commissions on all the trades you make. For example, they might charge you $12 a month, plus up to $5 per 100,000 currency units traded.
If any broker is selling you a system that costs significantly more than this, like in the several hundreds of dollars a month in fees and commissions range, they are probably scamming you.
What Not To Expect From Forex in Order To Avoid a Forex Scam
Don’t Look for Quick and Large ROIs
Though Forex is legit, it is by no means a way to “get rich quick.” Forex trading takes a lot of time, dedication, and discipline in order to make steady returns over the long term. Anyone who claims they can quickly flip your money in the Forex markets and make you big returns is not telling you the truth.
Don’t Expect Guaranteed Success
At least 70%, and probably closer to 90%, of people who trade in Forex lose money. That’s just the reality of Forex trading, and the reason why many people wonder “is Forex legit?”
However, if you commit the time and capital required to make good Forex trades, it is possible to earn strong ROIs over the long term. Just don’t expect guaranteed or instant success, and don’t believe anyone who tells you they can guarantee that you make money on Forex.
Don’t Trust Someone You’ve Never Spoken To, Who Is Offshore and Unregulated
As we touched on earlier, most fraudulent Forex brokers operate offshore and are not registered with the local governing bodies where their victims live. As such, they are able to run their scams in relative peace and make off with thousands of dollars from unsuspecting investors, which they funnel into offshore bank accounts.
If you’re ever contacted online by a Forex broker or trading system salesperson, and they aren’t located and regulated locally, don’t look any further into trading with them. There are plenty of safe brokers you can use instead to avoid becoming the next victim of a Forex scam.
Don’t Expect Facebook/Instagram Ads To Be Legitimate
One of the preferred ways Forex scammers attract targets is by running paid ads on social media sites, including Facebook and Instagram.
These ads usually promise high ROIs and quick success, and are often linked to profiles of brokers or “Forex influencers” who make themselves appear very wealthy. They might claim to have some “secret” to Forex trading to try and entice you into signing up for their program, but they will really just steal your money.
Recovering From a Forex Scam (If You Didn’t Spot the Signs Early On)
Even when you know how to spot a Forex scam, you can still fall victim to one. Fortunately, you may still be able to get your money back with the help of the fund recovery specialists at PayBack.
Contact us as soon as you suspect you’ve been scammed for the best odds of getting some or all of your money back from the Forex scammers.