Connect with us

Industry News

How to identify and protect yourself against forex scams

The retail forex industry has boomed in recent years and is now a multi-billion-dollar industry – with hundreds of regulated brokers and daily trading volumes of almost $200 billion dollars.  The volume of trading in forex has grown even more during the prevailing coronavirus pandemic as reported by industry analysts & leading brokerages in their…

Some pointers on how to not fall prey to scams in the forex industry

The retail forex industry has boomed in
recent years and is now a multi-billion-dollar industry – with hundreds of
regulated brokers and daily trading volumes of almost $200 billion dollars. 

The
volume of trading in forex has grown even more during the prevailing
coronavirus pandemic as reported by industry analysts & leading brokerages in their Q1 2020 earnings.

Retail traders are attracted more to
markets during higher volatility & falling stock, commodity prices during
Coronavirus.

While Forex is a legitimate instrument,
but some industry malpractice participants and con artists are taking advantage
of its complexity & lack of knowledge among general public & new
investors to scam & fool them.

Though, many common scams related to forex
have been reduced by efforts from regulators around the world but still there
are some scams that still find victims. Sometimes from lack of proper
information on scams & sometimes due to lack of local regulations. 

While many of the scams in the forex
market are no longer as pervasive as they used to be – mostly due to more
regulated environment, but some problems still exist.

South African broker comparison website Forex Brokers SA
looked at some of the common types of forex scams that you need to know about
and how you can protect yourself against them.

4 Common Forex Industry Scams

1) Unregulated and Dishonest Brokers

An unregulated broker is a broker that is
not regulated under any recognized jurisdiction or with country’s financial
market regulator, so it can’t be held accountable by a governing government
authority in your country.

These brokers are often offshore brokers
and most of these brokers are registered in a jurisdiction like some island
nation that is leaner to their business models. While some brokers may not even
be regulated anywhere & just provide fake license.

While there are also cases of some
regulated brokers that may sign up some of their clients in offshore
jurisdictions to offer high leverage or to evade their regulatory
responsibilities.

If an unregulated broker commits fraud or
scams you or indulges in malpractices in any manner, you have little or no recourse
against them. This is because there is an absence of laws that protect you from
such malpractices. 

There are several ways in which such
brokers can scam you. They can take your money using software “glitches” or
“bugs” as an excuse, or they can fail to process your withdrawal which means
your money might get stuck with them, or they can fail to process your trades
in the market.

Here are some of the malpractices that
you must look out for in your broker:

Malpractices are not limited to those
listed above only. So, you must be very careful while choosing a broker.

B2

2) Fake Forex Signal Seller Scams

A forex signal seller is an institution
or an individual that offers advice on when to buy or sell particular currency
pairs.

A signal seller typically claims to rely
on market analysis and news to judge the right time to trade in currency pairs.
They may offer trading advice through automatic messages or may manually send
you messages.

Signal sellers are known to be often
wrong and they may give advice that could lead to large losses for you.

Do not trust signal sellers who promise
advice that can regularly outperform the market. Only listen to signal sellers
that are approved financial advisors & that suit your own analysis.

3) Forex Robot & Trading System Scams

In these scams, you may be approached by
someone asking you to buy a robot or an automatic trader that can trade for
you. They will say that this robot allows you to earn money while you sleep.

The robot is supposed to be able to
conduct trade in your stead that generate a profitable yield.

However, most of these robots never
actually deliver as promised and you may end up with significant losses. These
trading systems are never reviewed or tested by independent agencies.

4) Untrustworthy Investment Schemes &
Funds

There are several entities &
individuals that promise to offer get-rich-quick investment schemes through
forex and cryptocurrency – that are not credible.

You should be wary of any investment
schemes that promise guaranteed returns or outsize profits.

Returns or profits in the forex market
can never be guaranteed and you should always remember that your investments
are subject to market risk. Never trust any company or individual that claims
otherwise.

For example,
you may be told about a ‘forex management fund’ that promises 50% annual
returns. You just have to send them your money and it will be managed by an
investment expert with a stellar record.

These offers are always scam and you
should never trust them. The “stellar record” of the investment expert is
usually fake and unverifiable and you will likely lose all your money.

Spot these early signs of
scams


1. Promises of guaranteed returns

There are several scammers who claim to
offer trading systems or investment education & advice with guaranteed
results – some even offer services to invest for you. You need to be wary of all
of them.

You should never invest in what you don’t
know – only based on an advice or through others.

Regardless of what you are being sold in
the forex industry (investment scheme or course or system) or whatever success
rate, backing the seller claims – always ask for proof of the credibility of
the seller.

When you ask them, most won’t answer or
show you proof.

These sellers or scammers are known as
“snake oil” merchants because there is no proof of the usefulness of what they
sell or their trading background.

2. Asking for Personal Information

Only give your personal information to
vendors who you completely trust and who are established in the market. Your
personal information is valuable and can be misused.

Before providing your personal
information, you should ask for risk disclosure document. Always read the
entire document before ascertaining whether to provide your personal
information or not.

3. Advise out of Nowhere on the Internet

If you are asked to participate in a free
webinar, or are offered free courses or investment advice, then it is probably
a scam. Do not trust messages or emails that approach you from out of nowhere.

While no reliable industry source or
company will contact you in such way, but even if you get contacted, you should
only trust communication from credible sources that at least have a proper
online presence and long business standing, reputation & creditability.

Additionally, you should check their
history, management, regulation, office address, contact information, and
reviews.

Do not trust information that is given to
you for free and be sure to verify it from 3rd party reliable
industry sources and do not provide your personal details in return.

4. Brokers that Limit Withdrawals

Do not work with a broker or an entity or
individual who tries to limit your withdrawals from your own account held with
them.

This is very common in investment scams
& with fake brokers; most people get to know about this when they request
their withdrawals – many would experience issues in their first big withdrawal,
and they will give all kinds of reasons for delays.

You should always read the reviews about
the entity online before depositing.

If a forex broker is using any reason to
place restrictions on the amount you can withdraw, you should take it as a red
signal. The forex broker may be financially unstable or indulging in
malpractice.

Once you start working with a new broker,
try and make a test withdrawal to see if it is processed smoothly.

General rules to follow to Avoid
Falling for Such Forex Scams

1. Educate Yourself 

The first step to becoming a forex trader
is to educate
yourself
on the practical know-how and nitty-gritty
of the industry.

You need to familiarise yourself on how
the industry works and how experienced traders conduct their activities.

Start by learning the basics of
Forex Trading
including technical
analysis, fundamentals & the risks of forex trading, and the market players
like regulators, brokers.

You may want to consult a professional
investment adviser on how to best approach the forex industry.

2. Start with a Demo Account

The best way to learn how to trade is to
use a demo account that several notable brokers offer. A demo account gives you
the practical experience of trading in a near real market environment without
the risk of losing your money.

With demo trade, you can practice – when
and how to enter your orders, how to use risk protection, and what kind of
research, strategy & market analysis to implement.

It’s important to note that demo trading
environment may greatly differ from real market conditions. Choosing a reliable
& genuine broker will ensure that there is lower discrepancy in demo &
live conditions.

Once you are practiced in demo for few
months, you should go live with only little capital that you feel comfortable
with.

3. Do Not Trust Opportunities that seem too
good to be true

The forex industry is full of scammers
that make promises that sound too good to be true.

As a rule of thumb, you should never
trust anyone that is making such a promise.

To be successful in the forex industry
you need to have years of experience and volumes of knowledge. Remember that
there is no shortcut in the forex industry.

4. Only Trade with Regulated Entities
& Brokers

As already mentioned, it is essential
that you should only trade with brokers who are regulated by a government
authority.

Different regulators operate in different
countries and are known by different names. And some regions have their
collective financial agencies & policies like: ESMA & MiFID in case of EU.

Major forex market regulators include: TheFCA of UK,
CySEC of Cyprus, BaFin in
Germany, ASIC in Australia, NFA of the US, FSCA in South Africa, CMA in Kenya.

Check for regulator in your region and
search their policies and signup with a regulated entity licensed by them.

5. Read Reviews and Compare Fees

Before settling on a forex broker, you must
read their reviews and check trustworthy information websites, forums for user
reviews & other trader experiences.

No forex broker will have overwhelmingly
positive reviews, but you can always find trustworthy brokers with a good
history, near flawless track record.

Further, you should compare the brokerage
fees and other hidden fees that are charged by each broker.

6. Conduct Proper Risk Management and
Assessment

Even if you are sure about
all aspects of your broker, you still need to know all the risks, assess and manage them properly.

It is essential for all traders to do
research on proper risk management techniques such as stop-loss orders and
negative balance protection.

Practising
risk management techniques will ensure that you keep trading for a long time
without sustaining any heavy losses. Every good trader has inculcated a habit
of risk management and you should too.
See here for global coronavirus case data

Continue Reading
Advertisement

Industry News

School4Trading Review – How to Spot Possible Forex Broker Fraud

School4trading Review

School4Trading Review – How to Spot Possible Forex Broker Fraud

In this School4trading Review, we will look at the features of the software, as well as the customer support. First, let us look at the interface. The design is simple and easy to navigate. It also provides a chatbot, which helps you to communicate with the broker. The customer service is warm and inviting, which is a hallmark of a good broker. In contrast, a fraudulent broker will use cold and impersonal customer support to lure people in.

Another problem with the system is that the login process is not always intuitive. You may have to retype your password several times to get in. Then, you may experience difficulties withdrawing your funds or accessing your account. In such cases, you might have to wait for days or even weeks before you can withdraw the money you’ve invested. This is not a good sign. It’s better to choose a different trading platform altogether.

If you’re having trouble logging in, you should also check the legitimacy of the broker. Whether the broker is licensed by a reliable regulatory body or closed down, you’ll want to be sure it’s legitimate. If the broker isn’t licensed by the right body, don’t trust him. You shouldn’t waste your time with an inexperienced company. This will only cause you problems in the long run.

The next factor that should be checked is the licensing. A legitimate broker will have a license from a high regulatory body. However, a broker without a license will be unreliable. Moreover, a reliable regulator will take away the license of a scam broker. As a result, a trustworthy School4Broker/Profittrade review should mention fees, account rules, and contract terms. A scam broker will be unable to operate legally.

Secondly, look for warning signs. The broker should be licensed and regulated by a reliable regulatory body. It should be regulated by a high level. If it doesn’t, it’s a scam. Lastly, it should have a website that lets you easily access your account. Moreover, you should not hesitate to check the contact information. If you find any information that seems suspicious, you should reconsider using the broker.

In summary, Forex trading isn’t easy, but it doesn’t have to be complicated. It’s not as difficult as it seems if you’ve heard about the program. You’ll learn everything about the basics and how to become a professional. But if you’re still unsure about whether this program is right for you, don’t hesitate to contact a school4trading’s website.

The most important thing to remember when it comes to Forex trading is that it’s not easy. While it’s important to have a strong background in trading, there are a number of factors that can affect your success. Having a proper plan is vital in the long run, because you will be trading with real money. And, the platform should be reliable. Otherwise, you’ll end up losing a lot of money.

As we’ve mentioned, Forex is not easy. Investing isn’t something you can do in the comfort of your own home. You need a proven system. There are no free trials, so you’ll have to find a way to do it yourself. This isn’t a scam, and it’s a great way to make money without any help. A Forex system can help you learn the intricacies of the market.

Although the process of learning Forex isn’t an easy one, it’s certainly not impossible. Fortunately, there are many people who are willing to take the time to learn how to trade. But, even the most experienced trader needs to be aware of the risks of the market. While Forex trading isn’t easy, it can be done with the right knowledge. The software’s user-friendly interface is key.

Continue Reading

Daily Financial News

Don’t Count On JPY Correction; Staying Long GBP/JPY

The path of the potential pace of the JPY decline may still be underestimated by markets, which continue trading the JPY long.

While the 10% USDJPY advance from September lows looks impressive from a momentum point of view, it may no thave been driven by Japan’s institutional investors reducing their hedging ratios or Japan’s household sector reestablishing carry trades.

Instead, investors seemed to have been caught on the wrong foot, concerned about a sudden decline of risk appetite or the incoming US administration being focused on trade issues and not on spending. Spending requires funding and indeed the President-elect Trump’s team appears to be focused on funding. Here are a few examples: Reducing corporate taxation may pave the way for US corporates repatriating some of their USD2.6trn accumulated foreign profits. Cutting bank regulation could increase the risk-absorbing capacity within bank balance sheets. Hence, funding conditions – including for the sovereign – might generally ease. De-regulating the oil sector would help the trade balance, slowing the anticipated increase in the US current account deficit. The US current account deficit presently runs at 2.6% of GDP, which is below worrisome levels. Should the incoming government push for early trade restrictions, reaction (including Asian sovereigns reducing their holdings) could increase US funding costs, which runs against the interest of the Trump team.

Instead of counting on risk aversion to stop the JPY depreciation, we expect nominal yield differentials and the Fed moderately hiking rates to unleash capital outflows from Japan.The yield differential argumenthas become more compelling with the BoJ turning into yield curve managers. Via this policy move, rising inflation rates push JPY real rates and yields lower, which will weaken the JPY. Exhibit 12 shows how much Japan’s labor market conditions have tightened. A minor surge in corporate profitability may now be sufficient, pushing Japan wages up and implicity real yields lower.

JPY dynamics are diametrical to last year . Last year, the JGB’s “exhausted”yield curve left the BoJ without a tool to push real yields low enough to adequately address the weakened nominal GDP outlook. JPY remained artificially high at a time when the US opted for sharply lower real yields. USDJPY had to decline, triggering JPY bullish secondround effects via JPY-based financial institutions increasing their FX hedge ratios and Japan’s retail sector cutting its carry trade exposures. Now the opposite seems to be happening. The managed JGB curve suggests rising inflation expectations are driving Japan’s real yield lower. The Fed reluctantly hiking rates may keep risk appetite supported but increase USD hedging costs.Financial institutions reducinghedge ratios and Japan’s household sector piling back into the carry trade could provide secondround JPY weakening effects

Continue Reading

Daily Financial News

Mexico raises interest rates, cites Trump as risk

The head of Mexico’s central bank says U.S. Republican candidate Donald Trump represents a “hurricane” sized threat to Mexico.

Banco de Mexico Gov. Agustin Carstens told the Radio Formula network Friday that a Trump presidency “would be a hurricane and a particularly intense one if he fulfills what he has been saying in his campaign.”

Trump has proposed building a wall along the border and re-negotiating the North American Free Trade Agreement.

Mexico’s central bank raised its prime lending rate by half a percent to 4.75 percent Thursday, citing “nervousness surrounding the possible consequences of the U.S. elections, whose implications for Mexico could be particularly significant.”

Mexico’s peso had lost about 6 percent in value against the dollar since mid-August. It recovered slightly after the rate hike

Continue Reading

Trending