The foreign exchange rates industry has grown to become a multi trillion dollar niche. While good old fashioned hard work and experience can help wield even the rosiest cheeked of newbies into accomplished traders, there are also scams to beware of. Within the foreign exchange rates world It’s always worth remembering that old maxim, “if it sounds too good to be true…”
In this article we look at a few common types of scams perpetrated within the foreign exchange rates industry.
Scams In The Foreign Exchange Rates World
High Yield Investment Programs (HYIP). These are programs that are finance (and quite often forex) based. They suck investors in with promises of huge returns but in many instances the “investor” gets very little (or none) of their capital back. It’s always worth noting, the financial world makes us all sweat for our returns. It’s not easy returning even 20% a year on your capital – yet some of these HYIP’s boast that they can deliver same returns within a few days. Sometimes, HYIPs might appear to be paying off in the short term – friends and affiliates of the HYIP manager will crow about the returns they are making, prompting other investors to come in with their capital.
Expert Advisors & Trading Robots. The idea is so very appealing. You set up an automated program within your trading platform and allow it the authority to trade your equity. The robot or expert advisor then hums away in the background, executing trades based upon a series of market variables and rules. The issue is that many of these robots simply do not work in the long run – there have been many instances of people trusting these robots, and losing the main bulk of their equity in return for their faith.
Scams From Forex Brokers. The vast majority of foreign exchange rates brokers will tend to be honest and reputable businesses. There are always exceptions to this rule however, and as a trader it is up to you to place your money with a broker that is both reputable and well regulated. There have been instances of traders losing their equity deposits through brokers that offer comingled client accounts – one of the most notorious examples of this is the Refco scandal. A lot of Refco currency traders lost everything when the company went bust – the main problem was the company not segregating each individual traders funds, but rather treating all funds as one giant collective. It would probably not surprise most people to learn that Refco was registered in a low regulation country. Had the company been regulated by a reputed regulator, the clients would almost certainly have had their money safeguarded. The moral of the story is, pick your brokers with care. The location of the broker, and who regulates them is crucial.
Forex Signal Services. These services offer traders professional buy and sell trading signals. A quick Google of some popular signal services will reveal a slew of problems and complaints from previous customers. For a start, the currency markets move with such speed that any signals generated will become almost instantly out of date and so useless. Furthermore, many of these services while claiming to use advanced techniques provide signals using basic technical analysis that anyone could master.
You probably have worked very hard for your available trading equity. Trading foreign exchange rates can be a great long term method of generating an income – just work hard, make your own decisions and stay clear from the scams and snake oils that will always be a sad part of this industry.