How to Protect Yourself from Forex Fraud

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With over 5 trillion U.S. dollars traded every single day, the international currency market is the largest financial market in the world. All that money moving around the world attracts a lot of business, not all of them legitimate. Market veterans can spot a scam from a mile away, but if you’re new to forex trading, it can be challenging to differentiate a legitimate investment from a con. You could lose a lot of money if you’re not vigilant.

Even halal Islamic accounts are not immune to fraud. While there has been a concerted effort from regulators and brokers to educate investors about typical schemes, financial crimes are becoming more difficult to detect. At the very least, you need to make sure that your broker is registered with a government regulator. This ensures that there’s some legal oversight of their operations.

You can’t protect yourself from something you can’t see. Here are a few other tell-tale signs of a forex scam:

  1. Guarantees of profit

Any broker or trader that offers a guaranteed profit on currency trades should be viewed with suspicion and treated as a possible scam. Ask any market veteran, and they will tell you the same thing: the foreign exchange market is unpredictable, and there is simply no way that anyone can make a guaranteed profit on their trades. Any such claim should be seen as a red flag.

This is one of the most common scams, and regulators have issued ample warnings about this evil tactic. Fraudsters typically target new investors and entice them to invest a considerable amount with promises of guaranteed returns, only to see their holdings evaporate. When scouting for traders, ask to see their investment results before making a decision.

  1. Lifestyle-focused marketing

house exterior with lights inside

Another red flag you should look out for are advertisements that promise a lavish lifestyle to market a firm’s services. Any market participation, whether in the stock market or the international currency market, is usually associated with high-flying Wall Street types and high-net-worth individuals. While it’s true that many people have become wealthy from investing in financial markets, these things don’t happen overnight.

Of course, using luxury as a selling point is a tactic as old as the ad industry. However, this method makes more sense when targeting a demographic that already has the means of buying luxury goods. But if a startup firm promises riches if you invest with them, it could be a sign that it’s a scam. Check the firm’s lifespan before signing with them. If the firm is relatively young, stay away.

  1. Selling trade signals

If you’re new to the world of international foreign exchange, it can be challenging to know which brokers to trust and who to steer clear of. But if there’s one group that you know you can avoid, it’s signal sellers. Seasoned investors avoid them like the plague, which is why they have started targeting rookies and vulnerable people.

Signal sellers claim to have a system that can identify the best times to buy or sell a currency pair. By collating industry news, market trends, and expert analyses, they claim to predict a favorable trade ahead of time. It’s important to note that the product they’re selling is the system itself, which is often subscription-based.

We know that these signals rarely work for the simple reason that they’re available on the market. If their system can predict favorable trading opportunities, why would they share their data with the public? Why give other traders an edge when they can keep the information to themselves?

  1. Fake reviews

Any smart shopper knows to take online reviews with a grain of salt, and the same concept applies to forex trading. In a hypersaturated market, there are thousands of brokers vying for your attention. Some of these companies pay for manipulated or fake reviews in hopes of attracting some attention their way.

It would help if you didn’t exclusively rely on online information when scouting for brokerage firms. Make it a point to go to the company’s office and meet with traders in real life. Ask to see their investment performance and trust your gut.

Spotting a scam requires a mix of book and street smarts, common sense, and a thirst for answers. Always ask questions and do not let up until you are delighted. If you uncover red flags or aren’t satisfied with their answers, walk away. It’s the only way to protect yourself from fraud.

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