Generally the ones who lose the money say that Forex is Scam and those who earn money say that Forex is not a scam.
To whom to trust so you do not lose your time and money involved in Forex trading?
Not easy to say but it is always better to try it for yourself. You learn the best from your mistakes.
If you do not try it you will not know what is that and how it feels to trade on the Forex market. To do it and try it by yourself, invest a small amount of money which you can afford to lose.
If you earn money by trading, good. If you lose the money it should be a lesson from which you should learn and which you should not repeat.
To give you a better overview about Forex trading scam types and is Forex a scam I have divided the post into a few sections. Each section will give you overview from different angles so you can make a decision. The decision should you get involved in Forex trading or you will stay out of it.
What is Forex
Forex trading is earning money by trading and to give you a closer overview I will use stock trading. If you have traded the stocks then you know that if you buy the stock and if the price of the stock rises you will earn money.
If the price of the stock falls down you will lose money. And if the price of the stock is $0 you will lose all what you have invested.
Similar thing is in Forex. In Forex you do not buy the stock but you buy or sell the currency pair. Currency pair is called a trading pair which involves two currencies. Like Euro(EUR) and U.S. dollar(USD) where you say that Euro will fall down compared to U.S. dollar and vice versa.
When you put together those two currencies you get EUR/USD trading pair. In the pair you have a ratio between those two currencies and that ratio is defined by the price.
The ratio and the price is shown like EUR/USD = 1.2345 which means that 1 Euro is equal to 1.2345 U.S. dollars. The price is shown with 4 decimal places because the trading is done on the lowest scale.
The lowest scale is the 4th decimal point in the price of the trading pair. That is called a pip and you can learn more about what is a pip on the next link.
What is Forex Trading
The price of the trading pair fluctuates and your job is to define will the price go UP or DOWN. If you predict the correct direction you will earn money. That is called Forex trading – simplified said.
That means if you think the price of EUR/USD trading pair will go down you will sell that trading pair and earn money.
If you think that the price of the EUR/USD trading pair will go UP you will buy that trading pair and earn money.
While you can earn money by predicting the correct direction, you can lose money if your prediction is not correct.
If the price of the trading pair does not go in your direction you will lose money. How much money you can lose depends on you and what you have defined as an acceptable loss. If you do not define how much you will lose on each trade you can lose all money you have on the trading account.
Trading on the Forex is not an easy job and it takes certain skills to do it properly. It is not that you cannot learn trading but it is more about time, patience, discipline and emotion control.
Read more: Forex Trading Beginner Tutorial
What is Trading Forex Scam
Now, while you know how the Forex trading works, it is good to know how to spot the undesired events that can happen. Any journey, like Forex trading, brings risk with it. The Forex is not exception.
Where is the money circulating there is a chance you will see scammers. Scammers are people who want to use you and your money to get rich. Scammers are using illegal and legal ways to trick you and to take the money from you.
You can say that trading Forex scam is when you pay something and you do not get what you have paid. It happens when someone tells you stories about earning a lot of money, make a promise and you do not get the promised result.
I think you have seen the same scenario in your life up to now. Forex is not something new but it is a new way how scamming is done.
While trading is earning money by predicting the correct direction of the trading pair price there are many ways how someone can trick you.
How to Spot a Forex Scam
There are several ways you can be scammed because the Forex market is large and trading is widely open to all people in the world.
While trading on the Forex requires you to predict the price of the trading pair there are ways to do it. You can predict the price by watching the charts, reading the news, reading fundamental analysis of the currencies.
If you do not know how to predict the correct direction you can pay someone. You can pay so someone can tell you where the price will go or you can pay someone to trade for you. If you do that you are exposing yourself to be scammed.
Here are the ways how Forex trading scam try to lure you and take your money from your pocket:
- Trading signal
- Forex trading Robots/EA’s
- Trading education
- Managed accounts
Trading Forex Scam – Trading Signals
Another way to get information where the price will go is through trading signals where someone is selling you the information. When you pay for that signal and you never get the signal you have paid for, or the signal you get is not correct then you can say you are scammed.
Before you pay anything for a signal you get the trading results of that signal channel as a proof that signals are profitable. But the reality is that the trading signals results are not correct and they are forged.
Scammer sends any kind of signal just to send something and if he luckily predicts the correct direction you can earn something. But at the end the sum of all signals will make you lose all the money.
Trading Forex Scam – Forex Trading Robot
Robots are bot or programs that are running on the trading station and open/close trades for you. It has preset conditions when to open and close trade.
If you are lured by the ad that the robot is profitable you end buying it. When you get the robot you end up getting garbage that is useless or even do not have anything with Forex trading. But that is a really rare case because you will make some checks about the robot before making the purchase.
It can happen that you buy a robot that is doing fine at the start but in time the robot starts to lose the money.
Trading Forex Scam – Trading Education
One of the best ways to be a victim of Forex scam is to pay for a learning course and get scammed.
It happens that you see the promise about getting rich if you pay for the course and you pay for it. When you start your education you get basic knowledge about Forex which you already know. Or you pay the education because it was promised you will earn $1,000 each week and you end up only with the idea.
Trading Forex Scam – Managed Accounts
Managed account is when you give your money to someone to trade for you. You enter into the deal because you are promised to get a certain percentage each month.
The trader that offers his services gives you track of records of his previous trading accounts as proof of success. Based on that you get sucked in and invest your money.
After that what happens?
Traders disappear with your money. He does not answer your calls, e-mails.
Another thing happens that the trader really starts trading for you. But after a few trades you see that your account is already wiped or completely wiped out because the “trader” does not know how to trade.
Beware of Forex Scam
As you can see, people are finding different ways to get the money from you. While Forex is free and open to all people in the world many scam ideas are realized where a lot of money is being lost.
There are ways to protect yourself from Forex scam. You need to do more research and give more time into preventing being scammed but at the end it is worth it.
How to Avoid a Forex Scam
There are two ways to avoid a Forex scam.
First one is to learn from your own mistakes. That means if you can test Forex trading by yourself it is a good way to prove that it is not a scam.
If you want to use trading signals, robots, Forex education, and a managed account you can invest a small amount of money. That small amount should be an amount you can afford to lose. If you lose that money it should not happen that you do not know how to survive to the next salary.
When you do it by yourself you will see which ways the scammer has used to trick you. Next time when you encounter a similar approach you will know how and when to avoid it.
Second way is to learn from others’ mistakes. You can read on the internet reviews from other traders that have been scammed.
Many traders share their experience so other traders do not become a victim. It is a good way to prevent scammers from taking another victim and to remove him from the internet. There are times when the police intervene and the scammer gets in jail.
Here is a list what to watch to avoid scammers:
- False advertising
- “foolproof”, “guaranteed” or “100% success”
- Confusing messages
- reading the message two or more times and being clear is the sign something is wrong
- Automated trading that sounds like magic
- there is no 100% success rate on any EA
- Unverified payment methods
- transaction channels must be secured
Is a Forex scam or not – I say it is not.
It is not a scam because banks are trading on the Forex market. Wiki says it is exchange market where participants exchange currencies.
From the other side, Forex scammers are real and you can be scammed. But you can be scammed everywhere.
Your job is to prevent that from happening and there are ways. While Forex is available to anyone we all have a large knowledge base on the internet that can help to avoid scammers. If not avoid totally then at least to minimize the risk being scammed.
Do not let someone tell you that Forex is a scam because it is not. There are many traders who earn a lot of money and some of them even live from that trading.
It is a hard job to become a successful Forex trader, and it is hard to sharpen the skills you need to be professional in trading but it is possible. Set a goal with small steps and you will reach it eventually.