The promise of easy money and turning $100 into 6 figures in weeks will always grab the attention of the vulnerable, and those looking for get rich quick schemes. It doesn’t matter how much you want it to work or how much you are convinced that this time its going to be the one that strikes you rich. You end up just to find that it was another one of those forex scams. Not only did you waste your money buying into the useless BS but also lost you forex account investing into their crap.
Forex scams are all around and they come in all types of disguises, these forex scam artists are all to eager and willing to take your money. There is no easy way out of trading forex and there is no perfect system, robot or signal provider and analyst that will make you a million.
To learn more about if retail forex trading is profitable please read about it here “is retail forex trading profitable?”
As discussed above forex scams come in many disguises and although there are many more. I will list off some of them and talk about each one and how you can avoid them.
How many times I have heard traders complaining about brokers? Taking their money by increasing spreads, stop loss hunting, spiking price and even denying the trader from withdrawing their funds. Some of these complaints can be put down to, for someone to blame for their losses. On the other end there are many traders that blame everyone else for their losses bar them self. It could be market makers manipulating price or brokers trading against them and there will always be those who claim ALL brokers are scamers but this is far from the truth.
Can brokers manipulate the price?
In a short and direct answer yes they can just like any business there are honest businesses and dishonest businesses. So how do we find an honest broker to avoid these types of forex scams? I think it would be best if I start off by listing some things to look out for when choosing a broker.
Ok now lets break it down…
Electronic communications network (ECN) and Straight though processing (STP) brokers forward your trades straight through to the interbank market and do not need to hedge (open trades) against your positions. Dealing desk brokers are the “Bad guys” so to speak and they can manipulate the price in anyway they like. Typically when you place a trade with a dealing desk broker if you win the trade they loose money.
The dealing desk broker want you to loose. With a STP or ECN they make their money by commissions and spreads so they want you to keep trading. They don’t want you to loose money but in the same time they don’t care if you win either. They just want you to keep trading because its how they make their money. The dealing desk broker wants you to loose your money as fast as possible because they are at risk if you win.
The broker you choose must be regulated by a governing body for example. Here in Australia a broker must have a Financial services license and is regulated by ASIC. This limits forex scams with forex brokers, however does not guarantee you will meet with honesty but does give you some kind of certainty that if they fail to meet the standards and regulations defined by ASIC, they will meet with the law and could be fined be shut down and can even get jail time.
In this point I will provide you with a real life example of what to look for. Below I will present two different charts 2 different brokers I wont name names here but at the end of this article I will provide you with a link of the broker I use.
At the time alot of traders were short on the AUD pairs and stop loss placement was above the previous days high. What happened is the Reserve bank of New Zealand cut interest rates which caused alot of volatility in the markets. As you can see in the charts the left one, the price spike was lower than the previous days high and the right one was above yesterdays high.
This my friends, is how you spot a dishonest broker. This broker would of been using algorithms to recognize where traders were keeping stop losses and purposely spiking price up. The chart on the left is an ECN broker the chart on the right is a dealing desk broker. All it takes in research before handing over your money. Another good thing is to run a demo along side a live account and see how price moves in relation to the other.
The broker I use is Pepperstone and by all means at the time of this writing I am not in any way endorsed by Pepperstone or affiliated to them.
Algorithmic trading, robots, expert advisors are a program that places trades automatically. By predefinition a robot is a trading system that has been back tested on past chart data. To this date I have never seen a profitable robot but there are countless robot programmers that claim to turn your account into a million. They range from as little as $20 up to as high as $10,000. These kind of forex scams are very convincing as these websites that sell them give you all sorts of guarantees. Back testing results and graphs is one of their tricks.
Some go to the extend with a very enticing sales pitch page that tells you this system maybe be gone at any time because, they will some how get into trouble with brokers if they knew a profitable robot was being sold to the public. The only way to find a good forex robot is to either build one from a robust manual trading system and monitor it always.
In reality these robots only work in back testing and are just a toy and useless. Some of these robots will eat your account in just a few trades while others will keep your account at break even. There are some that look very promising at the start giving you enormous amounts of profit gain in a short time but to loose it all in one trade.
My advice is stay away and the only way to trade is to study and trade manually. At a future date I will write a post specifically all about robots how they work. How you can build and test them out for yourself. Pro traders who have built their trading experience over many years can create successful robots but spend many weeks or months under development and aim for low draw downs and sustainability, and not quick money over night.
Never use signal services they are here today gone tomorrow. They often use small accounts and make more money getting paid as a signal provider than actually trading. They don’t care about your trading account and even their own. Signal providers often show a really good run for six months then loose it 2 months later. With signal providers again I have yet to see a profitable one in the long term. Too many traders that loose their money trading their own account end up getting burnt with these guys also.
I wouldn’t call these forex scams but they offer a monthly fee to join their website just to get information that is readily available for free else where. The monthly fee adds up to normally around $2500 per year. Most of these guys dont even trade. Some of them just get info from other real traders and sell it on their site. Some of them look very pro but in reality are just copy cats. They make more money selling their monthly subscription than they would ever being a trader.
Binary options would have to be the biggest scams in the forex market. To date i have not seen or heard any pro trader using this system. Generally stay away from brokers that offer binary options. There are numerous scams going around facebook and twitter claiming to make you 4 or 5 figures a day. To all my readers please be aware of this and report any scams to this site. If there is enough interest I will dedicate a section to this site to list all past and current Forex scammers.
Just a quick note how to spot an Internet marketer claiming they are a forex guru. There are site’s like JVZoo that a set up to promote forex scam systems. So keep an eye out for any forex system advertised on those kind of sites. They are purposely set up to make loads of cash by naive forex traders. They don’t make money by trading forex but rather selling their dodgy system. What happens is you will get many many affiliate marketers do good reviews on their product so un-suspecting buyers click on their affiliate links.
Just so you know what kind of money these people make is into the Million’s of dollars from the sale of one system. When they system become exposed they start a new system under a different domain. Or even the same system under a different name.
Sometimes they will advertise only x amount of copies left normally 3 or 4. Or they will put up a note in big letters saying they will take it down at any minute so you should buy it quick. They make a sense of urgency and scarcity so you impulse buy. Then you find out you got scammed many months later.
More forex scams will be added later so stay tuned.
There are many more types of forex scams out there but for now Im heading off. I will be talking about the others at a later date some listed below.
If you have any particular question regarding forex scams please comment below and will answer back to you ASAP.