The Three Major Types of Forex Scams to Avoid

However, there are three major types of forex scams that people commonly fall victim to. Below we will explain how these work, as understanding them is the first step in avoiding them.

1) Robot Scams

A Forex robot is a trading program that uses algorithms, or lines of computer code, as technical signals to open and close trades. Not all Forex robots are scams. For example, Forex robots can be built using Expert Advisors (EAs) within the popular MetaTrader suite of trading platforms.

Searching online for a Forex robot scam list may help you to avoid some of the known scammers. There are a few other things to watch out for to avoid Forex robot scams you may come across:

• Marketing messages that are unrealistic. If the author of a Forex robot has to 'sell' you on the dream of what it could do for you, then it's unlikely they will have the results to back it up. After all, numbers don't lie, or do they？

• Very high percentage growth returns. Some Forex robots advertise systems that yield over 4,000% return in just a few years. This may seem fantastic, but it's important to look at the statistics. The return could just be closed trades, the system may have open trades that if the stop losses were hit could wipe out any gains.

• Undiversified scalping strategies. Many Forex robots employ a scalping system which means they trade for very small profits. This then shows a high win rate and can inflate the results in a supportive market condition. Yet, market conditions change, and if the system loses more per trade than it wins, it will only take a few losing trades to wipe out any accrued profit.

• Using unregulated brokers. Some Forex robots show extremely good results using unregulated brokers no one has ever heard of. In this instance, the results might be good on their own interbank spreads but if you open an account with them your spreads and commissions will be wider, thereby eating into much of the profit.

At the end of the day, if you are considering using a Forex robot, then treat it like a business rather than an emotional decision. Start with an online search for a list of forex robot scams and then do your own due diligence.

2) Signal Seller Scams

Forex signal sellers are individuals who send out trade ideas which usually include a currency pair, direction, entry price, stop loss and target levels. There are multiple things to look out for so you don't fall victim to these kinds of forex trading scams:

• Subscription fees: Individuals may market amazing results without any verification. To get access to the trades, you often need to pay high subscription fees, or they start out low and use credit or banking details for other kinds of money scams. If their trade signals are so good, why sell them at all？

• Broker-tied signals: Some signal sellers offer you trading signals, but only if you sign up with a specific broker. This means they may be getting a kickback from the broker, so are motivated to send you any trades for you to take regardless if they win or lose. Having said this, some will want to keep you profitable so they can continue to receive their kickbacks from the broker, which acts as their payment for the service.

• Unverified results: It's all well saying your forex signals have made a high percentage return but if they can't show a verified track record it means they're not trading the signals themselves - which is clearly a red flag in itself.

The key to avoiding any type of currency exchange scams, money scams or trading scams is to, again, think like a business and do your due diligence, rather than act on an emotional decision of inflated promises and dreams.

3) Phony Trading Investment Scams

There are many adverts nowadays promoting phony forex trading investment scams and fake forex investment funds. In the past, some traders have argues that the Forex Kings and Forex Paradise are scams. However, we don't have any concrete evidence to support these claims. In essence, a slick marketing message or salesperson will sell you on the phantom, or unverified results, of their forex fund. All you need to do is send them your investment and you can sit back and enjoy the returns.

Of course, many people who send their money never see it again. The company says they have never heard of you and have not received any funds from you. What started as a forex trading investment scam now turns into one of those money scams.

Another outcome, is that they open an account for you, usually with an unregulated shady broker. However, after one or two trades, they wipe out your account. While they blame it on the market, it's all gone to their brokerage company. Furthermore, because it is unregulated, it is very difficult to get your money back.

Why You Should Educate Yourself To Avoid Trading Scams

As Forex trading carries risk, losses are inevitable. Retail speculators are almost always trading undercapitalised and can be subject to the problems of gambling addiction and improper use of leverage. Any speculator who trades without skill is essentially gambling.

In all fairness, a large number of the reports of money being stolen by brokers is a result of weak trading, and not scam brokers. If unskilled traders spent time developing a proper trading methodology they would become better traders much quicker, and would likely avoid Forex scammers altogether, as they would be better informed about potential risks and what to avoid.