Scams in the Foreign Exchange Market
The foreign exchange market is no stranger to scams. While volume of foreign exchange trading has increased throughout the years, unfortunately so did the amount of fraud. Unscrupulous individuals convince unsuspecting consumers to invest in certain trading schemes, or value-added software, which can supposedly generate high profit. Due to its loose regulations, as well as its over-the-counter nature, the foreign exchange market is susceptible to scams, and leaves consumers vulnerable. Regulatory authorities also find it hard to find proof that manipulation occurred, as there is no central market.
A lot of fraud occurs in boiler rooms, where telemarketers promote products or services, usually through dishonest means, and using high-pressure selling techniques. Clients are often told by the telemarketers to issue checks to an offshore account. Not surprisingly, victims do not see their money multiply, but rather disappear. Another tactic used by dishonest web sites is promoting online training sessions where one will do well, and then lure users to invest and "trade for real".
In addition to outright fraud, forex scams include selling software that guides individuals in generating large profits, convincing customers to change schemes for the purpose of churning accounts, and generating commissions or simply mismanaging customers' accounts.
Forex scams also include brokers who claim that the foreign exchange market is a safe and profitable mode of investment. One disadvantage of retail traders is they do not have access to information and rely on professionals to assist them in trading. Professionals devote full-time to this industry and have access to capital and information. However, even the most experienced trader can not predict the outcome of the market. No one can guarantee a profit in foreign exchange trading, and anyone who promises such is a fraudster.
Dealers can also scam individuals through exorbitant fees they charge. Some firms charge per trade, others dealers get a commission, while others charge a mark-up on top of the spread. It would be best to compare dealers' charging mechanisms, and services offered, before making any commitment.
Before investing your hard earned money into any trading scheme, apply caution, and make sure that the scheme is legitimate, that the company you are dealing with is reputable, and your broker is experienced, with a solid reputation. Research and get a background on the parties you are dealing with. They must have financial education, the experience, and registered with an administrative body. Be wary of dealers who refuse to give or release their corporate information and history. Remember, "if the deal sounds too good to be true, it probably is".