Is Forex Trading a Scam
In the Forex Market, over $6 trillion is traded daily. It is one of the most dynamic markets where investors invest large amounts of money. However, beginner traders usually have doubts regarding the legitimacy of the forex market. Is Forex trading a scam is the most common asked question by beginners. In this article, you will learn the important aspects regarding the legitimacy of trading currencies.
Before moving ahead with the question, Is Forex trading a scam or legit? Have a look at a quick introduction of forex trading.
What is forex trading?
Foreign Exchange trading is the buying and selling of currencies to make a profit from price fluctuations. To purchase a product, we have to pay the price. Similarly, to buy one currency, we have to sell one.
In simple words, currencies are traded in pairs, such as EUR/JPY, USD/EUR, CAD/JPY, etc. The difference between the price of the currencies is your profit or loss. Have a look at an example to understand better.
Traders can use various forex trading strategies and tools, such as technical analysis, fundamental analysis, and automated trading systems, to help predict and take advantage of price movements in the market.
Recently, a report surfaced that the export percentage of Japan to Britain increased by 20% from last year. As a result, the Japanese currency strengthened against Britain. Therefore the trader sells the currency pair.
Here's a quick look at what you'll read
Yes, the Forex Market is legit. Currencies are exchanged in the Forex market for different reasons, such as imports, exports, tourism, etc.
Forex Scams are fraudulent activities conducted with the objective of tricking traders into losing their money.
No, Forex Trading is not a scam. Currency trading is a part of the financial and investment market.
Forex trading is a legitimate business. However, many scammers in the market are indulging in illegal activities to make money from novice traders.
- Fake brokers system
- High Return Forex scams
- Price Manipulation Forex Scams
- Automated Scam
- Sales tactics Forex Scams
- Withdrawal Restrictions
- Regulations Details
- Lack of Transparency
- Lack of information
- Unusually Good Offers
Is Forex market legit?
Currencies are exchanged in the Forex market for different reasons, such as imports, exports, tourism, trading, and cross-border business.
So currency exchange plays a crucial role in the globalization process. A person living in the USA can buy any product and services from Britain or any other country.
The exchange of good and services globally take place efficiently due to FX Market. So, the Forex Market is a completely legit financial market with many participants.
What are Forex Scams?
Forex Scams are fraudulent activities that come in multiple forms. It comes from unscrupulous forex broker platforms and false trading systems intending to steal money from innocent people.
In simple words, scams are fraudulent activities conducted to trick traders into losing their money. Scammers use unreasonably high returns with no risk promises and manipulated data to fool traders dealing in currencies.
Is Forex trading a scam?
Currency trading is a part of the financial and investment market. Even governments and authorities take part in Foreign exchange. So trading in currencies is not a scam.
It is an investment tactic used by traders to make money from currency price fluctuations. Just like stocks, cryptocurrencies, and commodities, currencies are also important financial assets.
Currencies represent the economic status of the respective countries. Therefore, their price changes frequently and traders invest in them to take advantage of such market movements.
The legitimacy of Forex trading
In most countries, foreign exchange trading is legal; meanwhile, in some countries investing in currencies is not legal. In FX trading, losing money is very common. Daily, thousands of traders lose large amounts of money in currency trading. Therefore a question arises: Is Forex trading a legitimate business?
The answer is Yes. Forex trading is a legitimate business. However, many scammers in the market are indulging in illegal activities to make money from novice traders.
Like any other financial market, the FX Market also became a center of fraud, abuse, and other illegal activities. The main reason behind it is that no central authority who controls the forex market activity.
Due to the absence of a regulatory authority, it became easy for scammers to take advantage of inexperienced traders. However, in the countries where Forex trading is legal, local regulatory bodies regulate the region.
For Example, In the USA, forex trading is well regulated by the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA).
Types of Forex scams
Now you got the answer Is Forex trading a scam? Let us have a look at the major types of Forex scams to identify the trading scam efficiently.
Fake brokers system:
Scammers have created fake Forex trading companies that appear legal. Not only this, but these scammers are also active on their websites. They use social media platforms to lure traders.
It is very difficult to identify these brokers as they use celebrity endorsement, discounts, and exciting advertisements to lure them. These systems are well-designed to lure traders. However, a trader needs to first check its regulation before investing his money.
High Return Forex scams:
One of the most common scams in the Forex scammer list is a high return forex scam. It is also commonly known as the Ponzi Scheme. As the name suggests, these scammers promise high returns and negligible risk.
Under these schemes, traders are promised a guaranteed return of the principal amount with profit. However, a trader must understand investing involves risk. The firms who are claiming no loss are fooling them.
Price Manipulation Forex Scams:
One of the most common forex scams is price manipulation. Under this, the scam takes place by manipulating the price. For example, when the spreads are very high. A standard spread is of 2 top 3 pips. However, when the broker offers 7 pips, then there is something fishy.
Automated Scam:
Software is an integral part of the Forex trading format. However, these technologies are also used for automated scams. These are well-designed automatic system scams. Under this robot, scammers lure inexperienced traders into making big gains without any market knowledge.
This automated system is used to generate misleading and false figures in the name of right trading tips. The main motive is to convince the traders of how genuine the forex broker is and encourage them to buy its services.
Sales tactics Forex Scams:
The main aim of a salesperson is to sell his product and services. Under these sales tactics, Forex Scams salespeople started using High-pressure sales techniques to make the trader invest as soon as possible.
In order to pressurize the trader, they make false promises of big returns with small investments, no loss or risk guarantee, and other tactics to sell their products. Suppose a Forex Broker is giving an unusually good trade offer but within a day’s time frame.
Generally, in such cases, the traders don’t want to lose the opportunity and put their money without even thinking once. As a result, they suffer losses.
How to spot a forex scammer
Restrictions:
Forex Brokers made big promises at the time of investment. However, when traders attempt to withdraw their funds, they cannot do so. It is due to withdrawal restrictions. These restrictions is a sign to avoid forex scams.
Regulations:
As we have studied, in some countries, forex trading is legit, and in some, it is not. There are regional organizations that regulate trade in countries where it is legal.
Various forex broker platforms work without restriction in countries where it is not legal. So it is necessary to check the regulation and the organization by which it is regulated.
Transparency:
A regulated brokerage provides all the important information on its website. The site clearly mentions its products, services, fees, commissions, and policies.
To check the platform’s transparency, the best way is to start trading with a demo account. This way, you can get important information about the platform and its reliability.
Unusually Good Offers:
Various brokers provide exceptionally good offers such as discounts, no risk, bigger profits, etc. Do not go for unrealistic offers. These are the biggest red flags to avoid forex trading scams.
If you are trading in Forex, your risk will depend upon the amount of money you spend. These are the marketing strategies used by scammers to lure traders. Avoid these fake scams.
Lack of information:
Forex Trading Legit firms provide complete information about the company on their website. These firms provide their address, contact, regulation, and other information.
However, if a broker is not regulated, then you will find a lack of such information. Not only this, but you will also find a warning at the bottom of these brokers. So these are the signs you need to avoid before investing your money.
Conclusion
Forex Trading is risky, with many scammers waiting to take advantage of a novice trader. These scammers use attractive advertisement techniques and false promises to lure traders.
Therefore, traders need to be smart enough to identify these scammers. Little awareness and inquiry will save you from huge losses. A trader needs to analyze a couple of factors like regulations, previous performances, social media activity, fee structure, and customer support policy before selecting a Forex Broker.
You have got the answer to the question Is Forex trading a scam? Forex trading is not a scam. Scams are common not only in Forex trading but also in other fields. Unfortunately, Forex scams have become a part of trading.
So there is no need to become worried about these scams or not participate in trade. Just take some precautions during trading and protect yourself from these scams and make money in the market.
