Forex trading is legitimate and decentralized and is a huge market that attracts millions of traders each day. The foreign exchange market is extremely volatile and carries considerable financial risks. This means people can lose money in the market as easily as they gain it. A lot of traders lose millions after falling prey to forex trading app scams. To avoid such pitfalls, traders should be able to spot red flags and identify scams.
Forex trading app scams
In forex scams, criminals will persuade unsuspecting traders to invest in fraudulent schemes. They will offer enticing, once-in-a-lifetime investment opportunities to traders and make false promises of huge gains. They usually abscond after receiving payments, and the investors lose all their money.
Common forex scams
Criminals use sophisticated and elaborate methods to cheat people out of their money. There are some frequent forex trading app scams that traders should be vigilant about.
Single seller scam
Single sellers are brokers that claim to have knowledge about the optimal time to trade or invest in the market. They do so by presenting the investor with research data that they have allegedly gathered from the concerned market. They may also submit false testimonials from their alleged ex-customers to give authenticity to their claims of expertise. Furthermore, they appeal to the investor to hand over a certain amount of money to them so that they can multiply it exponentially, thus promising to make the investor rich. They also charge the trader a monthly or yearly fee for all the bogus advice they provide. Most of the scammers disappear after the initial payment. But some may wait for the money to perpetuate the problem.
Robot scams
Forex robot scams are fully automated. They automatically perform trades for investors using set algorithms. These robot trades claim to generate enormous wealth overnight. But they are not tested or reviewed by any formal or competent authority. Random trades can be done due to issues in any code or parameter. This can become detrimental to the investor’s profit.
Broker scams
Criminals may sometimes pose to be brokers from legitimate agencies to trap investors. They may create almost identical websites or apps to deceive investors into trusting them. But in almost all cases, contact details mentioned in the apps will be bogus. They will give dubious reasons like server issues or phone line troubles for unsuccessful communication attempts. Investors should always check with financial authorities to verify the authenticity of the trader and the trading app before investing any money.
Managed account scams
In these scams, criminals will encourage investors to trade using accounts that are managed by the company. The customer will have no part in the investing process. Investors are also required to give a commission to the company for handling their accounts.
Ponzi schemes
Ponzi schemes are used by fraudsters to advertise imaginary funds that supposedly give huge returns within a short time. They initially pay the guaranteed returns to the investor to entice them to invest more and recruit others to join. After the criminals get a huge amount of money from all investors, they abscond.
How to identify forex scams
Scammers prey on the vulnerability and gullibility of investors. There are some suggestive hints that can help betray a scam.
- Unsolicited offers: A lot of people are surely interested in making money through forex investments. But if you are contacted by brokers unexpectedly, it is most likely a scam. In such cases, do not give away personal and financial information. Do not download apps or visit the websites of such brokers. The best forex trading apps do not require such tactics to get customers.
- Risk-free investment offers: Any investment has a considerable amount of risk associated with it. If a brokerage app or website is offering a risk-free investment, then it is fraudulent. The best forex trading apps around the world educate their customers on the risk that can come with investing.
- Unrealistic returns: Scammers most often guarantee to make investors rich overnight, especially with little investment. Investors should be able to identify deals that seem too good to be true. No good forex trading app will offer such hare-brained investment
- Time pressure: Investment is a risky process, and traders should always think well before making any small or large investments. But if the brokerage is forcing you to make hasty decisions, then it is most likely a scam. Some trading apps may even offer limited period discounts to incite people to invest in fraudulent schemes. The best forex trading apps do not pressure you to make such hurried decisions. They even offer demo accounts to investors to get the hang of the complex world of investing and to choose the scheme suited to their needs.
- Social media advertisements: Numerous fraudsters are now taking the help of social media websites to advertise their apps. These advertisements show lavish lifestyles and luxury products that people can buy after getting profits from their investments. The ads are sometimes introduced alongside unrelated content, like a game or something completely unrelated to finance. This is done to distract customers and tempt them into investing.
- False testimonials: Scammers usually come up with a lot of supposed testimonials and success stories from their previous and current investors. They will passionately narrate fascinating stories of how ordinary people became extraordinarily rich by investing in them. They may even produce photographic proof of their lavish lifestyle to dupe the customers. Good investing firms and apps do not need to resort to such elaborate scouting plans to attract customers. The track record and solid reputation of being among the best forex trading apps speak for themselves.
What to do in case you are scammed
People may sometimes get scammed even after exercising constant vigilance. If you have fallen prey to a forex trading scam, you have to act immediately and follow some steps.
- Delete the main app and other associated applications from your devices.
- Get in touch with your bank and inform them that you have been scammed. Give them information regarding your mode of payment. Follow all the directions the bank gives you. Do not hesitate to inform the bank about the personal information that you may have entered into the app.
- Give a formal complaint to a competent authority with all the details as early as possible.
Forex trading can be a great venture for those who are skilled in the forex markets and know what they’re doing, but you should exercise caution while investing. Also, you should remember not to deposit more cash than you can afford to lose.
Sources:
https://www.nerdwallet.com/uk/investing/forex-scams/
https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/fraudadv_forex.html
https://www.investopedia.com/articles/forex/09/spot-a-forex-scam.asp
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