The currency exchange market is the biggest market in the world and unfortunately, one of the most targeted by scammers.

It is already difficult to earn profits in forex trading without having to watch your back each time you invest any money. Every trader should beware of these unscrupulous people who are targeting online forex traders.

Most of these scammers are very good at playing their tricks on you, so you should arm yourself with some basic knowledge on how to spot a scam or a scammer.

First thing you must be aware of is the different types of scams commonly used on currency traders online.

Scam Forex Brokers

It is not very easy to tell which broker is genuine and which one is a scam. It was once much easier because you would rely on customer reviews and see what other traders who have used that brokerage firm are saying about their dealings with it.

However, nowadays the scam brokers have taken their tricks to another level. Immediately they launch their “business” they start visiting forex forums under fictitious names.

Using these names they give glowing tributes to the scam brokerage firm pretending to be previous or existing satisfied customers.

There are still a few things to look for. The most important being, is the firm registered and regulated by a trustworthy, strict regulator? Is the broker registered in a country with good legal systems?

Non-regulated brokers have no one to answer to so they can easily swindle you out of your profits or even take off with your whole investment, leaving you with no course for redress.

If you pick a broker, read the fine print in the contracts before sending any money. Most of the scam brokers make you sign terms and conditions that indemnify them of all losses, including those where they are the ones who have taken your money.

Others will trade well with you until you start claiming your profits. That is when they will stop replying to your emails and give you the run around when you call them. They will make withdrawing your profits and even the initial investment impossible.

Another trick they use is to claim that you have been trading on a demo account all along and so the profits are demo profits and not real profits.

The benefits of a regulatory authority is that it audits brokerage firms and makes them comply with set laws and strictly adhere to industry and ethical standards.

Those brokers who do not comply face deregistration and even prosecution.

Click here to learn more tips on how to choose a good forex broker.

Also, click here for an unbiased review of some top brokers in the industry.

Forex Trading Robots

At least 80% of all forex trading robots are a scam. They promise you that purchasing the robot will result in 24-hour profits without the need for your manual intervention.

Just invest your money and go to sleep and you will find your pennies turned into millions. If I had a machine that worked liked that, I would never sell it.

I’d just be waking up, going to the bank to withdraw funds, and having a ball every day of my life.

Auto Dealers

As I said, more than 80% of forex robots are scams. The very few genuine ones do not talk of guaranteed profits and will advise you that you have to monitor it. Genuine robots are good for managing trades and entering/exiting just a few trades at a time for you.

Do not leave weekend and overnight positions unless your strategy includes that. Anyway, for these robots that have some acceptable level of success, scam brokers have an antidote for them.

Scam brokers have auto dealers which they use to frustrate profitable traders, especially those who use forex robots.

The auto dealers identify profitable traders then frustrate your trades by sending continuous re-quotes. Therefore, when you are trading manually you will never get a chance to trade and your already entered trades will run into losses.

If you are using a forex robot it will be rendered useless and will hang due to these re-quotes. The auto dealer will even go as far as freezing your trading platform and your price charts.

If you have been trading profitably and all of a sudden you keep being swamped with re-quotes, then your broker has implemented the auto dealer plug-in on you.

If your platform freezes over even after restarting multiple times and prevents you from logging in, then you are most probably fighting against an auto dealer.

Scam Trade Signals

Just as bad as forex robots are the forex signals providers. Only about 10% of them are genuine and knowledgeable. The rest will just take your money and send you bogus signals.

If you complain of losses after using their signals they will claim that you got the timing wrong but the signal was accurate, or a host of other excuses.

My advice is, instead of paying $200 to $500 monthly to these signal providers, open a mini account with a genuine trader and put that down as a cost of learning.

Then use that account to teach yourself how to generate your own signals. That money may even earn you profits but even if you lose it all, you will have learnt so much that you can use on another account.

Also, sharpen your forex education by going through the immense resources available on this website (www.forextradingbig.com).

Tips to Avoid Forex Scams

If you come across any brokerage company that tells you there is very little or no risk in trading with them, run away very fast and don’t ever look back.

The same applies with any provider of forex products or services, such as robots and signals.

Any company that refuses to give you their firm’s background information or share their customers’ experiences may be a scam.

Any broker who claims to be trading on the interbank market on your behalf is 99% likely to be a scam.

If the brokerage firm is American (or claims to be), check them out with the National Futures Association (NFA) and the Chicago Board of Trade.

If there is any record of them, check for any complaints against them. Check for a history of charges levied against them and fines or any disciplinary measures taken against them or against members of their management team.

Learn more on wordwide forex regulation here.

Summary

• Always be extra cautious before sending any funds to a broker or other service provider e.g. signals providers.
• Do not send money to brokerages in countries with weak legal systems and blatant corruption.
• Be even more cautious about trading on margin. Work with your broker for some time first and establish their genuineness before taking on leverage.

Photo credit: TradeviewForex