When there is a chance to make a lot of money, there are always people who are eager to start making money right away. And where people want to get rich quickly with little work on their part, there are scammers ready to take their money. Scams are getting into the currency exchange market, but experienced traders know how to avoid them. New traders, on the other hand, are more likely to fall for them.
The U.S. CFTC (Commodity Futures Trading Commission), which regulates futures and commodity trading, warns new investors to be wary of frauds and scams that promise huge profits from your investments, both in and out of the Forex market. Several Consumer Fraud Alerts have been sent out by the CFTC about foreign currency trading. They give you the following advice to help you stay away from scams.
Be wary of pitches that promise high profits with little risk.
One sidebar ad for a Forex trading company says, "I made $1900 in one minute!" Ads that say you can make a lot of money with a small investment and take little or no risk are tempting bait. There are big profits to be made in forex, but there are also big losses. Most new traders quit by the end of their first year because they can't afford to take the risk.
Think twice. Period.
Check out the business or person you want to do business with before you give them any money. Check out the CFTC's page that warns people about fraud. Check to see if the company is a member of the National Futures Association or if it is registered with the CFTC. Check to see if the firm or company has been in trouble with the law. Be even more simple. Find out if the address and phone number are real and if they belong to the company. Make sure the person you're talking to is an employee of the company. Scammers can easily make fake credentials, especially if you do business on the Internet.
Don't send money over the Internet without being careful.
Scammers find it very easy to work now that they can use the Internet. Hosting a website that looks professional only costs $6.95 a month. That's less than a penny a day to reach millions of possible customers. Check out the company with all of the above authorities before you give them your credit card number, permission to transfer money from your bank account, or wire transfer information.
Watch out for high-pressure sales tactics.
Legitimate dealers don't have to send you unsolicited emails or put you under pressure to do business with them. If someone tries to get you to invest right now, tonight, or right now, that should be a huge red flag. A real dealer cares more about making sure you stay a customer for a long time. He will be patient while you check out his credentials and reputation. A fake dealer can't afford to do that, so he has to hook you right away or risk losing his score.
Be wary of companies that say they will trade on the "interbank" market for you.
The interbank market is a loose network of banks, financial institutions, and large corporations that trade currencies. Fraudulent currency trading companies often tell their customers that they will trade for them on the interbank market, where the prices are better. You should take that as a sign to stay away.
Even though they aren't technically scams, you shouldn't pay a lot of money for training courses that promise you "guaranteed" ways to make a lot of money. If the course says that its system will make you a lot of money with little risk or that it will give you a 40% return on your money in six weeks, don't believe it. Experienced traders know that the forex market is a time market. Even though you can make a lot of money in short-term trades, you have to be in the right place at the right time... which means you have to put in the time and effort to get there.
They also know that they will lose more often than they will win. The trick is to keep your losses short and your wins long. Any business that says you'll make money on all or most of your profits is lying in their ads. Stick with companies you know and trust and whose credentials and history you can check.
