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Bookmark and Share Print This Page   | Home > Forex Trading Tips

Foreign Exchange Trading - Avoiding Forex Scam

Written by Zahir

For foreign exchange trading neophytes, identifying a scam may not be easy. This is understandable. However, some scams are so incredible to the point of being ridiculous that even beginners can easily smell it from a mile away. An ad, for example, that promises 2000 pips in a day, or one that guarantees to triple your money in 3 days, should raise a red flag. Think hard before giving in; and don't even consider quitting your day job for it.

It is unfortunate that some people who have fallen for these ploys have associated foreign exchange trading in general with scams. The fact that there are a lot of unscrupulous people out there just waiting for an opportunity to make a quick buck doesn't help. Likewise, in recent years, the number of identified forex-related scams has increased that identifying the hoaxes has become increasingly important. Scam forex ads usually come as online pop-ups, or appear as newspaper ads, and in the classified ads sections of business magazines.

In reality, foreign exchange trading is very dynamic and has the potential to yield high profits, but you have to be careful. To make it work for you, you have to be able to differentiate a scam from a genuine investment opportunity, and this will only be possible if you understand how legitimate forex operations work.

So, how is forex trading done the legitimate way? Forex traders conduct business by placing their orders through banks, exchanges, registered security dealers or insurance companies. All forex transactions are supervised by the CFTC, the acronym for Commodity Futures Trading Commission.

On the other hand, scammers will pose as a legitimate institution to take advantage of you. To avoid being scammed, make sure to check their identity first and report them to the CFTC if they turn out to be frauds. The CFTC has the federal government's mandate to conduct investigations and take the necessary legal actions on erring forex brokers, if necessary.

There have been several advisories issued by the CFTC on trading options and futures contracts. Some key points in the said guidelines follow:

  • 1. Be wary of firms that guarantee unusually large profits. Remember, in forex trading, nothing is guaranteed.

  • 2. If you see an opportunity that seems too good to be true, check if it is legit. Until you do, stay away from it.

  • 3. It never hurts to ask. Get more information from companies claiming to dabble on the interbank market.

  • 4. Do not trade in margins. Do so only if you fully understand the process.

  • 5. Never send cash by mail, online, or by any other method unless you are sure that the transaction is safe and legit.

  • 6. When a particular firm makes a lucrative, but dubious offer, have its performance record checked.

  • 7. If your request for professional information or company background is not immediately addressed, keep your distance.

Content source: www.admiralmarkets.ph , A Philippines Forex trading Broker.

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Risk Disclosure: Trading forex on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.