How to avoid forex trading scams
October 26, 2022
In the UK alone, investors are losing millions of pounds to unscrupulous individuals via elaborate and often sophisticated forex scams. It’s becoming a huge issue both in the UK and around the world, and one which banks and other financial institutions are keen to clamp down on. With talk of going as far as the introduction of government interventions to cut down the number of people losing money to fraudulent online scams, would-be investors are looking for ways to protect themselves and their online investments from fraudsters. Here we have some tips on how to avoid the main types of forex scams out there at the moment.
Forex scams tend to lure prospective traders into their schemes with promises of little or no risk investments that will supposedly yield them high returns, but once a transaction has been made and funds are deposited, the traders then disappear, seemingly without trace, along with every penny of their investors’ money. There are a wide variety of tactics that fraudsters use to get their message across to those who are primed to fall into their traps, including creating their own social media channels and websites with various phoney ‘testimonials’ from previous investors who have made big money using their schemes. The sophistication of some broker scams can make it really difficult to identify those that are legitimate vs those who will run off with your life savings. The most common types of scam include:
- Claims of being ‘risk free’ – no investment is ever completely free of risk, and anyone claiming otherwise should be avoided.
- Claims of unrealistic returns on your investment – the old adage of ‘if it’s too good to be true, it probably is’ certainly applies in this situation. If the projected returns on your initial investment seem unrealistically high or too good to be true, the trade is definitely best avoided.
- Time constraints or pressurising – there shoudn’t be any pressurising language used in order to get you to invest your money, and certainly no timed cut off limits. Legitimate brokers will always explain the positives and potential negatives of an investment in order to comply with their regulatory requirements.
- Social media advertising – a growing tool in the scammer playbook, social media ads depicting luxurious items and lifestyles as a result of having made successful trades should be treated with the utmost caution. Things are not always as they appear to be on social media, and it’s extremely easy for scammers to portray certain lifestyles in order to convince users that their unrealistic claims are achievable.
Most legitimate traders in the UK who offer financial products, including investments, have to be authorised to offer them by the Financial Conduct Authority (FCA). Investing with an authorised and FCA regulated broker will mean that your money is protected against fraudulent activity or losses that happen as a result of bad advice or the firm disappearing into the ether by the Financial Services Compensation Scheme (FSCS) up to the value of £85,000. The best way to avoid being scammed on forex trades is to ensure you only use a regulated trader, and that you verify that they are actually regulated by checking this with the FCA using the company’s information before parting with any of your money.