Any business model is successful when the unscrupulous people start scamming you. So it comes as no surprise that Broker scams exist in the financial world.
We live in a digital world due to the ongoing progress in technology. Gone are the days when you had to go to a bank to encash or transfer funds. Physical money is hardly used, and most people keep them in case of emergency. Then, all the shopping and fund transfer was done on a personal computer and now on a smartphone.
Considering that Forex is the most lucrative market to make easy money, many who have little or no knowledge fall target to forex scams. They fall easy victims to the scammers as they talk only about how their victims can get rich and bombard them with financial jargon, further confusing them. These victims then trust them with their money only to realize that they were ripped off.
Who are these Forex Market scammers?
Forex scam brokers are not necessarily brokers; these imposters are most likely individuals who claim to be broker companies. Since they have vast internet experience fabricating their sites with fake information.
Since these scammers are not regulated, they don’t have a valid license for carrying out the business. Some of these imposters may not even know how a forex market works but are able to prey upon novice traders as they are clueless about the Forex market.
These scammers motivate these novice traders to seek their fraudulent website screaming financial jargon and heavy words making them look like a professional website. Since their prey gets convinced about the “genuineness” of the broker, they sign up, and that is where their real trouble begins. These popular deceptions can identify these blacklisted or bogus brokers:
Slimy brokers:
Up till now, these scams have been very popular. Their modus operandi mostly involved a single individual or a group of people creating a website. These websites were nothing short of a landing page advising people to invest and make a lot of money. These would also include PAMM accounts, an easy, hassle-free way for people to choose their forex money managers. Once they have sufficient funds “deposited” into their “firm,” these imposters would either shut down their website without informing their victims or go down with a pre-planned bankruptcy.
Forex bucket shops
Although this scam is somewhat sophisticated and requires careful planning, the returns for the scammers are pretty significant. These scammers do it by developing a trading interface that mimics the functionality of popular Forex firms. The trader is not connected to the global interbank market but to other traders who are registered on their phony website or the platform instead. The trading platform is such that the traders, one way or the other, keep losing money while the scammers make money.
Pyramid schemes
Pyramid schemes are one of the oldest scams present everywhere, not just restricted in the FX market. This Broker scam is not about Forex brokers but is about a firm acting like a broker collecting deposits from the traders, and not even attempting to fake activities on the interbank market. These imposters will fill you with empty slogans and promises. However, such scams are rare as compared to other scams.
How to Identify Forex Trading Scams?
Thanks to the internet revolution in the early 2000s, the Forex market started reaching its peak due to its popularity and access to everyone. It was challenging to differentiate between a legitimate broker and a fraudulent broker, particularly when novice traders entered the market. However, due to awareness spreading like wildfire on the internet, it has become easy to educate people about the potential scams lurking around. Checking the genuineness of any broker has become much easier. One can always check the license provided by the broker against the list of licenses approved by the regulatory authority of the country of origin.
Now that we have understood how they carry out their operations, we can now dive into the
strategies these imposters employ to lure in their prey.
They promise high profits.
Some unseen problems might crop up even if you have a contingency plan, as with any business. No business will guarantee exponential growth within days or weeks of inspection.
This is also the same with Broker scams if the broker claims tall but unrealistic returns. However, according to the statistics, roughly 11-25% of novice traders would eventually be professional FX traders and make good money in the long run.
They say there are no risks.
No business under the sun will ever be free of risk. This is a trademark tactic employed by these imposters. They would make fake promises suggesting that there is no risk involved. On the contrary, even a genuine broker is not immune to risk. The only way to survive the market’s volatility is by strategizing the portfolio, which mitigates the risk. Remember, the market does not depend upon the broker, but it is the other way around.
No regulation
Legit Forex brokers are regulated by a regulatory authority, either from a public or a private license issuing company from the country of origin. You could find the information about the regulators mentioned on the broker’s website, which can be cross verified on the regulator’s website.
Unprofessional practices
You can be 100% sure that the broker is a fraud if you get a cold call, contacted by telegram, or any other social media platform that you have never heard of. They fake their qualifications, and with the help of excel, they will try to impress you with their profitability but fail to provide any concrete data to support their claims.
Dubious strategies
Blacklisted brokers and imposters will generally use little-known or unknown trading terminals other than MT4, MT5, QUIK, CQG, ROX, or LIBERTEX, which these imposters use. However, in 2022, brokers and traders will use any of the above terminals since they are simple and reliable.
Dubious tools
Any broker focusing solely on PAMM accounts and binary options while promising a significant profit is bound to be a scammer. Although PAMM accounts and binary options are effective tools for any broker, they cannot only be the primary source of income generation for a successful trader.
Fake ratings
Most blacklisted Forex brokers love to flaunt their top positions on some dubious rating poll. They would only show the current rating and not their historical rating on their site. They would also pull out a third-party resource that belongs to the same imposter bearing no weight in the FX market.
SSL-certificate
SSL certificate is a site’s digital signature that ensures the connection’s security and secrecy. It makes the chances of malware or spyware transferring your data to third parties are almost impossible.
Conclusion
Forex scams and broker scams are just two fishes in the ocean while there are plenty of other frauds emerging within the virtual world. Honing your awareness could be the key to the problem. But that is only when you learn how to detect the warning signs and dodge them.
Unfortunately, if you were a victim to any financial scam and are still mourning it then it’s about time you stop and act. Firstly, commence by reporting the scammer. It will assist other traders to prevent such scams. Further, you can also opt for incredible options like fund recovery where you can get your money back with legal aid.
