Avoiding Forex Scams
With the growth in popularity of mechanical trading systems and algorithmic or “black box” trading, there have also been one too many instances of forex scams offered by firms claiming to give signal services.
Of course this is not to assume that forex signal services are automatically scams, but proper caution must be exercised in deciding to purchase one. The importance of learning the basics of forex trading and how the market moves must be emphasized even if one decides to use a forex signal service.
Online trading and the ease of opening an account these days have also opened up the case for fraudulent activities, so it is imperative that you do your proper research and read the fine print in any contracts you enter.
Back test sufficient?
Another piece of information to watch out for is the back test results for the system you sell that you want to use. While past performance is not a guarantee of future performance, it can be judged from the results of the back test to determine whether a system requires adjustment or whether it will produce consistently favorable results in the future. However, here again knowledge of the market bows down to do a test analysis and check under what conditions and principles the system operates. A system that bases its trades solely on the GRID principle is not a system, as many factors must be involved in order for the strategy to be profitable. Do you want such a system? Write to me, you will get it for free 😉
The availability of system back test results is already a point in favor of transparency for the signal service. Still, bear in mind that you should take these figures with a grain of salt as the owner can modify the numbers to his advantage. As the cliché goes, “better safe than sorry.”
The broker can cheat too
Not only are scammers present among signal services, they can also lurk among forex brokers. Therefore, it is important to deposit your hard earned money with reputable and regulated forex companies to avoid losing your funds to a scammer. You will ask how to recognize a reputable company? That’s what broker comparisons are for so you can choose. You can only find brokers with a history on the market who have shown no problems with their clients. If you get bonuses from a broker, but there is not much information about them online, don’t take any chances. If you are new to the market and you want free or extra bonuses on your deposits, please contact us.
It is also important to read the terms and conditions when opening a trading account as it may contain important information regarding spreads and transaction costs. You don’t want these factors to eat up most of your trading profits later on! For your scalping trading system to only bring one pip of pure profit because the rest would be consumed by the transaction costs.
Verification with regulatory authorities
Again, you should verify with the local financial industry regulators in your country to see if you are doing business with a registered broker. In Australia, the regulator is the Australian Securities and Investments Commission (ASIC), which aims to maintain fairness in the financial market environment, which also includes insurance firms and lending companies.
Another way to check up on your potential broker’s reputation is to do a quick online search to see the feedback of clients. Forex forums can also be wealthy sources of information on certain brokers.
Before opening a live account and trading real money, it might be better to start with a demo account first to get a good feel of how trades are executed. If you are comfortable with the platform, bid-ask spreads, and the speed of execution, then you could consider opening a live account with the same broker.
In the unfortunate scenario that you fall victim to a forex trading scam, you can be able to file a report to regulatory agencies in your country.