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Easily Identify Scams with These Tips

April 19, 2021 by Forex Winner Leave a Comment

Easily Identify Scams with These Tips

Trillions of dollars in the financial markets attract investors from all over the world, including many scammers. With little to no knowledge of the industry, these fraudsters try and rob you of your money through various Ponzi schemes. Their primary target is beginner traders who are attracted by the get-rich-quick methods. Our article will discuss the potential places where the robbers thrive and attack any trader taking his first trading steps so you can avoid them in the future.

Source of swindlers

The swindlers thrive on popular social media platforms offering account management services, automated algorithms, etc.

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Telegram scams

Telegram is one of the birthplaces of scams in finance regarding social media. You can find tons of different people trying to rip you out of your hard-earned cash. While there are a few genuine services, it is pretty challenging to see them as a beginner. Be wary of websites that give you links to their Telegram. Facebook and Whatsapp groups also generate leads for them. 

A telegram group that debates on forex and provides signals. Usually, these communities have 10-20 thousand members, making it impossible to ask any genuine questions.

Image 1. A telegram group that debates on forex and provides signals. Usually, these communities have 10-20 thousand members, making it impossible to ask any genuine questions.

Pro tip

It would be best not to join free groups that you find on Facebook, Twitter, and Telegram. Chat communities from authenticated companies may come at a cost, but they are a bit more reliable at the end of the day. 

Account management

There are account management services that require you to share your Metatrader password. Scammers guarantee returns ranging from 100 to 1000%. If you ask any professional trader sitting at the top of a hedge fund, he will tell you that average gains of 10% a month are made by top traders at best. As institutions with billions of dollars in equity cannot find high ROI, it is vague to look on for yourself.
One good method that scammers use is to take several accounts from different investors by promising high returns. They use full leverage and open a buy in one portfolio and sell in the other, leading to margin calls and 100% ROI on either—this way, fraudsters tank a considerable income from multiple accounts.

Pro tip

If you decide to lend out your account, make sure to minimize leverage as much as possible. This way, you can monitor the performance without the risk of losing too much.

Signals

Trading signals buy or sell trades lent out by service providers to a beginner or amateur trader. By following their trading approach, an investor can profit or lose similarly. The problem is most providers are using tricks to manipulate their output. A trade that hits stop loss is reported as breakeven etc. 

Pro tip

Use verified records from Myfxbook only to track the performance of signals. Signals on MQL5 are also not up to the mark in some cases; therefore, most genuine brokers do not allow copy trading from the MetaTrader platform.

Robot scams

Trading algorithms clutter the market with a promise to offer increased control over your trading and better returns. You may find them with names such as money-making machine, billionaire scalper, gold miner, etc. In reality, they will only expose your portfolio to significant drawdowns. 

Pro tip

Test out an EA on a demo account before placing it on the live. Also, an EA should have trading results to tally the performance. Notice the absolute and maximum drawdown figures to note how much risk is there on your account.

Broker frauds

Top-tier authorities do not regulate all brokers that you come across. The exchanges have to file with a regulation on their own however most refuse to do so and take advantage of it. They manipulate bids/spreads, reject executions, and disappear without any trace. If you are scammed out of your money, it is impossible to retrace it as there are no check and balance regulators.

Pro tip

For checking if an exchange is regulated, you can scroll over to the bottom of the webpage and review any information on the topic. Two or three regulatory companies keep their eye over good brokers.

Fake investment funds

Fake investment funds offer huge gains on your initial investment, which may seem very enticing. Once they have scammed enough traders out of their money, they disappear without leaving any trace behind. 

Pro tip

Only invest with mutual or index funds with proven performance. 

MLM markets

These types of markets focus more on recruiting a number of traders and less on their services. For those who don’t know, multi-level marketing centers around currency trading and is where traders lend out their signals and provide educational material for a monthly fee. The group members are then paid incentives for gathering more traders. 

Pro tip

Trading the markets does not require you to join shady businesses or pay a fee. 

End of the line

Your pursuit of making money in the financial markets may lead you to several scams. It contributes to the high drop-out rate where 90% of traders fail to make it 10% profitable. For your best interest, avoid any place having talks of huge returns in a short period—the right way for trading instruments is to educate yourself on the topic as much as possible. Stay with regulated companies and use virtual portfolios to help you in your trading career’s initial stages.

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