Step by Step Guide to Protect Yourself from Forex Fraud

Forex has always been an appealing target for opportunists looking for instant cash and a retire soon lifestyle, however, alongside the legitimate opportunities are countless tricksters and fraudsters pretending to be "professional brokers", "investment opportunities", and "trustworthy money managers". The reality being, most of the losing traders, lose not because of their trading strategy or trading plan, but simply because they trusted the wrong person to handle their money!

If you are contemplating on trading Forex, or have recently become aware of trading Forex, learning how to protect yourself against Forex fraud is as much a priority as learning how to read a price chart. Let's look at this in a simple step by step logical and commonsensical fashion.

Step 1: Investigate your broker

Most fraudsters know how to play the part. Their websites are graphic designed and they have live chat, and they all have licenses and even if their licenses are 100% bogus. The first step is to always do some investigating as a rule of thumb. 

Before you open an account, do your best to research if your broker is regulated by a respectable regulator (FCA in the UK, CySEC in Cyprus for example), this doesn't mean your money is guaranteed to be safe but you at least know that you are opening an account with a broker that is regulated by someone.When verifying the existence of the regulator, it's also good practice to confirm the existence of that license, if it can't be found, then you better be very careful.

When you book a hotel, you always check reviews first and you'll never part with your money unless you are satisfied that the hotel is not a scam, so do your due diligence with your broker. 

Step 2: Watch Out for False Promises

One of the most usual ways to be scammed is to be told that trading is easy. You will see some lines such as - "You'll be earning $1,000 per week and no experience of trading necessary!" and "you'll get guaranteed profits using our system."

Whether it is true or not. Here is the reality. No one can guarantee you profits from trading Forex or anything else for that matter. The market moves. It is not predictable, no matter how competent you are. If it sounds too good to be true, it probably is.

To make it clearer, here’s a quick comparison: 

To put this into context, I used a different line. If you hear the second line, you should leave. 

Step 3: Protect Your Personal Information

Scammers put pressure on you to give them all of your personal information, such as bank account details, ID scans, credit card numbers, before you have even opened an account. Regulated brokers should and usually do ask for documentation to verify your identity, they should behave as professionals and show you transparency in their dealings.If the person keeps telling you to submit your information via email, or WhatsApp instead of your details being submitted through a secure recognised organisation, stop. Your information is valuable, just like money!!

Step 4: Do not get too comfortable with your "account managers"

Most frauds start with a traceable, friendly voice. These "account managers" are trained specifically to build rapport and become friends with you, almost immediately. They will give positive comments to begin with, then make pro comments, and then, once they have got you comfortable, they will pressure you to deposit more money; for example 'Just a little more and then you will double your profits'.

But, as soon as you request money back, boom, they just disappear, or they just stop answering calls. A legitimate broker will never pressure you to deposit more than you are comfortable with depositing. Keep in mind, they are to create the platform, not to be there with you the cheerleader of your wallet.

Step 5: Test withdrawals early

One smart thing to do is to take part of the deposit, and do a test withdrawal. This is the easiest way to see if the broker can be trusted.

If the withdrawal goes smoothly, that is a good sign.If they suddenly delay you or are making excuses (like you just have to make a larger deposit before you can take your money), this is fraud. Resulting in a warning.

Step 6: Know how pressure is used against you and created by scammers.

Scammers thrive on urgency.  Scammers will say things like 'this deal is only available for the next hour' or 'you will lose out this opportunity forever if you do not invest'.

The goal is to invoke emotional responses towards something very important, like making a snap decision without a contemplation of the consequences. Always remember; the Forex market is not going away. Anything that makes you rush is not an opportunity. 

Step 7: Control your Emotions

Scams invariably will play off emotions (even loneliness, which can sometimes create a peer bond). Some scamming operations even apply a combination of trading scams and relationship (romance) scams, that build trust, communication and personal know-how long before they introduced the "investment".

Your greatest defence, is staying calm and cautious.  Ask yourself, "Am I making a rational decision because it makes sense or instead, am I simply reacting to the irritation or euphoria of taking action?"

Step 8: Continuous education

The last thing I can think to say in your defence to be scammed is education. The more you understand about how Forex works, you are making it harder for anyone to scam you.  Even to know, the biggest trap, is that no system is 100% guaranteed to make you profit, can keep you safe.

You need to consider Forex as you would any other trade or profession. It should be evident to anyone, that if you are not going to go through years of education to become a lawyer or doctor, you cannot expect trading will be a direct-commerce magic route to the wealth you are looking for. Education and experience are your biggest allies as a trader.

Summary

I want to say again, protecting yourself from Forex fraud is not impossible as long as care is taken to be cautious, ask questions, and never rush. The biggest component is that if it sounds too good to be true, the promise is too big, or you made it sound too easy - please remove yourself from the moment.

If you still want to learn more about safe trading practices, trustworthy brokers, and step-by-step learner-journeys, please move on to the Learn section of Wikilix. Education is your best defence against any scams.