Like any other enterprise, Forex currency trading invites its fair share of scams and troubles. How do you recognize a scam? What are the warning signs? Read on to find out.
There has been a startling increase in the number of Forex currency trading scams that have been reported recently. More and more traders are being conned into taking on corrupt trading proposals that promise high profits. Unless you are a seasoned trader, or extremely well read, its impossible to judge immediately what a scam is and what isnt. There are however a few warning signs that can trigger the alarm bell in your head, advising you to move cautiously and with discretion.
Sounds Too Good to Be True
And it probably is, too! There are no get rich schemes in Forex currency trading and if someone tries to sell you a scheme like that, you can be sure that all is not what it seems. Scamsters are forever on the look out for easy targets, and wish nothing better than to unload you of all the money you have. Therefore, check the veracity of all schemes and find out as much as you can about it, before you plunge head first into it.
No Financial Risk Involved
The ground rule of Forex currency trading is that a certain amount of risk is involved. The nature of the business is such that risk is almost expected. Therefore, companies that are inclined to downplay risks with an air of nonchalance, or do not show you the risk disclosure statements readily are surely out to fool you. Another thing to look out for is a person who asks you to use money that you cant afford to part with. Any intelligent trader knows the importance of diversifying investments. When you come across someone who wants to put all the eggs in one basket, youd better keep the eggs secure and look for another basket to put them in.
Trading on Margin
If you are a newbie to the world ofForex currency trading, avoid trading on margin. It takes a while to understand exactly what it means and entails and scamsters rely on this to fool gullible customers. Unless it is executed properly, margin trading is a very high risk strategy that can swing either way you may end up making a lot of profit, or you could end up losing all your money. If you have a 50% margin, you can buy double the amount of stocks that you could with just the initial value of cash in your account. It goes without saying that if there are losses, you are liable to pay an amount that far exceeds the actual amount in your account.
Trading in the Interbank Market
The Interbank market it usually used for high level Forex trade and accessed by top level banks and financial institutions. Forex currency trading that involves the Interbank market can be extremely insecure and un-regulated. The entire currency transaction is done over a very loose network, making it extremely easy for you to lose money. Dealing in Interbank market is the perfect recipe to court trouble and disaster. If anybody proposes a scheme which involves the Interbank market, it would be best to stay away from it.