Foreign Exchange Fraud (and How to Detect/Spot Them)

In today’s technologically advanced world, Forex fraud may come in various forms. Here are some of today’s most common Forex trading fraud to help you identify and keep yourself from becoming a victim.

  • Signal Sellers – Among the many challenges that beginner Forex traders encounter is determining which Forex market players are honest and reputable, and which ones are not. Signal sellers are a fine example of these unscrupulous players.

A signal seller mainly offers a system that can purportedly identify the best times to buy or sell currency pairs. The system may either be manual or automated. In a manual system, the user needs to enter information to get results.

There are systems that depend on technical analyses, while others depend on the latest news. Still, there are others that use a combination of the two. One thing is common, though. They are all supposed to provide leads to great trading opportunities. Typically, signal sellers charge a monthly, weekly, or daily fee for the services they offer.

According to experienced analysts a lot of these signal sellers are mere scam artists and proponents of Forex trading fraud. One common argument against these people is that if their system can really beat the market, then why don’t they just keep the information to themselves, instead of making it available for all? It would make better sense if they just use their amazing signal system to earn massive profits for themselves.

These fraud Forex brokers and scammers discourage some potential investors and lead them to ask the question “is Forex a fraud.” Trading experts assure investors that while there are confirmed scammers, there are legit ones that offer well thought out signalling services. You can use reputable sites like  that offer safe trading only with the most reputable brokers around.

The issue really is, can anyone predict for certain the move that the trading market will make next? According to Eugene Fama, a Nobel Prize-winning economist, it is not possible.

Another Nobel Prize-winning economist, Robert Shiller, however, believes otherwise. He cites evidence to prove that investor sentiments can create busts and booms that, in turn, create trading and investment opportunities.

To know if a particular signal seller can really help you, the best way is to create a practice account with one of the reputable sellers. Just have patience, and in time, you are bound to determine whether or not predictive signalling can really work for you. And that is the most important thing.

  • Fraudulent FX Investment Management Funds – In the investment world, it is said that among the surest signs of potential fraud are outrageous claims.

During the last few years, there has been a proliferation of Forex Management Funds. While there may be a few that are not fraudulent, most of them are scams. Typically, they offer investors the chance to have all their Forex trading activities handled and managed by supposedly highly-skilled traders who can provide maximum returns on their investment in exchange for a portion of the profit.

The main concern is that the fund’s manager would often require the investors to yield control over their money, and turn it over to somebody they barely know about, except for the hype and the often false track record of success found on the scammer’s brochures and website.

In the end, the investors are often left holding an empty bag, while the scammer runs off with their hard-earned money.

A good Forex market rule of thumb to follow, just like with other investment vehicles, is if something sounds incredibly good to be true, then you can almost be sure that it is. A good example is a guarantee of 100% returns within a short period of time.

  • Dishonest Brokers – While the Forex market may not be completely unregulated, there is no central authority regulating it. The spot Forex market is totally regulation-free, and it is responsible for the majority of all trades. Thus, it is not uncommon to find unscrupulous Forex brokers who unfairly deal with their clients, and even defraud them in some cases.

To avoid bad brokers, you can do either of these two proven ways. First, check out the broker on a website that helps identify dishonest brokers, and second is to sign up only with a company that handles stock market trades that are subject to SEC regulation and FINRA oversight. Although the Forex market itself is not regulated, no brokerage firm under such oversight would be foolish enough to risk losing their license by scamming their Forex clients.

Your Best Defense against Fraud

The best way to keep you from dealing scammers is to be informed. Read credible sources to have a good understanding of how the forex market works. Before actually investing, it is best that you practice trading extensively using a dummy or practice account. The results of your practice trading will help you determine your next steps.