7 Forex Market Scams and how to avoid them – Revealed ( 2020 )




According to research in South Africa, Forex market scams are on the increase. The growth of Forex trading has opened the door to scams and dishonest practices by those who often prey on beginners. In this article our research team explains how to spot 7 Forex market scams and how to avoid them.

The foreign exchange (Forex) market is the largest financial market today, with an average daily trading volume of more than $ 5 trillion, including currency futures and options.

It is growing exponentially as more people are attracted to making profits trading Forex from home themselves.

Also, due to advances in technology with widespread access to fast internet connections and the automation of trading platforms the Forex market is completely accessible to the “normal” person and it is very quick and easy to access the Forex market “real time” all the time.


The Forex market can certainly be very profitable IF you know what you are doing.

Like in most things in life, however, to do well at Forex requires a strong foundation of knowledge and skill that can only come by study and experience.

It is imperative that you understand trading concepts and that you also have a grasp of risk management techniques.   A good Forex trader is a careful and strategic trader.

Unfortunately, the exponential growth and rampant popularity of Forex trading has also opened the door to dishonest con men who prey on those that do not have the knowledge or is unwilling to do the research to avoid being scammed.


This is especially true with social media advertising which allows us all to be bombarded by target marketing.

So, while we all know that there are scammers and con men everywhere knowing how to spot a scam is often the difficult part.

It’s one thing to know that a real Prince isn’t at the end of an email asking you to please take his millions of dollars and quite another to be a victim in an already complex and confusing world of Forex trading.

But like all con games, Forex scams will often focus on pitching “too-good-to-be-true investment opportunities” as a way of convincing you to give up your hard-earned money.

If you are new to trading and lack the necessary Forex education and trading experience, scammers will try to exploit your optimism, and capitalize on your fears and your lack of Forex knowledge.


The more that you educate yourself on the Forex market the less of a target you will be.

This is not helped by the fact that the Forex market is not always very well regulated.

This is changing rapidly as governments are realizing the need to protect its people from being robbed, but scammers do have many ways to get around this if you aren’t careful.


Signal Sellers


Forex signal sellers are individuals who send out trade ideas to other traders. This usually includes a currency pair, direction, entry price, stop loss and target levels to trade.

A signal seller offers a system that claims it can identify, more systematically then other traders, times for buying or selling a currency pair. The system offered can be manual or automated.

Some systems rely on technical analysis, others rely on breaking news, and many employ some combination of the two, but they all claim to have better information to predict the next moves in the market and  provide information that will lead to great trades.


How do scammers make money off you?


Subscription fees


They will usually charge some sort of subscription fee that can be weekly or monthly.   Or they may suck you in with free info and then charge fees for other information.


Broker-tied signals


Some signal sellers offer you trading signals, but only if you sign up with a specific broker. This will usually mean they have a recruiting arrangement with a certain broker.

Their main goal is to get you to sign up with the broker regardless if the trades they send you will really win or lose.


Unverified results


Many times, they won’t show you their verified track record of trades to show they are actually trading with their own advice.  They must be able to show you that their advice wins trades consistently over time.

They will usually be backed up with a massive list of testimonials from “clients they’ve helped” to gain the trader’s trust but in reality, do nothing to forecast profitable trades.




The best way to determine if a signal seller can benefit you is to open a trading account with one of the better-known Forex brokers and enter practice trades in a demo account that doesn’t involve real money.

Make trades based on the signals provided by the company to test whether his info is legit and works.





Become an expert Forex trader in no time at all!


Like most things in life, to be good and consistently competent at something requires time, patience, study and the commitment to build up enough experience and skills to understand what you are dealing with.

Forex Trading including day trading are no different.

There are many great online schools to learn Forex.  This is a crucial part of becoming a better trader and this is not what we are talking about here.

What we are saying is, be very wary of any individual or program that promises to make you a profitable trader in a very short amount of time.

The offer will usually be based on their secret knowledge or a system they’ve developed to help you beat the market and the odds.




Any course promising to turn a beginner into a professional trader in a short space of time is a red flag and you should probably steer clear.

Can you learn excellent trading strategies quickly?  Yes.  Will you probably be able to execute if solid strategies and have the know how to recognize the right patterns and indicators very quickly?  Probably not.

Becoming a trader is hard and long road if you want to be consistently successful in forex. Professional traders manage millions of dollars a day and have built up expertise over time.

You can’t expect to be able to do the same with a quick course online or bypass it with a secret system.


Too good to be true Managed Forex fund


This is a scam in which an advertised Forex trading genius or team will allow people to invest in the fund that they manage.

This person has made a lot of money and wants to “share his wealth and knowledge” and help others to win too.

This fund manager is usually solely responsible for all the trading and for the work and responsibility clients are charged a performance fee which is usually every month.

Forex management funds have multiplied with the popularity of Forex and the ignorance of most new traders.  Many of these funds are scams.

They offer investors the “opportunity” to have their Forex trades carried out by highly skilled Forex traders who can offer outstanding market returns in exchange for a share of the profits.

The problem is that the fund requires the investors to give up control over their money and to hand it over to someone they really know nothing about except for the target marketing campaigns that puff up a fund manager’s success on their own website and brochures.




If a fund promises very high returns you need to be looking into the actual trading history of the fund to understand what kind of trades, they are placing.

Look at the funds trading history and make sure the data you are receiving is completely transparent.   Data can be presented in different ways in order to convince you of the performance of the fund.

You need to understand the fund’s “Real performance” especially in a volatile market like Forex.

Does that mean that a fund cannot perform really well?  They can indeed, and this is one great aspect of Forex trading, but they are few and far between.

So do your due diligence and research all the pros and cons.  If there are only pros and only high returns and no risk, then that is a red flag.


Ponzi or pyramid schemes


One type of managed fund that is actually a form of fraud is a Ponzi scheme.  This managed fund promises high returns from a small initial investment up front.

The early investors usually do gain a high return on their money and they are encouraged to then recruit their friends and family into the scheme.

The truth of the matter is that the ‘investment opportunity’ does not actually exist and their initial return is being funded by money paid in by other members of the scheme. When investor interest starts to drop the scammers close the scheme and take the money.


Dishonest Brokers


The Forex market is becoming more and more regulated but there are still a lot of gaps and opportunities for shady brokers to take advantage of new traders.

It is almost impossible to regulate a global de-centralized market that is open 24/7.   This opens the door for dishonest brokers to either completely defraud or cheat clients out of their funds.

Sometimes, it’s not that the broker will steal your funds outright.  They will open an account for you, and have you do a few trades, then wipe out your account blaming it on the market.

But in reality your funds have gone to their brokerage company. And because the broker is unregulated, it is very difficult to get your money back.




You can protect yourself by making sure your broker handles stock market trades and so is regulated by the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) or you can make sure they are highly regulated in the areas they trade in globally.

In South Africa you want to make sure they are regulated by the FSCA.


Manipulation of bid/ask spreads


Manipulation of bid/ask spreads normally involve the broker taking advantage of new traders and  having spreads of around 7-8 pips instead of between 2-3 pips which is the norm.

Since the spread is so crucial to a trader making profits, as well as the broker and this is something that a trader will need to learn and understand as they grow in Forex knowledge, this is a scam targeted at newbie traders who don’t know any better.

These types of scams have reduced a lot over the past few years as Forex becomes more and more regulated but it still happens.




This is just another reason amongst the many of why it is absolutely essential for traders to choose a Forex broker which is highly registered with at least one or more regulatory agencies.


There’s a guarantee of profit

Anyone.  Let me say again, anyone.  Anyone, that promises guaranteed profits of 100% or more should be seen as a big red flag.

It doesn’t matter if it is a reputable and established Forex broker (although this usually won’t be the case with very reputable firms), or an expert professional Forex broker or trader themselves.

There are simply no guarantees in Forex trading.

The market’s extreme liquidity and volatility means that the market can make unforeseen and unpredictable movements at any time, making the claim of guaranteed profits a near impossibility.

One can be an expert at identifying patterns and key indicators but there are just too many variables to know for a fact that the market will do this or that to make any sort of guarantees.




If any firm makes these types of claims then you should ask to see several years of audited results, analysing month-by-month figures to confirm their claims openly and transparently.


‘Too good to be true’ marketing

Given the exponential rise in the popularity of social media over the last ten years, the popularity of using these platforms to target victims has risen with it.

In fact, using social media to scam victims netted just under $40 million in just 2019.

Social media regulation is, for the most part, entirely unregulated.  Uninformed investors believe that since an ad appears on Facebook, Instagram or Twitter, which are trusted social media platforms, then the ads themselves most be regulated, vetted and therefore legitimate in some way.

This is not at all the case and too many people have lost their money in this manner.




Once again, it goes back to making sure that a trading broker is regulated and doing your due diligence.

If an advertising campaign is promises riches and living that lifestyle of private jets, yachts, luxury cars, and expensive watches, chances are this is a scam preying on the desires of many to achieve this lifestyle quickly with no effort.

While these luxuries can be achieved through a successful Forex career with the right time, training, knowledge, and work ethic, this is often marketed as a quick and easy way of Forex trading that promises great returns with no risk.

If it looks too good to be true, it probably is!


Online reviews


On a side note.  One of the ways we try to protect ourselves from scammers is by checking out a company or person in reviews.  This is usually a great way to see what a product is like and how a company performs or treats client.

Unfortunately, with Forex companies, these have to be taken with an extra layer of caution since the use of fake reviews is incredibly common.

Positive reviews can be left anonymously by the company themselves, whilst negative reviews can be left by competitor brokers as a way of disparaging their competition.


Forex Robots


A Forex robot is a trading program which uses algorithms that they have programmed as code as technical signals to open and close trades.

Not all Forex robots are scams. For example, Forex robots can be built using Expert Advisors (EAs) within the popular MetaTrader suite of trading platforms.

You cannot completely rule out robots today because computer algorithms are extremely common and used in many industries.

Some great and reputable platforms do use Expert Advisors, or Robots, to process data and make predictions based on algorithms.  You must learn how to spot a scam one!




You can do an online search for a Forex robot scam list to help you to avoid some of the known scammers.

Usually a robot will be submitted for formal review and tested by an independent source. Check the source of the review to see if it is legitimate and done by an independent company.

Don’t just take a review posted on their website at face value, investigate the source/s to find out where the review comes from to assess whether it is true or not.

Other things to help spot Forex robot scams are: unrealistic marketing messages; promises of high percentage of returns; unregulated brokers; and undiversified scalping strategies.

Sound familiar?  Unrealistic promises are usually part of every scam.  It doesn’t matter in which way or avenue it is presented.  If it seems too good to be true than it probably is.

If you are considering using a Forex robot, then treat it like a business rather than an emotional decision. Start with an online search for a list of Forex robot scams and then do your own due diligence.




There are really only two main ways that you can avoid scams in the Forex market but this is usually the type of advice that new traders, who want to profit big and do so quickly, do not want to hear.

  1. Make sure you do proper research and due diligence on every offer that comes past you. Make sure the broker or individual is highly regulated.  Make sure they are well established and have a great and true track record.  And make sure you do not fall for any type of too good to be true promises.
  2. If you are serious about becoming a good and successful trader with a profitable career, begin to properly educate yourself. Find a great online Forex training school or find a very reputable broker that has great training and educational resources and make use of them! On top of this, make sure the broker has a demo account so that you can start to apply what you are learning in a no risk environment.
  3. Make peace with the fact that you CAN make a very good amount of profit in the Forex market but it WILL take TIME. Time to build the skills and expertise you need. Time to learn how to use the analysis and research available and to understand the market in a thorough and comprehensive way.


Now that you have learnt to spot 7 Forex market scams and how to avoid them, you can apply these points to your trading life. You will not be able to be scammed because you know better, and you will have the knowledge to make profits for yourself., according to research in South Africa.

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