What is Forex Fraud / Broker Fraud?
Even those who have been in the game a long time might not have an understanding on how brokers can scam you out of your hard earned cash. Here are some ways which they do it.
Targeting the Gullible & Not Even Placing Your Trades
Some fraudulent brokers don't actually make the order which you've placed. They pocket that money hoping you 'lose' all of the money which you've put down. As most people are impatient and don't exercise self control; given leverage where they can control up to 500 times their starting capital and the promise of making tens of thousands in months from your initial $2000 deposit, it's no wonder that most people crash out of the market. These companies, if you could even call them that, are fraudulent operations suckering in the gullible, 'money blind', individuals who inevitably go on to lose all their money. For good traders who have made money in their account may (or they may actually get a successful withdrawal) run into problems. The fraudulent broker may manufacture an excuse why they can't pay you, or state a reason why your trade wasn't eligible i.e. 'scalping'.
The CFTC (Commodity Futures Trading Commission) (United States) has stated "among them solicitation fraud, a lack of transparency in the pricing and execution of transactions, unresponsiveness to customer complaints, and the targeting of unsophisticated, elderly, low net worth and other vulnerable individuals."
Other Forex Fraud
- Ponzi Schemes
- Misleading or False Advertising
- Managed accounts which are not professionally/properly managed
- Shady pricing practices in executions & transactions
- Withdrawal problems
- Software to profit in Forex which doesn't work (and the seller knows when their software doesn't work yet they still sell it)
- Stating Forex is a low risk investment with high profits. Some comments may include, 'Easy way to make $400 a day'. It would be easy to make $400 yes, with the right strategy, risk management, knowledge and account size; yet the probability of making $400 consistently from a small $3000 account is near zero.
What does the National Futures Association have to say?
"Retail forex trading has increased dramatically over the past few years. Unfortunately, the amount of forex fraud has also increased dramatically."
Closing FX Fatcat Comments
There are sharks out there to take your money. These include Forex brokers, Forex services, Forex Signals, Forex Software and also other traders who want the money in YOUR account. Forex is a near zero sum game (we say near zero because the broker takes their commission, so one actually starts with a negative). By zero sum we mean the money you make comes from someone else and the money you lose goes to someone else.
Keep your wits about you, use wisdom, keep on your toes, do your due diligence in researching all the aforementioned, and last but not least, from all of us at FX Fatcat: Trade safe, always.
Markets can remain irrational longer than you can remain solvent.