Is Forex a pyramid scheme? – Know the Type To Avoid It
The question that often arises is Forex a pyramid scheme? Forex is not a pyramid scheme or scam and is completely legal in the US, UK, and many other countries. However, just like trading stocks or cryptocurrencies, forex trading has risks. One of the main problems is that many foreign forex brokers allow users to trade with high leverage, increasing the risk of losing large sums of money.
Many foreign brokers are also unregulated, meaning there is nothing to monitor or prevent them from committing fraud. New or inexperienced traders may be best to trade on the platform. Although they have lower leverage and stricter policies, they can incur lower risk. Read On To Learn The Main Types Of Forex Scams To Avoid!
Main Types of Forex Scams to Avoid
These involved in forex scams, money scams, and common trading scams are generally wanting to locate new and innovative methods to benefit from new traders. However, there are three main types of forex scams that usually take their toll. Understanding the three types of fraud is the first step to avoiding them.
#1 Forex Robot Scams
A forex robot can be a trading plan that utilizes algorithms, or lines of laptop or computer code, as technical signals to enter and exit trades. Usually, forex robots are built using expert advisors, or Expert Advisors (EA), contained in the packages of the popular MetaTrader trading platform.
Of course, not all forex robots are scams. An online search for a list of forex robot scams can help you steer clear of some of the known scam forex scams. However, here are a few things to watch out for to avoid any forex robot scams you might come across:
• Unrealistic marketing messages: If forex robot writers ‘sell’ you dream of what they can do for you, then they probably don’t have the evidence to back it up. After all, numbers never lie right?
• Very high percentage growth returns: Several forex robot ads promise more than 4,000% profit in just a few years. This may sound fantastic, but it’s important to take a look at the statistics. Profits may be only from closed trading positions, the system may have open positions which have the potential to wipe out all profits on reaching a stop loss position.
• Diverse scalping strategies: Many forex robots use a scalping system which means trading with very small profits. This then indicates a high win rate and the yield may increase in favorable market conditions. However, if market conditions change, and if the system loses more than it gains, it will only take a few losing trades to wipe out all the gains.
• Unregulated brokers: Several forex robots show excellent results using unknown unregulated brokers. In this case, the results may be good on their interbank spreads but if you open an account with them your spreads and commissions will be bigger, so it will eat up more profit.
Ultimately, if you are thinking of using a forex robot, consider it as a business judgment rather than making an emotional decision. Start with an online search for a list of forex robot scams and then do your due diligence.
#2 Signal Selling Forex Scam
Forex signal sellers are individuals who send trading signals which usually include currency pairs, directions, entry prices, stop losses, and target levels. Many things must be considered so that you do not become a victim of forex trading scams and money scams like this:
• Subscription fees: Individuals can market to you amazing results without any proof. To gain access to trading signals, you generally have to pay a high subscription fee, or it can be low which requires a credit card or banking details for other types of money scams. If their trading signals are so good, why are they selling them?
• Broker signals: Some signal sellers offer you trading signals, but only if you register with a specific broker. This means the seller gets a reward from the broker, which is a motivation to send you any trading signal for you to take regardless of the gain or loss on the signal. This is also what makes some sellers want to keep you profitable so that they can continue to receive rewards from the applicable broker as payment for the service.
• Unverified results: Everyone says your forex signals have made a good and high percentage of profits, but if they can’t show a verified track record this means the trading signals are not their own – which is a red flag.
The key to avoiding any kind of currency exchange scam, money scam, or forex trading scam is, again, to think like running a business and doing due diligence, rather than acting on emotional decisions from lucrative promises and dreams.
#3 Forex Trading Investment Scams
There are many advertisements nowadays that promote forex trading investment scams and forex fund investment scams. In essence, all kinds of marketing messages promise you miraculous results with unproven results from their forex funds. All you need to do is send them your investment, and you can sit back and enjoy the results.
Of course, many people send funds and then lose their money. The company will then say they have never heard of you and have never received any funding from you. What started as a forex trading scam has now turned into a money scam.