Unfortunately, I’ve seen a lot of scams during my 6 years working at the coal face of retail forex trading. Some of the best forex trading scams are hard to pick, so stick with me through this post and you’ll be able to identify the most common tricks used by dodgy forex vendors in the biggest financial market in the world.
Firstly, let’s define the term SCAM. To me, this is the sale of a product that doesn’t deliver on its promise. Like buying a carton of milk and finding it’s full of water. Since the forex markets has no centralized regulation nor an exchange, the word scam gets thrown around a lot in forex. Sure, there’s some crappy stuff out there, however, just because it’s poor quality doesn’t necessarily make it a scam with the intention of cheating you out of your money. Consider the intent of the vendor, if all they want is your money without making an effort to deliver, then it’s a forex scam.
Top 5 Forex Trading Scams
Here are 5 of the worst forex scams we have found and how you can avoid forex trading scams:
1 . Fake Myfxbook Statements
False Myfxbook statements are used to trick clients into buying a dodgy indicator/EA or to attract clients to invest in a forex-managed account for the sole reason of “churning” so they can earn rebates. For those unaware, EA (Expert Advisor) is essentially software in which you are able to program so it automatically places orders in the foreign exchange market.
Creating a fake Myfxbook statement is as simple as having access to the MetaTrader servers. You can literally copy and paste an excel spreadsheet of trades into the server, then say “abracadabra”‘ and you’ll magically have an incredible, fully authorized Myfxbook statement to market to unsuspecting mugs.
- The track record is longer than the underlying broker has been in business.
- Trade history is hidden.
- Performance drops off as soon as it starts being marketed.
Don’t get suckered into rushing into an EA or managed account. Instead, watch them trade for 3-6 months before making any decisions. If it’s a scam, they’ll likely crash and burn during that time.
2 . Prop trading & Educational Programs
What are they pointing at? There aren’t even numbers on that chart… People, please stop taking acid.
This is certainly one of the most common forex trading scams operations out there. Over the years, I’ve seen these a few times. The pitch is; pay for our education and if you’re good we’ll give you some capital to trade. What they don’t tell you is the spreads at the assigned forex broker are significantly wider than the industry average and the money they allocate to you isn’t real. It will have a direct impact on your portfolio and trading decisions, and eventually, you’ll most likely lose money.
The spread is the biggest impediment to you making money as a trader. The wider it is, the less likely you are to succeed over the long term, and the people offering the program know this.
Having the carrot of managing capital and living from the performance fees is damn compelling, but under this format, it’s like bringing a wooden spoon to a sword fight. You don’t stand a chance.
- The cost of the “education” will be $5k+. Also, occasionally, these platforms charge an additional monthly fee for using their trading program services.
- You’ll be forced to trade the FX market at their broker with marked-up spreads
If you want to work as a professional trader and manage client money it’s actually pretty easy. Work hard and produce a 12+ month track record with low drawdown and the money will find you.
3. Most Commercial EA’s
Million Dollar Pips was one of the most popular EA’s ever sold, but the developer never traded it on a real account.
Let’s assume you’re a dishonest EA developer and you want to make a quick buck? (like 99% of them), here’s how you do it:
- Develop a simple automated strategy, also known as a forex robot, that is able to place automated forex trades in the market with a high percentage win rate.
- Run it on a dozen accounts using a variety of settings.
- After 3 months, pick the best track record and publish it to Myfxbook.
- Develop a sales page detailing how “sophisticated” and “professional” the strategy is.
- Buy an email list, contact affiliates offering a 50% commission on all sales, then launch!
A few years ago it wasn’t uncommon for you to sell 10,000 copies of your EA at $99 apiece. Waddayaknow, you just made yourself a cool $1mil!
Nevermind that the EA will eventually fail (they all do at some point), by then you’ve locked the doors, loaded your bags of money into an unmarked van and moved to the next town. Nowadays, especially with the crypto boom that is sweeping the world, there are hundreds and thousands of crypto and forex robot scams where it is not really clear exactly what they offer and whether you’ll be able to withdraw money. So, be careful when you notice these fraudulent promotional schemes out there online.
4. Shady Brokers
As previously mentioned, there are many forex trading scam operations including some shady unregulated forex brokers. Luckily, I have never personally encountered this, however, I’m told it’s a major problem in China as well as in other countries around the globe. The model is basically out-and-out theft.
Here’s how it works:
- Start an unregulated broker.
- Offer large incentives to recruit affiliates (or IB’s) who then bring the clients.
- Once the broker has a few million dollars in funds, empty the accounts, transfer the money to an anonymous tax haven and shut the doors.
Hard to believe isn’t it! Like I said, I’ve never seen it happen, but China’s another beast and almost completely unregulated. This is the main reason why you should search for heavily regulated brokers that hold licensees from top tier one regulators such as the Securities and Exchange Commission (SEC), commodity futures trading commission (CFTC), National Futures Association (NFA), FCA, CySEC, ASIC, and more.
5. Anything from Greg Secker
Trust me…. I’m rich.
This guy is the most successful scammer in the industry. Everything he touches turns to gold, for him. And to shit, for the clients.
Their model is a hothouse of sales tactics where inexperienced traders are suckered into a free seminar, then upsold to a $4k course, then upsold again to a $25k course. The tactics are so good the clients don’t even know they’re being conned. I know this because I’ve met plenty of former students, none of whom are profitable, but all consider the program worthwhile.
If I’m being taught how to waterski at a cost of $20k. At the end of the course, I should be able to at least stand up! Apparently not when Greg Secker is teaching you. The education they provide is nothing you can’t find for free elsewhere on the internet.
However, the real problem I have with this charlatan is that the client is told to open and fund an account at a forex brokerage account owned by him, where he earns income directly from their losses (also known as a B-Book).
So the equation is:
Pay him to teach you how to trade > Start forex trading > He keeps your losses and buys a Lamborgini
If it’s been a particularly good day, he’ll then double down with a young woman in the passenger seat.
Final Thoughts – How to Avoid Scams in the Forex Market?
To sum up, you can never be sure that the one forex brokerage firm or the one automated trading software you have decided to use is indeed a forex scam. However, you might be able to reduce to risk considerably by choosing one of the most reputable brokers or legitimate forex robots. After all, there’s still a number of trading systems out there that provide a good forex investment opportunity.
So, if you are making your first steps in the forex trading market, and you are looking for a trading platform where you can safely exchange currencies, and predict currency movements, be sure to stay away from any forex scam.
Do you think you’ve ever been scammed? Hopefully not, but if anything looks suspicious please feel free to contact me and I’ll have a closer look into it for you.
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