Forex Trading Scams: An Expert Guide to Avoiding Fraud


The way digitalization is spreading is benefiting hundreds of thousands of users, but it is equally sad to know that the number of scammers is rising, as are their scams. As pro-netizens and millennials, we are intrigued by various online learning and earning opportunities.

There are various trading platforms available where investors can make their moves; however, if you are not careful enough, you can fall prey to these scams. The blog covers its meaning, it is working, and the red flags.


According to the latest data from the Federal Trade Commission (FTC) in the United States, individuals reported losing more than $299 million to business and investment scams in 2020, including forex trading scams. This represents a significant increase from 2019 when reported losses totaled $182 million.

A Brief Introduction to Forex Trading

Foreign exchange trading, or “Forex,” is a platform where international currencies are meant to be exchanged or converted under a standard exchange rate that lies on each currency and makes a profit out of it. The forex market is one of the giants and the most liquid financial market globally, with an estimated daily trading volume of over $6 trillion.

Forex trading works in two pairs known as currency pairs that are traded against each other. For example, EUR/USD is the currency pair that trades against each other. It represents the exchange rate between the Euro and the US dollar.

A trader can easily play in the field of forex trading once they know when to purchase and sell the currency according to exchange rate fluctuations. Forex trading can be enticing, but it involves high risk, and traders should always be ready with a well-researched strategy to battle against it.

As it is a digitized function now, the loopholes in the system are exploited by scammers. We accept the fact that, wherever there are pros, there will be cons. Forex trading scams are happening and will continue to occur until and unless we, as learners, investors, and knowledgeable beings, can spot the red flags and have the knowledge to avoid them.

What is a forex trading scam?

Scammers have only one agenda: to steal money from their victims and vanish without a trace. Shockingly, many get tricked by elaborate tales of high returns and large profits.

Such fraudulent activities are mostly performed by forex brokers or trading companies that use aggressive marketing tactics. Many fall prey to their tall talks and mesmerize them with heavy financial jargon that they start trusting; they then open up a forex trading account and invest in their so-called “lucrative financial opportunities.” Once these victims are encouraged to invest more after being shown bogus progress reports, The cat is out of the bag once these victims try to withdraw their money; these scammers will simply start ignoring them. These scammers will then stop entertaining their victims’ calls to the call center.

How does a forex trading scam work?

Scammers follow a standard procedure of enticing their victims through unsolicited phone calls, emails, or online ads to grab their attention.

Many fall victim to such ruses that are greatly elaborated by scammers; they understand that their victims lack the necessary financial awareness, and thus, they find it easy to convince their prospective victims.

Several methods are used by scammers to rip off their victims.

Bogus forex trading platform: Scammers will rig the trading platforms that are offered to their victims while trading. On the pretext of an “insider tip,” they will convince their victims to invest in certain currency pairs. Since the trading platform is rigged, it shows false results indicating that the victim is making a substantial amount of money. Victims under false impressions will invest more in trusting the scammer. When the victims try to withdraw their earnings, they are denied by these scammers.

Pump and Dump: Another popular tactic among scammers is the pump and dump. They will advise their victims to invest in a particular currency pair, and due to this, the price of that particular currency pair will rise. Scammers too will invest in that particular pair; once a sufficient margin is achieved, these scammers will start selling off their currency pairs, leaving their victims with worthless currency pairs.

Trading bots: A genuine forex broker or brokerage firm will ensure that they take care of their client’s interests. As their reputation increases, it is good for their business. Many are drawn towards them as they cater to their client’s needs. As an added feature, these firms will invest in a trading bot that requires minimal supervision.

These firms have automated trading software that trades on behalf of the investor. These bots speculate on historical data, charts, and graphs to give the best results. These bots can be programmed by the investor.

Since a lot of money is spent on the research and development of these trading bots, they are offered on a premium basis.

Scammers are aware of such bots, so they will convince their victims to buy a bogus bot at a competitive price. Since these bots are not field tested and no research is done to remove the shortcoming, they can surely spell disaster. These bots are known to make huge losses.

This is a harsh truth: not just a novice could be led into this, but an expert will also become a victim. Sometimes, it’s hard to even contact them because they disappear entirely with investors’ money and cut off all contact.

How do I avoid a forex scam?

Forex scams or any other scam can be overcome if we are aware enough to spot the difference between ‘fake’ and ‘real’. Here are some pointers that will help you better understand the red flags and how to avoid them.

Do your research: Many educate themselves about the current market scenarios. They also make a point to make themselves aware of all types of scams, whether they are old or new. They update themselves. Such awareness is beneficial in the long run.

Regulated Brokers: It would be in your best interest if you verified and authenticated their certificate for running a forex business and made sure they were regulated through government or private agencies. Such certificates are available on the broker’s website. If they lack these certificates, then it’s better to stay away from them, as scammers may be operating that firm.

Unrealistic promises: If the offer is too good to be true, then it probably is. Every business has a certain aspect of the risk involved, and every business requires time to mature before profits are realized. If someone tries to convince you of a once-in-a-lifetime investment opportunity, then it is a scam.

Invest wisely: There is no need to invest more and go over budget. It is a market, and fraud could happen. You should weigh your options before investing in the proposal you receive.

Demo account: A chance to take many genuine and authentic forex trading platforms and use demos or trials to operate the accounts without risking real money.

Professional advice: Try to take expert advice as and when needed; it helps you spot the real deal from a potential scam. If you find it challenging to understand the legal language used in terms and conditions, you should approach a local certified public accountant or CPA.


One of the best ways to spot a scam is to ask the broker to put everything in writing. A genuine broker will not use coercive tactics to close the deal with you. They would be patient and explain everything that their service could offer. Once you receive everything in writing, ask for help from a CPA. Also, ask your local law enforcement agency if the broker you have selected has jurisdiction to run their business in your state or country.

It is better to wait before you go ahead and sign those papers.