The foreign exchange (forex) market is huge. It has an average daily trading volume of more than $5 trillion, including currency futures and options. On the other hand, regulation is not very well. This because the opportunity still exists for many forex scams.
For instance, promising the quick fortunes through “secret trading formulas,” algorithm-based “proprietary” trading methodologies, or “forex robots”.
Every company or person who wants to conduct off-exchange forex business should register to become a member of the NFA (National Futures Association) and Commodity Futures Trading Commission.
Signal Sellers
Signal sellers are one group of operators to consider carefully. One of the challenges a rookie forex investor faces is determining which operators to trust in the forex market and which to avoid.
A signal seller basically offers a system that purports to identify favorable times for buying or selling a currency pair. The system may be manual. The user must enter trading info or it may be automated to put through a trade when a signal occurs.
Some systems rely on technical analysis. While others rely on breaking news and many employ some combination of the two. But they all purport to provide information that leads to favorable trading opportunities. Signal sellers usually charge a daily, weekly, or monthly fee for their services.
Phony Forex Investment Management Funds
In the past few years, forex management funds have proliferated. Most of these 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, this “management” offer requires the investors to give up control over their money and to hand it over to someone they know little about other than the hyped-up and often a completely false record of success available on the scammers’ website and brochures.
Investors often end up with nothing, while the scammers use investors’ funds to live high on the hog.
Dishonest Brokers
Although the forex market is not entirely unregulated, it has no single, central regulating authority. The forex spot market, however, which accounts for the majority of trades, is completely unregulated. Unsurprisingly, some forex brokers do not deal fairly with their customers and, in some instances, defraud them.
At this point, you can help yourself avoid forex scams by dealing with one that also handles stock market trades and so is regulated by the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA).
While the forex trade itself may be unregulated, a broker subject to SEC and FINRA oversight probably wouldn’t risk its license for other securities by defrauding its forex customers.