The Internet has been the great facilitator of change over the past decade, but it has also enabled many disparate consequences, as well. Whether we like it or not, there is a criminal element in our society that is always poised to use technology to separate us from our hard-earned money. Trading the world’s currencies over the Internet has been another area that has experienced explosive growth and popularity over this same decade, but fraudsters have been present every step of the way.
Any service that involves money will attract organized crime, and foreign exchange was no different. Fraudulent brokers were the largest problem, but the Commodity Futures Trading Commission (CFTC) stepped in and began ridding the market of fraudsters, regulating the forex market at large, and educating consumers as to the pitfalls and opportunities of forex trading. (For more info, go to ForexFraud.com).
Despite performing a yeoman’s task, the CFTC, like other regulators, has a limited budget. They have reduced fraud to an acceptable level, but it still persists. Every investor should always be skeptical and cautious, especially since your so-called business partners on the Internet are anonymous and face-less. More due diligence is necessary, and awareness will always be your first line of defense. Here are a few tips on what to be wary of:
• Unscrupulous Brokers: The CFTC has not eliminated all of the crooks. Beware of hard-to-believe marketing claims, especially from overseas brokers. Imagine trying to enforce your rights in another national jurisdiction. It would be a nightmare. Only deal with highly regulated, reputable domestic brokers that have been in the business for quite a while (For more info on forex broker reviews, click here);
• High Yield Investment Programs (HYIP): This term is nothing more than a substitute for a Ponzi scheme. Potential investors are promised outrageous returns on a monthly basis, as if that were truly possible. Greed takes over, and the “mark” makes an initial deposit. He will be shown great early results on sophisticated looking reports with pictures of electronic trading rooms to seal the deal, causing him to recommend this wonderful service to his entire network of family and friends. There are no returns. There is no trading room. It is all a scam;
• Marketing of other Forex Services: From signal sellers to automated software to managed funds, you will hear marketing claims designed to get your adrenalin pumping immediately in your veins. Watch Out! There is no perfect system, “Holy Grail” technique, or super efficient fund manager out there. This fact, however, does not stop these folks from selling whatever beautifully sounding service or product offering they have that will revolutionize your trading experience and make you a millionaire over night.
Did you notice the common thread in all of these scams? Every one of these approaches preys upon our desire to get rich quick. Greed is the motivating factor. If it sounds too good to be true, it most likely is. Forex trading is high risk and difficult. Currency traders must be wary of anyone that pretends otherwise.