Foreign exchange trading is both full of opportunities and dangers for investors. In 2025, due to significant geopolitical uncertainty, this may be an excellent opportunity to trade currencies. However, as the prospects for forex trading expand, the number of scams aimed at stealing funds from unsuspecting and novice traders is also increasing.

How to trade currency

Before making your first trade, please remember that the vast majority of forex traders are unable to make a profit. Although it is possible to make money through currency trading, only traders who have conducted thorough research and developed practical strategies are most likely to expand their investment portfolio. Therefore, before starting, developing methods should be the top priority.

After you are ready to start trading, please follow the steps below:

·Establish connections with brokerage firms. Your primary task is to find a brokerage firm regulated by a reputable financial institution, such as the Financial Conduct Authority (FCA) in the UK or the National Futures Association (NFA) in the US. Search for brokerage firms that offer easy-to-use platforms and competitive fees.

·Use a demo account. If you have just started currency trading, please use a demo account to learn relevant knowledge. Here, you can trade with simulated currencies and avoid costly mistakes while understanding the world of forex.

·Select the currency pair to trade. When you are ready to make your first transaction, please select your currency pair. These currency pairs are typically represented by three letters, such as USD/EUR, used to speculate on the rise and fall of forex pairs through spread trading and contracts for difference (CFD). Using leverage, you can use small deposits for margin trading, but please note that due to the size of your position, this may result in losses exceeding the margin.

·Determine whether you want to buy or sell. Once you choose a currency pair, you should buy or sell. If you choose to buy a currency pair, you expect the base currency displayed on the left to appreciate relative to the currency on the right. If you choose to sell, you expect the base currency to depreciate relative to its paired currency.

·Use stop loss and limit price to ensure safety. Use available options to set stop loss and limit prices to prevent losses. If the market momentum is not favorable for your position, stop loss can help you close it out, and specific profit or loss targets can be set to trigger automatic closing.

·Closing positions and withdrawing funds. If you are prepared to make a profit or loss, you can close your position and return the cash to your account for withdrawal or reinvestment.

In forex trading, you should not be distracted for a long time. Considering this, it is beneficial to continue monitoring your positions and taking action in the event of unexpected events in your held positions. Foreign exchange losses are common, and adopting a cautious attitude is beneficial for beginners.

Foreign exchange trading fraud

The high market liquidity of foreign exchange makes it an attractive destination for criminals. The main forms of foreign exchange fraud are portfolio manager fraud, stock price manipulation, and trading robot fraud, but there are many more forms. The following are the most common ways in which fraud operates:

Portfolio Manager Fraud

This type of forex trading scam can be seen everywhere on social media. In a portfolio manager scam, a social media account claiming to be a portfolio manager will contact investors and promise them high returns.

By allowing you to register and trade on their unregistered platforms, these 'portfolio managers' can manipulate trading prices and prevent you from withdrawing your balance.

You can avoid falling into these scams by choosing to use licensed financial advisors and certified trading platforms.

Stock price manipulation scam

If you have ever bought or sold cryptocurrencies, you may be aware of bid up and sell off scams. In the world of cryptocurrencies, price gouging and selling refer to creating counterfeit currency or influencers promoting and artificially inflating small cap cryptocurrencies, then exiting their important positions and lowering asset prices. Once they attract enough uninformed foreign exchange traders by "inflating" their investments, scammers will "sell" their positions.

To avoid this situation, it is important to conduct research on potential transactions before engaging in trading. When you see posts on social media that make currency trading sound unbelievably good, you should also remain vigilant.

Fake trading robots

Many forex traders use trading robots to automate their trades. Providers may claim that they have created a perfect algorithm that will produce significant results, encouraging traders to buy. However, no one can guarantee that any unverified robot will meet expectations, so you must conduct due diligence.

Ponzi scheme and pyramid scheme

If someone promises you high returns with minimal or even zero risk, then you may unknowingly fall into a Ponzi scheme or pyramid scheme. In forex trading, these scams operate by utilizing the funds of new investors rather than real profits. When new investors run out of funds, the scam will collapse and everyone will suffer losses.

How to identify foreign exchange fraud

Foreign exchange fraud may ruin the lives of even the most experienced traders, so how can we discover them? Let's take a look at five effective methods for identifying and avoiding possible forex scams:

Be wary of exaggerated promises and aggressive sales strategies

Especially on social media, endorsements from big name celebrities and influential promotions may be a bad sign. A concerning new development is that some social media posts involve false celebrity endorsements created using artificial intelligence. Considering this, you should maintain a skeptical attitude when dealing with any excessively promoted content. If someone promises you an incredible return, it's usually false.

Similarly, if influential individuals or other social media accounts adopt coercive or aggressive sales strategies, you should view their despair as a warning signal.

As an additional security measure, before creating an account for a forex platform or manager, please make sure to check if the platform or manager has been verified or approved.

High deposit requirements may be a warning sign

If the initial deposit required by the foreign exchange platform is abnormally high, it should be considered a warning signal and further investigation should be conducted. Foreign exchange fraudsters may choose to create a platform that requires a higher initial deposit as a means of immediately defrauding you of your money. Before deciding on a deposit, please make sure to check the comments and regulatory certifications of the broker and forex platform.

Unstable currency pairs may be signs of price gouging and selling

If you notice fluctuations in a trading pair (especially those involving illiquid currencies), it may be a sign of a plan to drive up stock prices and sell stocks.

If a currency is rapidly rising or falling, it is important to consult fundamental analysis. If you cannot see any indicators behind these trends, please check if social media activity is driving the currency up. In any case, unexpected activity is a warning signal in forex trading.

Stay alert in social media conversations

Foreign exchange trading scams may tempt beginners with promises of short-term huge profits, but the reality is that most traders buy too late and risk significant losses in market adjustments. As a zero sum market, forex always has winners and losers, and social media plans can use latecomers to artificially raise prices.

Pay attention to negative comments from brokers

If someone tries to deceive you, they may have done it before. One of the simplest and most effective ways to protect oneself from scammers is to view comments from any company or trading platform online. If you encounter any companies with extremely low ratings, it's best to stay away!

Avoid acting impulsively

Forex is one of the fastest growing markets in the world, and traders feel a sense of urgency when taking advantage of opportunities, which can lead to them making mistakes and being vulnerable to scammers. Although you may want to take quick action when purchasing rapidly changing trading pairs or seizing opportunities heard on social media, remember that taking the time to learn about opportunities is more valuable.

Nevertheless, the prospects of the foreign exchange market are still very favorable for discerning traders. Prudence and research are always the most sustainable ways to successfully conduct currency trading, in order to increase your risk appetite.