Foreign exchange trading is known as the highest risk level trading type in the entire financial industry. The active trading volume of the foreign exchange market makes it easy for exchange rates to fluctuate abnormally frequently and violently in a short period of time. In addition, the high liquidity of the foreign exchange market has made it a world-renowned "speculative hotbed", attracting global speculators to actively visit, and also giving rise to illegal behavior of capital from profit seeking to fraud.

Although industry regulation is constantly moving towards protecting investors, there are always some shady operators who set traps and use methods to manipulate unaware investors. Not only does it exist in regulatory vacuum countries such as China, but it still exists in developed countries such as Europe, America, and Japan.

Inexperienced foreign exchange investors are likely to be deliberately targeted by unregulated and deceptive brokers, as well as other so-called industry professionals, so it is always necessary to remain vigilant and conduct thorough investigations before handing over funds to any party.

Today, Tianyanjun has listed 10 common foreign exchange scams for everyone. Please be vigilant.

False/Unregulated Brokerage

This type of broker usually induces traders to invest, falsely promising high profits or even guaranteeing returns, zero spreads, or other unrealistic promises. Fraudulent companies often try to showcase their brand together with legitimate platforms, so investors need to strictly review the broker before signing any agreement.

Investors can also search the names of brokers on the websites of major regulatory agencies to see if they are regulated by reputable regulatory agencies of their original nationality. In countries such as the United States, the United Kingdom, and Australia, brokers must list their license number and company status on their homepage.

Counterfeiting Company

At first glance, these companies may have registered with regulatory agencies and provided the correct registration numbers, but further investigation reveals that they are very similar to real regulated brokers and may only be used for slightly different spellings, logos, or font variants. Huishang Jun receives almost daily inquiries from investors about the authenticity of foreign exchange investment company regulations, many of which are fake companies.

The term "fake company" actually refers to the basic information and regulatory information of legitimate overseas retail foreign exchange companies, attempting to achieve the goal of "confusing fake with real" in the domestic foreign exchange market, confusing ordinary investors to engage in investment relationships with them. In terms of customer financial security, this type of fraudulent company has no guarantee at all.

In the domestic market, the licensed companies are often companies from the UK or Australia. The main reason is that FCA in the UK and ASIC in Australia adopt mixed regulatory measures. Many domestic brokers in the UK or Australia often operate as insurance, investment consulting, or fund management companies in the local market, without any retail foreign exchange business. Moreover, the strong regulatory authority of the FCA in the UK and ASIC in Australia also provides a chance for fraudsters to "confuse fake with real".

Counterfeiting regulatory website

Another scenario is that brokers may persuade investors to verify their authenticity, publish regulatory status on their own website, and link to the regulatory agency webpage they point to. But in fact, this is not a real regulatory agency website, it is actually just a fake website they estimate to be set up.

To avoid falling into this trap, please be sure to check the official website of the real regulatory agency and search for the name and regulatory number of the broker, rather than trusting any link on the broker's website.

False foreign exchange signal seller

In recent years, with the booming EA market, foreign exchange signal sellers who claim to have rich experience and professional knowledge, excellent technical analysis capabilities, or the right to obtain news that affects market direction can help you identify the best trading opportunities. They usually promise to make quick and easy profits, but in reality, they are misleading indicators or lagging indicators that give you signals after price changes, allowing you to enter and exit the market later, So that they can seek benefits from it.

Although legitimate foreign exchange signal providers cannot guarantee 100% accuracy, good foreign exchange signals can assist you in making decisions, thereby improving your success rate. Huishang Jun has previously introduced that the best foreign exchange signal companies are registered with institutions such as the US Commodity Futures Trading Commission (CFTC) and hold their licenses, so it is important to verify their reliability before accepting services.

Trading robot seller

In the current era where automation systems are prevalent, perhaps there is no bigger scam than forex robots (EA). False foreign exchange trading robots claim that their robots can detect price fluctuations and other factors to evaluate the optimal time to enter or exit the market, but transactions are often random and lack any logic. To be honest, EA tools like this are everywhere and really unreliable.

Furthermore, sales pages are often accompanied by false recommendations from many trading celebrities, claiming how robots can provide them with objective profits. If traders wish to use automated systems as part of their trading strategy, extensive research should be conducted to ensure the avoidance of fraudulent robot sellers.

The best foreign exchange robot that can be used is one that you write yourself, or one that programmers complete for you based on their own strategies. You need to evaluate the robot on a trial basis and discover that it has a profit strategy that reflects the sales supplier's statement.

Foreign Exchange Ponzi Scheme or High Yield Investment Scheme (HYIPS)

Ponzi schemes such as financial pyramid schemes and money games are still one of the most famous scams, often deceiving investors under the guise of foreign exchange tracking and financial investment transactions, promising excessive profits at maturity. However, funds are constantly being transferred, and as more people join, more new investors' money can be used to pay old investors' fees, making investors believe that investments can indeed provide high returns, But in the end, this plan will collapse and the deceivers will flee.

Fraudulent Fund Manager

The high leverage and high risk of foreign exchange trading may also exclude some cautious and low risk investors, but when a fund manager claims to be able to achieve low risk and high returns, many people may think that this may be an extremely tempting attempt. Due to the market not performing as expected, fund managers need to correct their positions and even demand additional funds from investors, and in the end, the additional funds from investors disappear along with this fund manager.

Generally, legally regulated fund managers must have at least a certain level of professional qualifications, and must also obtain a license through the China Securities Regulatory Commission exam and pay a large amount of capital as paid up capital to ensure that all investment funds are managed by professionals on behalf of the public, and this fraudulent fund manager's background and ability cannot be verified.

Excessive training and education plans

Although teaching and training can be helpful in improving trading skills, any institution that claims to be able to become an expert after studying and charges high training fees should be avoided. They may not be able to fulfill their promises, and a large amount of free information online may also have a corresponding effect after screening.

Manipulation of bid-ask spread

This type of scam relies on the simplicity of the trader, who usually focuses more on changes in market trends and ignores the commission charged by the broker for the buy and sell spread. The larger the spread, the more money the broker makes, which reduces any potential profit for the trader. However, with the transparency of market regulation and the popularization of traders' experience and cognition, this type of scam is becoming less and less common.

Hunting stop loss

Fraudulent brokers manually close positions to obtain additional trading commissions before pushing market prices to the stop loss position set by the trader. Usually, large financial institutions adopt this strategy, where they have sufficient funds to buy or sell a large amount of currency, leading to an increase or decrease in market prices.

The reason for the emergence of hunting stop loss strategies is that these institutions are aware that traders usually set stop loss points at certain key points, such as support or resistance points, popular moving averages, Fibonacci levels, and cycle numbers. However, this is unlikely to happen for regulated legitimate brokers, but investors should be cautious.