Most Popular Forex Scams and How to Recognize Them

Trading Market

The largest trading market in the world is the foreign exchange market, or forex market (FX), which dwarfs the stock exchange in size with daily trades of nearly USD 5 trillion. The market is open around-the-clock, and when trading in New York ends, it also starts in Tokyo and Hong Kong.

Currency is always traded in pairs, such as the US dollar to the UK pound or the US dollar to the euro. This volatile market can provide significant profits for organizations, firms, and some individuals because of the continuous price deviations.

However, the infusion of new money into the forex market has resulted in a rise in forex scams. One is the direct investment in shady businesses, and another is the erosion of investor confidence by presenting incorrect information in instructional materials. No forex trader wants to lose money by falling for a forex trading scam, so it is essential to understand the most common Forex scams and how to avoid them.

Is Forex a Scam?

Is Forex a Scam

The world’s currencies are traded on the Forex market, which is a reputable exchange. Therefore, it is not fraud on its own. It would be challenging to trade the currencies required to pay for imports, sell exports, travel, or conduct cross-border business without the Forex market. However, because there is no centralized/regulated exchange and significant leverage positions are available, which theoretically have the potential to make traders a lot of money, fraudsters use the circumstance and beginner traders’ desire to enter the market.

The Forex market is a “zero-sum” market, which implies that for one trader to win, another trader must lose. As a result, the Forex market does not improve its market value. Moreover, the undercapitalized trader is likely to fail because many currency movements are controlled by massive, well-funded corporate institutions and banks, who are more educated about the market. Large banks and institutions trade currencies daily, but a significant learning curve is involved in doing well in this market.

The complexity of the Forex market is manipulated by fraudsters, who purposefully hide crucial information about market reality from their trusting traders while promising success with their scheme, information, or software robot.

You May Read: The Most Popular Strategies for Trading Futures

Most Popular Forex Scams:

Individual Forex traders risk falling for a forex scam due to the volume of activity and lack of a centralized authority. There are a few well-known ones to be aware of if you choose to go forex trading;

1. Robot Trading System Scams:

Robot Trading System Scams

The idea of earning money while you sleep is alluring. We all want to make money while we sleep, after all. However, in the case of Forex, con artists would guarantee trading robots or systems that would do all the work for you.

Computers are used to carry out this type of trading, deciding whether to purchase or sell a given security based on predetermined criteria. These forex robots have never been examined or confirmed by a third party to ensure their reliability.

It is not a good idea to base your financial and investment decisions on any system. Despite our desire to embrace technology, computers are not error-free. Furthermore, no one (not even a laptop) can predict future events within the currency market. Having a robot trade for you may seem appealing, but you should avoid them since they may be a hoax.

2. Signal Scam:

Signal Scam

In this scam, You’ll receive recommendations on when to buy and sell tailored to maximize your chances of profit. The perpetrators typically take pride in their high success rates and earnings. As a result, you will need to pay membership fees or make deposits through affiliate relationships with particular brokers (usually offshore and unregulated). Most of the time, those brokers are market makers whose main objective is to make you lose money.

Unaware investors that deposit money with an offshore broker, letting the “broker-agent” trade with it can end up suffering the most because they are promised high returns. Then, following a brief period of solid success, an investor will be requested to make additional deposits (with further promises of phony outcomes). This cycle keeps going until the investor requests a significant profit withdrawal. Then the agent disappears, the offshore broker stops responding, and your money has vanished.

3. PAMM Scam:


You can attach one of your accounts to another using the percentage allocation management module (PAMM) technique in order to duplicate performance or, to put it another way, duplicate the trades.

A limited power of attorney is utilized in this legal process, albeit it is commonly abused. Numerous services produce results that are exaggerated or fake. A PAMM owner could be an offshore broker without a license in the worst-case scenario. The showcase account can be easily changed to attract investors by leveraging a broker’s access to the software. The only options remaining are to crash the history or directly steal the client’s funds if the bogus account has collected enough money.

Extra caution: You are still putting your money in danger even if you think you would withdraw your money and immediately shut the account if something goes wrong. The most common forex trading scam involves a broker extending the trading session to avoid processing withdrawal requests, prior to the mounting of actual robbed losses.

4. Broker Scam:

Broker Scam

A broker can interrupt your forex trade, hide their exposure, or steal your money using three different manipulation techniques. Remember that this also applies to market maker brokers, who directly profit from your trade.

  • Routing manipulation: While a broker may pose as a straight-through processor (STP) or electronic communication network (ECN) broker, they may decide to route orders to a market maker rather than a market liquidity provider or retain fees “in-house” on the B-book. As a result of this manipulation, your ability to affect market pricing through your actions is effectively eliminated.
  • Price manipulation: Brokers continue to manipulate prices to get customers to sell their holdings, even if it is less common than it formerly was. In that situation, the broker manages the market to move your order toward the stop loss by a brief surge that can last a few seconds.
  • Operational disruption: This includes things like execution delays, slippage, requotes, and arbitrary disconnections that hinder you from executing ordinary trading operations. Using this strategy, the broker may trick traders into thinking they are winning. Investors who retained their traders on the B-book due to emotional trading blunders were paid off.

5. Multi-Level Marketing Scams:

Multi-Level Marketing Scams

The popularity of Forex has been maintained by the growth of multi-level marketing (MLM) businesses focused on forex trading. Forex (FX) is not an exception, although these industries are already viewed with suspicion. For instance, members of some well-known forex multi-level marketing firms must pay a monthly fee in exchange for daily trade signals and forex training resources.

Members are paid with tier-based commissions if they bring on more candidates. As a result, these organizations give membership recruitment more attention than commerce. However, there is no requirement for you to pay a membership fee or even join any organization to trade on the forex market.

Identifying Forex scams:

There are several red flags that forex scams are taking place. If you can spot these clues, you win the game. Here are several well-known red flags that you are investing money in fraud.

Unprompted emails and phone calls:

Victims are coerced into revealing personal information or handing over cash through fraudulent phone calls. For instance, it’s undoubtedly a scam if you receive an opportunistic call about an attractive currency investment opportunity. They will ask you to contribute money or give them access to your financial information for you to invest in the opportunity and make a fortune quickly. However, avoiding such calls or emails would be beneficial.

It’s almost realistic:

As a trader, you should always ask yourself this fundamental question: if someone or a company promises to be adept at increasing your money by a gigantic degree in a matter of days or weeks, shouldn’t everyone already be a multibillionaire? Of course, the majority of smart investors would have taken advantage of such profitable investments if they had existed before selling them to others. Therefore, before moving on, determine whether services that offer to multiply your money by quadruple exist.

Guarantees with No Risk:

It is impossible to anticipate making money without taking certain risks. Therefore, each forex transaction carries a certain amount of risk. The tale of danger typically increases in direct proportion to the number of possible returns. Like any market, forex trading has a bearish trend. Therefore, if someone says they can trade without taking any risks, they are lying to you.

Huge returns are promised quickly:

You can make plenty of money by trading forex. But it will take some time. You may only experience this once and go from having nothing to having everything in a matter of days. Nobody can promise you high returns in a short amount of time. It is a forex trading scam if you come across a business that promises returns and tries to lure you in with such assurances.

Contact Page:

If a phony broker approaches you with a trading opportunity, do not give in to the pressure. Before making any notes, pay attention. Tell them you’ll get in touch with them in the morning. Next, check the broker’s website to see whether there is a contact page or if the contact number is accurate. The call should be banned if it isn’t. Any trading platform should include a dedicated contact page.


Any trader must possess a license and be registered with the state’s administrative agencies. The National Futures Association (NFC) and Commodity Futures and Trading Commission (CFTC) in the US, as well as the Financial Conduct Authority (FCA) in the UK, are a few of the regulatory organizations. A broker or trading platform is unquestionably a fraud if it is not registered with a regulatory agency.

Terms and conditions:

Every trading website must have a “terms and conditions” page and a risk disclosure page. This proves their legitimacy and binding character. But, on the other side, each element could mask worries for the investor, prompting them to look for different ways to make up for any losses.

Background research about the broker:

Almost every broker will be eager to offer evidence to support their claims. Any accessible data will be used to support their method that guarantees returns with no risk. Online profit graphs are easily accessible. Unfortunately, scammers are cunning, showing only gains and expansion rather than losses. In the worst-case scenario, they might display charts from simulated brokerage accounts that don’t accurately represent real-world trading. You shouldn’t use this information, or any other limited knowledge, to choose a company or product. If they claim that it is a natural process, it is certainly a Forex scam.

False advertising:

Scammers usually exaggerate their trading results. They will post screenshots showing significant returns to show that they are consistently successful and profitable for their customers. Verify whether an impartial third party has confirmed the screenshots.

Discounts and Bonuses:

Have you received any calls or emails about getting credit cards? The same idea applies to forex trading scams that use bonuses or discount offers. Some firms can approach you and offer you incentives or discounts if you immediately make your first investment with them. As a result, they will try to influence or pressure you to make snap decisions within a set amount of time, giving you little opportunity to think about or do background research.


The Forex market is a “zero-sum” market, meaning that for one trader to profit, another must lose. Due to the level of activity and lack of a centralized authority, individual Forex traders run the risk of falling for forex scams. You will be given suggestions on when to purchase and sell in the Forex scam customized by the signal sellers.

An investor will be prompted to make additional contributions (with false results) following a brief time of considerable success. This cycle continues until the investor asks for a sizable profit withdrawal. The expansion of multi-level marketing companies specializing in forex trading has helped sustain the currency’s attractiveness. If someone cold calls you offering a lucrative currency investment opportunity, it’s most likely a scam.