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Staying Safe
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Avoiding Common Scams

No sooner do you get an insight into scams than somebody invents a new one. The best defense against scams in general and scams in Forex in particular is:

  • Know how the market works.
  • Do not be gullible.

When you read grievances by traders on one of the many “Forex scam” websites, you may think the sellers of Forex services, including brokers, are a pack of hungry wolves just waiting to eat you for breakfast. However, you can be scammed only if you are not knowledgeable about how the market works and if you believe promises that any 10-year-old would doubt. The stupid and the greedy will always be victims of fraud.

Moreover, as you read about purported scams, sometimes you will find that the trader was not scammed at all — he made a mistake and is unwilling to admit it. Before going ballistic about a perceived wrong, you need to find out whether there is a wrong in the first place. For example, you will see complaints about stops always being hit, and that is attributed to the broker. In reality, if stops are always hit, it could be because they were set too close and randomness alone sufficed, or other traders had stops clustered near the same stop level, and some smarty-pants traders were indeed hunting for them — but not the brokerage itself.

It is no doubt true that some brokers do not even lay off a trade when the stop is really close because they have a really good probability of that stop being hit. Another broker trick is not to lay off your trade because the probability is good that the broker’s own stop on your trade – the point where it can liquidate your position because of insufficient margin — will get hit. This was written about as early as Edwin Lefevre’s Reminiscences of a Stock Operator — in 1923. So, yes, the broker can be the wrong-doer, but the trader who is not over-leveraged and whose stops are set to avoid random moves and stop-hunters can outsmart the broker.

Forex scams originate from brokers and from sellers of other services, especially managers and expert advisors. In the US, the Commodity Futures Trading Commissions (CFTC) set up a special commission to study Forex scams in 2008. The main outcome of that commission’s report was the 2010 rule limiting leverage to 1:50. This was specifically to combat what is named “solicitation fraud,” meaning outsized broker promises of giant profits from a small capital stake. This still goes on in the retail Forex industry generally, but US brokers have become far more careful in recent years and every once in a while, a broker gets zapped with a hefty fine for making unsubstantiated claims. CFTC publishes yearly reports on its anti-fraud activity. For example, in the fiscal year 2023, the commission prosecuted cases involving the defrauding of thousands of customers, ordering $4.3 billion in civil monetary penalties.

Did you know that CFTC issued a special anti-fraud brochure to warn potential victims of Forex scams?

Another reason for stepped-up regulation in the USA was:

  • lack of transparency in the pricing and execution of transactions;
  • unresponsiveness to customer complaints;
  • targeting unsophisticated, elderly, low net worth, and other vulnerable individuals.

Warnings Signs

The warning signs of fraud are the same in Forex as in any other corner of finance — promises that are too good to be true and that appeal to that demon in all of us who would love to get rich quickly. Another warning sign is unsolicited phone calls and emails offering big returns for low money and low effort. Reputable brokers and managers do not engage in email blitzes and never cold call. In addition, any time it is urgent that you send money right away to get started — watch out. While every service purveyor likes to get new clients, high pressure to send money right away by wire transfer, PayPal, or credit card is often a sign of intent to cheat.

In summary, the five warning signs of a scam are:

  1. Ridiculous claims like “high return, low risk” and “trade alongside the big banks.” Here is a good one: “We want to make you rich.”
  2. Fancy language that you are not really familiar with (“structured,” “deferred,” etc.) and that can be interpreted in multiple ways.
  3. Long, complicated contract with a lot of disclaimers.
  4. Ticking clock urgency. The Forex market has been operating in its current form for 40 years and is famously almost always open. Opportunities will be available tomorrow, and next week, and next year. The salesman does not want you to think twice or consult anyone else. As for the trading program or expert advisor software of which only a limited number is to be sold — really? The salesman claims that if he sells too many copies of his secret trading program, it could influence the market. No, it could not. The Forex market is $6-8 trillion per day. No single program can move it, even if it were executed by one of the big banks, let alone a few retail traders, who collectively comprise less than 5% of Forex market participants.
  5. Email, hard-copy mail, and free-lunch seminars. The seminars are especially toxic. You may think you are a hard-headed person who cannot be influenced, but once you are in a room with a closed door and dazzling promises, you can be manipulated into buying something.

Cross-Border Differences

In the US, deceptive, misleading, and high-pressure sales solicitations are not allowed. Elsewhere, they may be regulated less tightly. Cyprus was the home of several frauds, and yet one broker in Cyprus is among the top ten ranked today. Dubai Financial Services Authority busted a scam in 2007 that cold-called investors from Australia and Singapore to invite them into Forex options ventures that ended up being entirely fictitious. Bells should have rung when the investors were told to fund their accounts by transferring money to Malaysia. You can see more such stories online.

As a rule, you should select brokers and other service providers, including platforms and software, in your home country or a country where regulation is tight, like the US, UK, Switzerland, and so on. You should be able to speak to a service representative on the telephone, and he should not apply sales pressure. Ideally, you should be able to visit the premises of your broker and look around, although obviously, this is not always possible. And would you be qualified to judge the premises, anyway? Those clerks busily churning out account statements could be churning out falsified ones.

Research broker reviews online. Check out the national regulator website for charges and investigate trader complaints on the many websites that offer broker reviews. You can do an internet search for “Forex scams” and find plenty of names named.


We have a nice overview of Forex regulatory agencies, published in our blog.

Read the fine print. Complaints from other traders about the inability to withdraw funds are a screaming warning sign. Obviously, if you accept a “bonus” for opening an account, you will not be able to withdraw it early or easily. This is not necessarily an indication that the broker is a bum. Learn exactly what conditions apply to withdrawing funds, and start with a mini account—and withdraw some funds to see how well it goes.


You can read reviews about Forex brokers submitted to us by traders.

In Play Now

Two scams in play right now are the webinar/seminar scam and the “use our money” scam. Those who put on expensive seminars to teach you everything you need to know about Forex can actually make a good income at $5,000.00 per person per day, but they almost always want to hook you up to a broker or a manager who will do the trading for you. The minimum investment in the seminar scam is usually on the order of $50,000. The seminar scammers position themselves as being at the high end of the investment spectrum, which appeals to the snobbish. The scammers are counting on those who fall for the seminar scam to be reluctant to complain when returns are minimal or non-existent.

The “use our money” scam is trickier. The idea is that the firm is offering you the next thing to a “job” and will provide you with starting capital. You get to keep a proportion of your gains. You also get to pay for training and are pestered to “top up” your account with your own funds when you take losses. So far, this scam is flying under the radar and has yet to be prosecuted.

Every scammer has to tell a lie or at least make a misrepresentation. The golden rule of avoiding scams is to adopt the principle that one lie or misrepresentation is all it takes for you to head for the exit. This is not a bad rule in life as well as in business — you get to lie to me only once.

Software, Experts, and Robots

Whether featured on a platform or compatible with a platform, Forex charting software comes in all stripes — the standard indicators plus Gann, Fibonacci, pivot point, and the “secret” formula of some brilliant back-room programmer.

First, there are no “secret” indicators. Indicators are just arithmetic. Most 15-year-olds in an algebra course can replicate every indicator. Moreover, indicators are free. You can find specifications for every indicator on the planet in books, magazines, and online. This does not mean you would want to go out and learn how to combine indicators into a trading system and then have that system place your orders automatically because that would be a huge undertaking.

And those who have done it with the intent to sell to you surely deserve to be compensated. But if the seller is making claims of high return/low risk, be warned. Forex is not high-return/low-risk for a number of reasons, including the use of leverage, stop-loss orders becoming market orders upon getting hit (with some unhappy surprises between your order and your fill), and abrupt shifts in direction.

Expert advisors and trading robots have the virtue of removing emotion and adrenaline from trading decisions but have the drawback of never, ever matching your personal risk profile. They are also subject to curve-fitting — having worked splendidly on past data but not adaptive to upcoming conditions.


We offer a big repository of free backtested expert advisors and indicators for different trading platforms.

To test an expert system or robot, you need to do two things:

  1. Examine the track record and ensure it covers enough time — at least 3 years and preferably at least 5 years — to verify it works over many different types of market conditions.
  2. Test it out with a demo account — and ensure you can get a refund if the program does not suit you.

We can conclude this lesson with a simple statement: It is easy to stay away from scams in trading if you act carefully and with reason.


You should avoid a broker where other traders complain stops always get hit.

The top rule for not getting scammed is:

It makes sense for a software or trading system vendor to restrict sales to a specific number.

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Avoiding Common Scams