By Onyebuchim C Obike
Forex Trading is one of the highest yielding financial investment in the world. According to the Bank for International Settlements, as of April 2010, average daily turnover in global foreign exchange markets is estimated at $3.98 trillion, a growth of approximately 20% over the $3.21 trillion daily volume as of April 2007. Some firms specializing on foreign exchange market had put the average daily turnover in excess of US$4 trillion of which $1.490 trillion us being generated from spot transactions (i.e. Forex transactions)
The above fact is the key factor that entices most people to invest in Forex. The enormous returns in Forex also gave rise to fraudulent schemes, which have been on the rise since Forex began.
Fraudulent shemes in Forex is also referred to the word "scam".
What is scam?
"Scam is a fraudulent business scheme" or "to deprive off by deceit" - (TheSage's English Dictionary and Thesaurus)
Scam is synonymous with fraud. It is deception, make belief, trickery, pretense, cheating, e.t.c.
A lot of people have fallen one time or the other to scam deals knowingly and unknowingly. Some got out with partial loss, while others lost everything without a single recovery. Scam victims usually suffer unbearable psychological pain due to the level of trust built with the scammer and the loss incurred.
Unfortunately any venture with high potential for money making is always alluring to scammers and Forex is one of those ventures.
Scamming in Forex had been in existence right from when Forex began, only that it has taken a new dynamic dimension in this current era. Forex Scam is the act of fraudulently taking money from a client or customer with the intention of providing a rewarding service for the client or customer, which is not true. In some cases the services provided by the vendor could be rewarding or true, but at the long run, when a glitch occurs due to poor design then the vendor disappears after months of negotiations without making any refunds.
Examples of Forex scams include;
Fake products
Ponzi Schemes
Fake Managed Account Schemes
Pyramid Schemes
These examples are more prevalent in Forex due to the nature of the perceived returns and high rate of unsuspecting traders who patronize them.
Understanding the true perception of Forex scam is very important in detecting and protecting yourself from fraudulent schemes in Forex. A lot of traders have a wrong perception of Forex scams due to their limited knowledge about Forex. A case scenario might look similar when it's being matched with real scam cases. But when you look deeply into such complaints, you'll find wrong perceptions and false alarms.
A lot of inexperienced Forex Traders are quick to scream "I've been scammed" due to their level of knowledge in Forex. If you fail to follow the instructions of a product, and experience loss then that is not a scam.
For example when a signal service provider says "use default settings for accounts lower than $1000, and do not adjust the Money Management Settings otherwise you will get undesired results. However you'll make little pips but on the long run your account will grow steadily".
If a user of this signal service gets impatient or greedy, and ignores the warning by tweaking the settings in order to attain short term quick gain in his account, such a trader would unfortunately experience undesired results to his/her account.
Let's assume the trader gets infuriated and sends series of complaints to the vendor about the poor performance of the product and later request for a refund. When the vendor refuses based on the trader's negligence, then a scam alarm is raised. Unfortunately this does not qualify for a scam case.
Every forex product has its threshold or required standards because they cannot be 100% perfect at all times. Most vendors usually state this caution or disclaimer notice on their website in order to protect users from unprecedented loss from market uncertainties. So it is the duty of a customer to keep to the product's limits. When you go against it and face the undesirable consequences then asking for refunds would not work, and establishing a scam case would be extremely difficult.
When a trader uses a Forex product not designed for news trading or for a particular trading session or configures the settings against the design of the Forex Product and gets losses then the trader cannot claim he/she has been scammed.
One of the best ways of understanding and protecting yourself from fraudulent schemes in Forex is to get yourself updated with the Forex regulatory agencies like CFTC, NFA and your local financial regulatory agencies. These regulatory agencies regularly publish red alerts and warnings about fraudulent schemes in Forex to protect Forex traders.
Fraudulent schemes in Forex can be very enticing, cheap, alluring, and certain. Understanding the hidden traps in any alluring offer is the first step of protecting yourself from loss.
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