Forex scams to watch out for

You may have heard a lot of the hype and publicity surround Forex recently. In fact, you may be here right now because of all of the good things that you have heard about the potential for successful investing in Forex. Although Forex has excellent potential for bringing a return on your investment, there are some risks involved. …And with anything that involves money, there is the risk and the potential to be scammed.

The category of people most vulnerable to being scammed while trying to trade Forex, are those people that are relatively new to Forex trading. If you fall within the category of being new to Forex it is important that you make yourself aware of what scam artists are doing, how Forex trading might be mis-represented and of as many potential scams as possible. In fact, you should do everything possible to protect and prevent yourself from falling prey to someone engaging in those activities.

The thing that often makes a scam success is the fact that they are so believable. Most people know that people usually fall for scams because they offer such an irresistible promise of financial gain; they cater to the greed in us. Therefore be wary of offers that sound too good to be true. …Exactly!  They probably are.

It is common knowledge that most scams entice us by promising massive returns on ridiculously small investments. These are known as High Yield Investment Programs (HYIP). Stay far away from them. Now although the Forex is a market that allows you to invest small amounts of money and to achieve great returns, the key way to avoid an HYIP scam is to invest in Forex using your own account, not someone else’s. Do not allow anyone to convince you to put your money into any fund that wants to invest your money in Forex for you. No matter how large their promises are.  These funds can not deliver on their promises. They generally pay old clients with new clients’ money and create a cyclical pattern that can not be maintained. They usually run out of money and investors are left with nothing. The owners of these funds are usually the only ones to make any profit.

Beware of sales people that want to sell you a subscription to exclusive Forex data or information. These are often called a Signal Services. They promise inside information that will earn you stacks of money and claim to have information that no-one else knows. Forex is not magic, so do not fall for this scam. Usually Signal Sellers try to convince you to sign up to receive either daily, weekly or at times monthly information. They claim this information will earn you huge returns on Forex and they are bold enough to guarantee it. The reality is that they can not provide you with any information that is any more useful to what is already in the public domain. Do your research yourself and don’t be suckered in by the false promises of a signal service.

Search engines are overflowing with vendors that claim that their software can trade in Forex for you and make you huge profits. The ads for this software are very enticing and promise massive returns. Remember, scams target our desire for lots of easy money. Surprisingly, some of these software packages are being sold for prices as high as $5,000!  This is ludicrous since the exact same software (except probably with more features) can be found online for free. The only software packages that will trade Forex for you are those that require you to already have knowledge of Forex. You will have to set the preferences based on your experience and understanding of Forex.

What is Leveraged Trading?

You might have heard the term Leveraged Trading since the time that you started trading in Forex. Leverage is one of the best opportunities for making extra money on Forex. It is a method of trading where a percentage or fraction of the money for a deal or transaction is borrowed. You would need a Contract to borrow to use leverage. These contracts are offered at different rates. With Forex trading, leverage rates can be up to a ratio of 100:1 (one hundred to one). A 100:1 ration means that the trader can borrow 100 times more than they risk or put down.

In comparison to other markets, Forex’s leveraged trading rules are fairly liberal. For example with the equities market traders generally have to pay around 50% of the price of the contract. As you can see, the opportunities are not the same. What this means in practical terms, is that a trader can trade or ask a ‘lot’ worth $100,000 even if they only have $1,000 in capital when the leverage ratio is 100:1. The extra $99,000 would be borrowed or leveraged.

The option of leveraged trading is an option that Forex allows that gives those with less capital a change to invest beyond their means. It might be used if a trader does not have the funds in their own account to make the large trade that they want to make, or if a trader did not want to risk their own capital. The benefit of investing more money that you have really just gives Forex traders the potential to make much more money on the Forex market. It should be used with wisdom since the larger your investment, the larger the risk is also.

The reason that Leveraged trading is especially useful in Forex trading is that very often the shift in currency rates is only very subtle. At times, the Foreign Exchange market only sees very slight shifts in currency rates. When a currency rate shifts only slightly when a small investment has been made on it, the return can only be very small. Although it is fine to invest just small amounts of money, a small shift in rates will only give you small returns. By leveraging your trade and investing larger sums of money, investors have a chance to earn larger revenues.

Reading leverage rates is fairly simple. If you have been given a leverage rate, the first number in the ratio is the leverage and the second number is the margin. When you see the ratio 100:1, the number 100 represents the fraction that the lender will pay and the number 1 represents the fraction that the investor will pay.

Forex Robots 101

A Forex robot is a software package that is created to trade on the Forex automatically for those that own it.  Forex robots are programmed specifically to analyze the Foreign Exchange market on a constant basis, determine or estimate the direction of a currency and to buy and sell currencies based on the information that they find.  This is all done on autopilot for the person that owns the robot software.  Forex robots usually only need to be fed a few preferences such as a low cap (to limit your losses) and they are able to trade automatically for you.  Programmers of Forex Robots claim that they can make money for you while you sleep.

How do Forex Robots work?
Forex robots work by scanning Forex data and making the most of trading signals that are built into the Forex trading system.  These robots then use the information that they analyze to the advantage of the robot owner.  Forex robots can analyze the fluctuations that take place throughout the day with currencies and are able to calculate the optimal time to buy or sell a currency. 

Although this might all sound like magic, Forex robots don’t actually have a mind of their own.  They trade and make decisions based on the preferences that you enter into the program when you are setting them up.  Your preferences control the bounds and limits of the robots behavior.  Therefore even though Forex robots perform unbelievable tasks, you will need a basic understanding of Forex in order to set them up and get them trading correctly for you.  You will not have to be an advanced Forex trader to use the software but you will at minimum need to understand how to set upper and especially lower limits on trades.  
Benefits of Forex Robots
Trade for you automatically
Able to calculate decisions similar to your own
Can trade for you while you sleep
Can trade at the best moments
Can operate 24 hours a day

The fact that Forex Exchange market is open 24 hours a day and that trading can take place at any hour of the day or night means that the best time to trade could actually be at 4am in the morning or at some other inopportune time.  If this is so, you might always be missing the best opportunities for profit in Forex trading.  Forex robots solve this problem by trading for you at any time day or night based on your preferences and the risk management choices that you enter into the system. 

Risks of Forex Robots
If after reading this article you decide that a Forex robot is the software that you need, there are a few things that you should be aware of and take into consideration before buying one.  First of all, Forex robots are banned by a large majority of Forex brokerages.  If you want to stay within the rules, you will have to ensure that using a Forex robot is within the rules of the Forex brokerage that you work with.  Those that trade using Forex robots against the wishes of their brokerage company run the risk of having their accounts permanently closed or being banned by a brokerage.