The increased popularity of forex trading has opened the floodgates to new investors who want to enjoy high returns from low investments. Unfortunately, it has also been a boon for scammers who want to part people with their hard earned cash. Spotting a forex scam is the best way to avoid being taken for a ride when you invest.

They Promise Little to No Risk

The reason forex is so profitable is because of its high risk nature. The forex market is volatile and less-than-savvy investors can lose money quickly if they are not aware of what it takes for success. If a firm is promising high returns with no risk, think twice before investing your money.

They Place Employment Ads Seeking Traders

One of the biggest scams that so-called brokers perform is to put out ads seeking forex traders. In this scam, traders are hired immediately, often without any interview process, and given a basic training on the demo software. The trainer is then enticed by seemingly high gains and uses his own money to start trading. With little to no experience with trading, the trainer quickly loses all of his capital and the broker gains a huge profit on the trades.

Spotting a Forex Scam

They Have a Negative Reputation

Many of the new forex brokerage firms operate by getting in as many investors as possible, bilking them of their money and getting out of the game before anyone catches wind of the scam. Before investing any of your money, check their reputation online and make sure that they are legitimate. If there are a lot of complaints online about the firm, beware. They may be under investigation by the Securities and Exchange Commission for fraud. If this is the case, your broker can be shut down and you will lose every penny of your money.

They are Not Affiliated With CFTC or NFA

Most reputable forex firms are affiliated with the CFTC (Commodities Futures Trading Commission) or the NFA (National Futures Association). These agencies oversee the activities of brokerage firms in their organization and can attest to the legitimacy of these companies. If a broker is not affiliated with these organizations, it does not necessarily mean they are running a scam, but you should proceed with caution.

You Cant Make Withdrawals

If your broker requires advance notice before you can withdraw your funds, run, dont walk away from the company. Investors should be able to enter and exit trades at will. Companies that run Ponzi schemes often restrict withdrawals because the money is not available to be accessed immediately. Beware of companies that restrict withdrawals while at the same time promising huge returns.

When it comes to spotting a forex scam, trusting your intuition is key. Check out the firms reputation, historical performance and professional standing to make sure they are legitimate. Avoid being a victim by learning to spot forex scams.