Foreign exchange fraud is a surprisingly common occurrence. Just like all forms of financial crime, it’s never entirely avoidable unless you choose to leave the market altogether. However, the good news is that you can cut down on the chances that you will personally experience it by following a few simple, yet powerful, steps.
Do your due diligence
When businesses trade with each other, they often follow what’s known as a ‘due diligence’ process: researching the background and general potential creditworthiness or financial solidity of the other party in question. Individuals who trade with organisations or other people should also think about doing this – and that goes for those involved in forex.
In the case of a forex trader, it can be done by looking up which body regulates the broker and whether it has issued any warnings about the site in question. Another form of due diligence involves reading broker reviews: if you’re asking ‘is JustForex legit?’ or something similar, it’s wise to check out relevant reviews from well-researched sites such as Forex Fraud. That way, you can reduce the risk of fraud from the very start.
Too good to be true?
Many foreign exchange scammers promise the earth at first and lure you in with tales of how you can go from your current status to huge riches without having to put in much effort. The reality is very different: those who succeed in the complex world of forex trading tend to be those who do their research, develop risk strategies, and keep on top of economic trends – or, in other words, work hard. If a promise made by a purported forex broker seems to be easy or wonderful, it could well be a scam – and it’s best to steer clear altogether.
Baby steps
Some people who begin trading foreign exchange find themselves getting carried away quite easily – especially if they had an early success of one sort or another. The reality is that forex trading is barely ever a completely plain-sailing experience: in fact, losses can easily balance out gains, and even the most experienced traders find that they don’t always make consistent profits.
By starting out small and exploring your way around the forex field, you can build up to a strong performance rather than risking a wipe-out of your capital from the beginning. In the context of fraud, it’s extra important to go slowly when you start out: that way, any losses caused by a scammer while you’re new and less knowledgeable will be reduced.
Ultimately, forex trading is never going to be entirely plain sailing – especially when it comes to fraud and scams. There’s an inherent risk in such a volatile trading environment, and this can only ever be managed rather than eliminated outright. However, by ensuring that you do your due diligence, practising cynicism and taking it slowly, you can defend yourself against risks such as fraud.
