Forex scam and a fraud, brokers being quite clever about the boundaries of terms. Both scams and frauds encompass charging the client's account for different commissions. Therefore, be sure that the spread will be the only broker's fee. Many market maker charge incredibly overpriced swap (rollover) fees, and the nastiest ones will charge "Automatic Sweep fees” (transferring your profit into the currency of your country). This is absolutely forbidden and you should tell your broker you're aware of this practice.


Trading Robots

Another scam consists in selling software or "trading robots" supposed to guide you and/or make profit for you when you are away or sleeping. There's no robot in this world that can react according to breaking news (such as ECB announcement or HSBC report). Robots are expensive and won't help you much.
Another scam that may concern big investors comes in the way of "managed accounts". If the broker says the capital will be managed by a professional in exchange of a commission, this might be "Ponzi" schemes. The most famous example is the French man Bernard Madoff who tricked a dozen of high line investors into investing money for his fictitious company.


Leverage Scam

By proposing high leverage, both Market Makers and no dealing Desk brokers encourage traders to place very large positions. This increases the transaction as well as the risk of loss if the market doesn't move where it is supposed to move. While professional currency traders such as banks, financial institutions, Pension Funds and other hedge funds tend to use no more than 15:1 leverage, retail clients may be offered leverage between 10:1 and 500:1.

Bonus Scam

Many brokers offer bonuses but in order to take advantage from them you must trade and get three times the bonus “value”. This is another technique to trick you into overtrading and increase your chances to lose money. In other words, you'll never see your bonus!

Next time we take a look at the factors that make a good Forex broker. Meaning that you see any of these factors not in place it should raise a red flag. This may be the most efficient way to be aware of Forex scams.


Tags: Bonus scam, leverage scam, Trading robots, forex indicators

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