Many know that one type of currency can be exchanged for another, but something that most people do not know is that there exist entire markets in the trading of currencies, and billions of dollars worth of foreign currency are traded each day. Because the details of the forex market are so unknown to most, it can be easy for a person to be taken in by one of the many scam artists out there today trying to separate the general public from their hard-earned money by offering “guaranteed” forex investment opportunities. There are several ways that people can protect themselves from these get-rich-quick scams.
The first rule in protecting oneself is to steer clear of any forex investment opportunities that sound too good to be true. Some companies are touting guaranteed returns of fifty to one hundred percent, but earning a return like this is just not likely in this day and age. Think about it - if it were possible to guarantee this type of money making potential, everyone would be doing putting all of their money into trading currencies. All of those mutual fund managers on Wall Street eking out gains of eight percent a year would immediately switch all of their billions of dollars in equity over to currency trading. While it is definitely possible to make money by trading currency, investors with realistic expectations are the ones who are most successful and the least likely to be scammed.
One should also be wary of any company that guarantees a return. Some investments are riskier than others, but all carry some chance of losing money. There is a direct relationship to the amount of return possible and the risk involved, and this is known as the risk-reward ratio. It is simply not possible for a forex brokerage to guarantee a positive return, and investors should avoid any company that does. Although investors make money every day in the forex market, negative returns are indeed possible and consumers should be made aware of their possibility.
In addition, any firm that purports to trade on the “interbank market” should be looked at with suspicion. By definition, an interbank market is created when banks trade currencies between themselves, or with other financial institutions, often at better exchange rates than can be obtained on the open forex market. Some companies advertise that they are able to tap into this market to take advantage of the superior prices, but in reality it is unlikely that the company is able to do so, especially if it is an unregulated currency trading firm.
Finally, investors should avoid falling for the advertisements that tout account executive jobs at currency trading firms. Often, poor ethnic minorities are targeted for these get-rich-quick schemes as they are offered high-paying employment opportunities with no experience necessary, often on late-night television infomercials. But once the applicant is solicited to invest a lot of money himself, these “jobs” turn out only to be ways these forex trading firms use bilk money from the unsuspecting public. And often, the job candidate is pressured to recruit friends and family members to the firm along with their hard-earned savings as well. Any job advertisement from a forex trading firm that sounds too good to be true likely is, and one should try and avoid these opportunities.
By following these four tips, one can successfully avoid the web of scam artists in an otherwise fast-paced, rewarding industry. There is a lot of money to be made in the forex market, and the savvy investor who trades with a legitimate brokerage house can find success in trading currencies.
