Forex Scams You Need to Be Aware Of

Forex is known as the currency exchange market. There are different parties participate in Forex such as banks, businesses, governments and individual traders from different countries. Therefore the transactions that are taking place require brokers and banks. More and more people become interested in trading Forex. As with any other popular trend there are many more new scams related to Forex are emerging every day. Majority of people who get involved in currency trading online do not even realize how many people out there are trying to take advantage of newcomer's hard earned money.

Individual traders and small business very often are looking to make big money with little investment. They usually become victims of scammers. Since Forex seen by many as an opportunity to make a quick profit many people do not question some issues that mast be researched. They tend to forget that they should invest their money with a broker who directly accesses to the foreign exchange market. There are two major types of scam in Forex business.

1. Broker scam.
As I mentioned many people do not realize that a broker they are choosing to invest money with must be a legitimate participant in the currency exchange market. There are so many so-called bucket shop brokers ready to take advantage of anyone who joins the currency trading business through them. Wikipedia gives the definition of a bucket shop broker as "a firm that takes the opposite side of retail customer orders without actually having them executed on exchange market." And in many states it is a crime.

This type of scam is based on the fact that 95% of traders loose their money very quickly. So what those fraudulent brokers do, they take that money from their clients as if they lost in the market, pay the profit to 5% successful traders and pocket the rest of the amount. Now imagine if a successful trader made a profit exceeding the loss of 95%. These brokers have nothing to do but to perform some sort of fraud on the account of this trader or fold their business and run.

2. Trading signals and software scams.
This type of scam is based on people's greed and laziness. Many companies claim that they provide buy and sell signals to Forex traders to make easy profit. Others are selling software programs that are supposed to give you correct signals when to enter the market and when to exit. Some companies are even selling the software that will be making trades for you.

These scammers are fishing for people whose major motivation is greed and laziness. Many people are looking for ways to make quick profit with little effort. Unfortunately there is no such thing. You can make a quick profit in foreign exchange but in the long run if you are not studying the market and yourself hard enough you will loose. I don't mean that every software and signal service is a scam. But they are only tools for trading currencies. Success depends entirely on individual who uses those tools.