Spotting a Forex Scam
Other scams and warning signs exist when brokers won't allow the withdrawal of monies from investor accounts, or when problems exist within the trading station. Can you enter or exit a trade during an economic announcement that is not in line with expectations? If you can't withdraw money, warning signs should flash. If the trade station doesn't operate to your liquidity expectations, warning signs should again flash. An important factor to always consider when choosing a broker or a trading system to satisfy your personal goals is to be skeptical of promises or promotional material that guarantees a high level of performance.
Of the 193 cases filed with the NFA in 2008 for rules and law violations, 166 were settled within nine months, but only 23% received lost funds. Therefore, similar to the circumstances that present themselves in a Ponzi scheme, even when those who deliberately engage in forex scams are brought to justice, investor reimbursement is not guaranteed.
To investigate your broker, the Background Affiliation Status Information Center system was introduced. Many of these changes have driven out the crooks, the unwanted and the old scams and legitimized the system for the many good firms. However, always be wary of new forex scams, as the temptation and allure of huge profits will always bring new and more sophisticated types to this market.
Professor Brian Twomey can be contacted at Inside the Currency Market