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5 Common Forex Scams & How to Avoid Them

September 28, 2020 06:50

The forex market is large with long trading hours, allowing investors to trade 24 hours a day, five days a week. A trader with good trading skills, a well-funded account and proper risk management has a good chance of generating substantial profits. As a result, a large number of forex platforms have sprung up in the financial market in recent years, and they are of variable quality. Because the forex market is so attractive, there are always scammers in the market trying to take advantage of this opportunity to carry out fraud and make investors lose their money.

Most of the trading instruments of forex platforms are CFDs (with margin), and some investors do not fully understand this new trading method. In addition, the emergence of non-compliant trading platforms also makes well-regulated forex trading platforms being stigmatized and questioned.

Therefore, this article will share some common frauds on forex platforms and provide ways to identify and prevent them so that investors can avoid these illegal platforms in the future.

Common Frauds in Forex

1 / Provide fake links for verification

Some illegal forex platforms would provide investors with verification with links to the regulatory agencies’ websites. If investors click on the link directly and enter the website, they may misunderstand that the platform is a regulated platform. In fact, the shared URL is fake. To avoid falling into these traps, please visit the official website of the regulatory authorities for regulatory information, and do not easily trust the “sharing” channels provided by the trading platforms.

2 / Claim to provide fully-automated trading

Some platforms claim that they have automated trading capabilities that allow investors to make money all the time, as long as they put their money in. However, these automated programs have not been reviewed, and the so-called trading history may be falsified.

3/ Capital-protected investment and promise of high yield

If the platform or its employees claim they can guarantee profits, investors should beware, as this is almost certainly a false promise. It is possible that such platforms make such seductive claims in order to raise enough money to run away with. The most famous scam in recent years was the 2017 IGOFX scam, in which Zhang Xuejiao, the general agent in China, lured investors with the promise of profits. Nearly 400,000 IGOFX investors were scammed, swindling about 30 billion yuan. These are the so-called pyramid schemes, also known as Ponzi schemes.

4/ Syndication Scams

Given the speed of information transmission, some fraudsters may use social media to join investment groups or flaunt their wealth so as to attract your attention. The content they posted is mostly about the secret of investment, or how to create passive income or profit from the market easily. Of course, they will also attach their statement of account or add photos from their everyday life to increase their persuasiveness and lead investors to invest in syndication, where they will charge a certain amount of service fee. Aside from breaking the law, the point is that investors could end up losing everything.

5/Slippage and Account Freeze

Some illegal platforms may intentionally create market gaps and negative slippages when the investor tries to close out a position, which seriously affects the trading result. Under such conditions, investors could lose money on a transaction in which they can make a profit at the beginning. In the case of extreme market volatility,  they may even be forced to close out their positions. After discovering the behavior of the platform, the investors are naturally unwilling to continue to use the platform. Even if the investors eventually make profits, some illegal platforms will freeze their trading accounts and prevent the investors from withdrawing money, and claim that the operation is suspicious.

How to Avoid the Trap of Illegal Forex Platform

Next, we’ll show you some ways to avoid falling into the trap of fraudsters:

1 / Search for domain name registration information

Investors can check the domain name registration information with domain registrars to find the registrant, date of registration, country, telephone, E-mail, etc. If the registrant is a private name and the registration time is short, it is considered as a high risk.

2 / Capital security issues

In order to protect investors, the funds of formal forex platforms must be managed by third-party banks, and investors’ funds and operating funds will not be mixed. Therefore, you can pay more attention to the customer deposit protection provided by the platform.

When opening an account, investors should keep an eye on the deposit and withdrawal terms. The less strict the terms, the more favorable it will be for investors. The platform with stricter conditions has higher risks in case of capital security.

3 / Check the platform license on the regulator’s website

Visiting the websites of well-known regulators to check whether the forex platforms are regulated is the most direct way to determine the legitimacy of the platforms and can eliminate the illegal platforms. Investors must also refer to the regulatory intensity and reputation of the regulatory authorities. The stricter the regulation, the better the protection of investors’ rights and interests. At present, the mainstream regulatory authorities include NFA of the United States, FCA of the United Kingdom, ASIC of Australia, FMA of New Zealand, etc.

Finally, we would like to remind the investors that behind the bright surface is all blood and sweat, and there’s no such thing as free rides. Investors can filter out most of the traps if they get their ideas right and ask a few more questions.

Regulated forex trading platform – ZFX

ZFX is regulated by the FSA and provides more than 100 trading products, including forex, precious metals, stock index, crude oil, natural gas and US stocks, with a minimum trading volume of 0.01 lot. In order to provide investors with a high-quality, fast and stable trading environment and give customers the best trading experience, ZFX offers a variety of account options according to different risk attributes and operation strategy of customers, and up to 9 sub-accounts can be opened. ZFX has the following features:

Provide STP and ECN trading mode

STP’s trading method puts all orders on the market and can find the best price for customers. Compared with traditional market makers, its biggest advantages are generally lower transaction costs and faster transaction speed than market makers.

The ECN model allows customers to trade with other customers. In other words, the customer’s order can be matched with the order of other participants in the market, truly realizing zero spread.

Learn more about STP and ECN trading modes

Three account types are available
Standard account

Offer a minimum trading volume of 0.01 lot, and a leverage of up to 30 times for your risk control, which is suitable for experienced customers who are already familiar with the operations.

Micro account

Offer a minimum trading volume of 0.1 lot and a leverage up to 2,000 times, with a minimum investment of $11.

In addition to reducing position costs, it can maximize returns for new customers who are just exposed to CFD products and want to test with small amount of funds.

ECN account

Offer a minimum trading volume of 0.01 lot. The transaction is favored by short-term customers due to its low transaction costs and almost “zero difference” and is suitable for customers who want to get in and out quickly.

Learn about the details of the trading account


About ZFX (Zeal Capital Market) 
  • The Best Trading Platform Award 2019 from Financial Weekly, Regulated by FSA.
  • 100+ trading assets, including ForexStocksIndicesGold, Crude Oil, etc.
  • 3 types of trading accounts to meet the needs of every customer
  • 0 commission, low spread, leverage ratio up to 1:2000
  • Powerful trading platform that executes 50,000 orders/s
  • Open an account with a minimum deposit of $50
  • 24-hour Customer Service

5 Common Forex Scams & How to Avoid Them - ZFX


Risk Warning: The above content is for reference only and does not represent ZFX’s position. ZFX does not assume any form of loss caused by any trading operations conducted in accordance with this article. Please be firm in your thinking and do the corresponding risk control.


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