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Updated on December 3, 2010

Forex trading is an easy way of making some residual income for those that truly understand the technicalities involved in forex trading. Forex trading is an act of trading in the currencies of countries other than yours.

Because of the seemingly easy money that one can make from forex trading, a lot of scammers have taken the opportunity to rip innocent people off their hard earned monies. They employ lots of tricks and that will be the subject matter of this blog post. Below are some common traps that forex traders easily fall into:

  • Using unrealistically low spread: forex fraudsters know that forex traders are constantly looking for low spread that will enable them make profit in no distant time. By spread, I mean the difference between the bid and the ask price. Forex brokers make their profits from the spread, so fraudsters use low spread as a bait to catch unsuspecting traders. You better investigate those trading platforms that promise unrealistically low spread. Where do you think they make their profits from other than to devise a dubious means of getting it back from you after enticing you with the initial low spread? Think!
  • Trading against you: trading against you simply means a process whereby the market trend quickly turns against you as soon as you enter a trade. Fraudulent forex brokers achieve this through the use of softwares that automatically reverse the trend on your platform. This will look so real that you begin to wonder. The worst part of it the software is so intelligently built to track your trading pattern. The software automatically built a template to cheat you if you are a scalper. A scalper is a day trader who utilizes opportunity of the periodic fluctuations. I discovered this on a day I suspected this and decided to simultaneously trade with two different computers. One on a demo basis while the other on a live basis.


To my surprise, they both move in different direction. The live trade moved against me while the demo trading moved in my favour. How else can one explain this? The lesson here is to test your trading platform before staking too much of your resources. Be sure not to do this with computers with identical IPs else, the software will detect that and fool you the further.

  • Employing some kind of Ponzi scheme: some forex fraudsters promise to give you returns that are way too big when compared to the reasonable returns. I warn my clients never to give anybody or organization money to trade forex on their behalf. But, if you must however do, make sure the returns are not too good to be true, as they often are. You also need to watch out for those investment schemes that promises a tax free returns. The truth of the matter is that most earnings are taxable. Taxation is a major source of government incomes. This is even more serious now that many businesses are going online- making internet tax a large stream of income to the government of most countries of the world.
  • Placing unnecessary restrictions on withdrawals: one thing is to trade forex profitably, another thing is to eventually get your money out when you must have made some cool money. I once traded with a platform that never allowed me to withdraw back my money.
  • Using unregistered forex brokers: one way of avoiding the above pitfall is to investigate the genuineness of the forex broker. There are regulating bodies that you can verify from depending on your country. Simply do a Google search and you will get the appropriate regulating body of your country. You can also employ the service of a forensic accountant if you wish.

I am sure that you have learnt a lot from this article and now stand the chance of making an informed decision while trying to select a forex broker of your choice. If I had not been here before, I wouldn’t have been able to give guidance on this issue, but you don’t have to learn from your experience when there are people who have suffered the same pain in the past. Like the saying goes ‘’the world is made pleasant as a result of experience of those that have suffered ’’. Invest wisely. In as much as the tips in this article are useful, they are not and cannot be substitute for quality forex training and good financial management.

To your success as a forex trader!


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