We want to make as much as we can as soon as we can with any investment. After all, that’s the guiding principle of Wall Street – buy low, sell high! Forex is an exciting market that is gaining more attention in the media and with online investors, and so of course, people are expecting to make a quick killing in that market, too. But as with any investment, it can be easy to get sucked into claims of easy money. Here is how not to fall for some of the best scams and why you want to protect yourself in this way.
Any claims of using leverage to make a huge profit should be treated with skepticism. First, let’s be clear: it is possible to make huge profits by utilizing leverage. Leverage allows you to put down a little of your own money while “betting” a larger amount of money on your trade. The rewards would be tremendous if you were successful. But if you are not, you owe more than you initially put down! It would be like going to the horse races and not only losing your initial bet, but then owning the betting establishment even more than you put down before. This is how some people go bankrupt.
Any firm that claims they can make big profits for you without you being that involved in the process should be treated carefully. You should always have an understanding of what you are getting into with your investments. You should understand the currency pair you are tracking, you should have at least a fundamental understanding of how that currency pair is affected by governmental and economic situations, and you should absolutely know what is being done with your money regarding that currency pair. When you hand over control over your money with no questions asked, that’s a sure-fire scam.
Why do you want to take extra precaution with Forex scams? Guarding against scams is particularly important in this market, because there is no regulating body to who you can complain. If you were scammed with a stock, then the Securities and Exchange Commission, for example, could step in and investigate. Forex has no real rules, and there are even fewer ways you can reclaim your lost funds. Don’t fall for scams that encourage you to invest more than you have in products you do not understand.