When you’re first starting out in trading there’s a great deal to do just to find your feet, never mind protecting yourself from scams as well. Unfortunately, scammers recognize this vulnerability and new traders are often a favourit target. It’s important to know what to look out for, to be able to identify common types of scam and to be alert to warning signs. This guide is here to help.
Stock and share scams
Because stocks and shares still account for the bulk of money traded, it’s in this area that most scams are centered. Among the most common are pre-IPO offers, in which a seller offers stock in a company which has yet to go public. Even if this offer is legitimate – which it is usually not – if the transaction isn’t filed with the SEC, you risk losing your money and gaining nothing. Then there are pump and dump schemes, in which sellers talk up a particular stock well beyond its real worth, creating a false sense of its value. Once the price has risen due to a lot of people buying, they sell their own shares at that inflated price and disappear – and the price collapses again, leaving you with a loss.
The other big scam in this area is the pyramid scheme (one type of which is more famous as a Ponzi scheme), in which you’re sold stock that you’re assured is great value and, because you start to receive good dividends, you invest in more. The problem is that those dividends aren’t real – they’re financed from the money paid in by the next set of buyers, with the scammer creaming a nice profit off the top. Once people stop buying into the scheme, what you’ve bought is worthless. What’s more, if you’ve helped to promote the scheme, you could be in breach of the law.
Forex trading is an area that’s prone to scams in large part because trades take place quickly, so it’s easy for swindlers to make their money and then move on. There’s a particular problem with fake brokers and clone firms which sometimes use the details of real firms on their websites and even claim to be regulated by the FCA (remember that you can check with the FCA if you have any suspicions). they’re sometimes referred to as boiler room scams because they often have no physical office or operate out of just one room. persuading people to give them their money and then giving nothing in return. This best fxpro review by ForexFraud.com is an example of the kind of article you should be looking for when you research companies you’re unsure about.
The other big issue in forex is with signal sellers, who operate by charging for pointers to forex pairs they say will make you lots of money. Some also offer systems that can supposedly beat the market. In reality, the tips are frequently worthless and there’s nothing you can do …» Read more