What Are Forex Trading Scams? (10 Common Types)

A forex trading scam is any ploy designed to swindle money from forex traders. There are many types of scams in the industry, such as signals, pyramid schemes, fake broker websites, and unregulated brokers with absurd offers.

Learn about the 10 most common scams in forex trading and how to avoid them. If you spot any of these signs, the chances are high that you are dealing with a scam.These are the tell-tale signs to watch out for in a forex trading scam. 

10 Types of Forex Trading Scams:

Below is a quick list of the ten types before an overview of each:

1. Forex Signal Scammers

Forex signal scammers trick users by:

• Unrealistic promises of high returns.
• A lack of transparency in providing sufficient, verifiable trading history or results.
• High subscription fees
• Fake testimonials

You will likely encounter these scammers on social media and online-based forums or platforms. 

2. Forex Ponzi Schemes

A Ponzi scheme in forex occurs when one is promised substantial returns in a supposed investment program.

Most of these scams profit from the upfront fees paid by investors (rather than the forex market), and old recruits get paid with money from new recruits. Unsurprisingly, this model is unsustainable and often collapses at some point.

We often use the terms ‘Ponzi scheme’ and ‘pyramid scheme’ interchangeably, but these are not the same. Usually, a pyramid scheme involves multi-level marketing, where the focus is on recruiting people. Forex scammers won’t benefit from this model, as it’s necessary to have individuals invest actual money rather than simply promote their scam. Thus, Ponzis are the standard.

3. Unregulated Forex Brokers With Unrealistic Offers 

Unregulated forex brokers can present several unrealistic offers. A common tactic is the use of an attractive bonus. ​​They will seemingly offer above-average deposit bonuses (e.g., 200% on your first deposit ). However, this offer is usually quite vague. In addition, it will come with high trading volume requirements so that the broker locks up your capital for as long as possible.

Even if the trader meets the bonus conditions, the broker will probably close your account or, worse, go out of business (disappearing with your funds). 

Other unrealistic offers by unregulated brokers may include:

• Excessive leverage (above 1:4000 or sometimes unlimited)
• No account verification or KYC (Know Your Customer)
• Promises of guaranteed profits with no risk through robots, copy trading, etc.

4. PAMM/MAM Forex Account Scams

PAMM (percentage allocation management module) and MAM (Multi-Account Manager) are two types of forex managed accounts in forex. Usually, an investor deposits their funds into a pool of money with other investors, where accounts are also opened. Then, trades from a ‘master’ account are copied in real time into these accounts, and the ‘master’ trader earns a share of the profits generated.

The deception happens when the so-called manager promises high or guaranteed returns. Furthermore, they will provide false, unverified profit history to entice their investors. In many cases, PAMM/MAM scams are just another form of pyramid scheme where gains or profits don’t come from real trading.

5. Forex Account Management Scam (With Account Manager)

This scam is very similar to the one mentioned above. The main difference is that the scammers would not mention the existence of a PAMM or MAM system. It starts with a so-called successful trader publicising how profitable they are using manufactured results online, particularly on social media platforms.

Then, they will mention their account management service. Here, unsuspecting investors deposit funds directly with the scammer to supposedly trade them on their behalf, with the promise of a certain profit growth over a certain period.

Ultimately, the fraudster will disappear with the funds, leaving all those who deposited miserable and poorer. 

6. Automated Forex Trading Scams (Robots)

Automated forex trading or forex robot scams have many obvious signs:

• Guaranteed profits with high win percentages. 
• Referral schemes that resemble Ponzis
• Fake user reviews and testimonials
• Overly aggressive marketing and pressure tactics

It’s common for robots to use fake backtesting results to convince traders they perform really well. Or even if the results may be real, they are taken from an easily manipulated sample size of a few weeks.

7. ‘Holy Grail’ Forex Indicators

A ‘Holy Grail’ in forex describes a trading system or strategy that is supposedly fool-proof and 100% accurate. With this in mind, it’s simple for scammers to sell an indicator as a Holy Grail. 

Holy Grail forex indicator scams are quite similar to bot scams, ranging from near-perfect win records to pressure sales techniques. It’s also common for these indicators to sell for inflated prices (like robots) and be presented as ‘extra special’ in their technical development.

See here our best Forex trading indicators that work.

8. Forex Copy Trading Scams

Copy trading in forex shares many similarities to PAMM. In this system, passive investors connect their accounts to a designated trader whose positions get automatically copied in real time. 

Most copy trading fraud happens with unregulated brokers. These brokers can generate fabricated profiles of traders with fake results that show astonishing results. When investors unknowingly invest, these funds may be used for things other than their intended purpose. 

Another example is churning, where the designated trader opens positions excessively to generate commissions for themselves. Finally, scammers may simply take the funds and disappear with them.

9. Fake Forex Broker Websites (Cloned Brokers)

Creating a lookalike site for a legitimate, reputable, and regulated broker is possible with a few smart developers. This ranges from duplicating the visual branding to the domain name (except perhaps a letter change or a different suffix like ‘.net’ instead of ‘.com’). A cloned broker will also provide almost identical contact details to the real company, but these would actually be dead ends. 

Once this foundation is in place, fraudsters can attract victims with fabricated dashboards and services showing standard account types and trading conditions. Then, we get the typical attractive offers and promotions, ranging from special deposit bonuses to zero fees. Also, expect a social media influencer to be involved in the whole scheme, who would heavily promote the broker and provide fake reviews.

The result is the same as the other scams. At the start, traders would face withdrawal restrictions or issues. As more victims voice the same problems online, the website would be close to the point of shutting down as the scammers vanish without a trace.

10. Fake Forex Guru Coaching Scams

A ‘forex guru’ is often a negative term that indicates someone claiming to successfully teach anyone to be as profitable as they are, usually with an overpriced, low-quality mentorship program. This scam effectively targets beginners who may see the educational value of paying for the self-proclaimed guru’s coaching.

As you would expect, most of these guys will provide information that one can simply source from the internet. They may only have limited trading experience, meaning their results aren’t impressive, nor that they possess unique knowledge. Fake forex gurus ultimately derive their income mainly from course fees. 

As a bonus, some may offer access to private groups on Telegram or Discord, claiming to share signals where recurring subscription fees are necessary. These signals have no legitimate credibility and would cause investors to lose money due to their lack of accuracy. 

What Can You Do If You’ve Been Scammed in Forex?

The unfortunate truth is that recovering funds captured in a scam is unlikely. Still, this doesn’t mean that one mustn’t report the incident publicly to prevent further occurrences with other people. However, you should take the necessary steps in this order:

1. Stop trading activity and/or depositing: You should halt any activity that would normally require trading or depositing money. While victims may have their suspicions, the scammer could still convince them to offer more funds.

Depending on the scam, one would also attempt to withdraw as much of their money as possible.

2. Gather the available evidence: Collecting everything related to the scam. This should include online conversations (emails, instant messenger chats, text messages, etc.), payment receipts, and screenshots of marketing collateral used by the scammer, among other material. The more evidence at hand, the easier it becomes for the relevant authorities to potentially locate the fraudster or fraudsters.
3. Report to the relevant authorities in your country: After being scammed, there are generally two bodies one should contact. The first is your country’s financial regulator. For example, the UK has the FCA, Australia has ASIC, Cyprus has CySEC, and so on. These organisations oversee forex trading in their respective regions and will publish a regularly updated warning or red list of current scams.

The next body would be the relevant fraud reporting unit (if available) within your country’s highest law enforcement organisation. 

4. Seek legal advice: While this is also a long shot and would cost some money, it could be a considerable avenue for form. Consulting with lawyers with experience in financial scam litigation may be useful. Legal teams are generally linked to law enforcement agencies. Thus, this route adds more manpower and slightly increases the chance of some recovery or at least arresting the actual criminals.
5. Consider a recovery service: While some companies claim to help recover lost funds, be careful about this option, as there are plenty of recovery scams. Perform proper research to find reputable and licensed companies that credible sources like regulatory and law enforcement authorities should recommend.
6. Spread awareness online: Share your experience on as many online forums or social media platforms as possible to warn others. 
7. Avoid future scams: Finally, learn from your mistakes and be more vigilant going forward. This is one reason we created this guide—to help traders avoid scams in forex. Trading successfully involves using regulated brokers, doing your research at all times, and having a long-term mindset not focused on high-risk returns.

For more quick tips:

• Avoid any “too good to be true” offers.
• Read the fine print.
• Watch out for high-pressure tactics.
• Use a regulated broker.
• Check for regulatory warning lists.

Can A Forex Broker Steal Your Money?

Yes, absolutely, especially with an unregulated broker that isn’t reputable. Also, it may not be direct theft of your funds but rather ways in which they provide a terrible environment for you to be profitable. Brokers with little to no regulation can steal your money in various ways:

• Disappearing: In the worst-case scenario, a broker could simply vanish after you have made numerous withdrawal requests.
• Manipulating trades – this is quite common. Virtually all unregulated brokers operate a dealing desk. In other words, they handle their clients’ orders internally. Thus, they can easily manipulate your positions with techniques like widening spreads and creating delays on your entries and exits (causing slippage).

• Freezing your account or causing withdrawal restrictions. A broker may freeze (or close) your account or make it difficult for you to withdraw your funds. Usually, they would indicate the trader has somehow violated a rule or employ other delaying tactics.

• Applying hidden fees during withdrawals. This method may be subtle but does count as a way to extort funds from traders. Unscrupulous brokers could state unexpected fees when you are withdrawing, meaning you would receive noticeably less than expected.

Meanwhile, reputable and regulated brokers are far less likely (if at all) to engage in these tactics. Still, traders should also read the fine print with each broker they encounter. It’s common for a legit company to be poorly received in various communities, whereas the traders who have felt cheated didn’t acknowledge the terms and conditions.

Why Has Social Media Increased The Number of Forex Scams?

Social media is one of the primary channels for scams due to its vast global reach and easy access. Millions of people use platforms like Facebook, Instagram, Telegram, and TikTok daily. Furthermore, they make it simple for anyone to advertise their products.

A scammer (disguised as a so-called social media influencer) can present success stories and lifestyles that seem realistic. However, as social media activity is digital, it is relatively simple to fabricate this material to appear believable.  

Using A Regulated Forex Broker to Avoid Getting Scammed

No amount of skill in a trader can make them successful with an unregulated broker. Brokers are responsible for providing the fairest conditions to execute any strategy successfully. Essentially, they are the only ones standing between you and any profits you would derive from trading currencies. 

Thus, trading only with regulated companies becomes essential to having the best trading experience and avoiding scams. You can learn more about the regulated brokers we recommend here.

Conclusion

While plenty of forex scams persist, identifying them is straightforward as they all have the same traits. These include absurd returns, pressure tactics, unverified testimonials, and unsolicited offers. As clichéd as it is, if it sounds too good to be true, it usually is. Nonetheless, we have created this guide to explain the common forex scams in more detail. 

Our other goal is to help struggling traders turn their fortunes in trading around with practical, advanced coaching. 

Thanks to over two decades of combined experience, our professional trading education produces consistently successful results. Learn more about it here.

Frequently Asked Questions on Forex Trading Scams: