How to Spot Scam Operations In Forex and Binary Options Trading

This is a guest article submitted by Lenin Nair from  Go Binary Traders

Many scams and fraud schemes are happening on a daily basis on the Web within the Forex and binary options trading market. This post will give you some information about these fraudulent schemes and ways to avoid them.

The US Commodity Futures Trading Commission (CFTC), the US agency that regulates commodity futures and options markets in the United States, has issued a warning to the people to take precautions to protect themselves from the several kinds of spam activities being done in today’s economic markets, along with the so-called “binary and Forex options.”

This new act, the Commodity Futures Modernization Act (CFMA) of 2000, clarifies that the CFTC has the power to investigate, sue, and end all of illegally operating companies creating transactions on foreign currency futures and options for the general population. In addition, the CFTC has power to shut down foreign currency fraud in its authorized firms and their associates.

CFTC has witnessed an increasing number and increasing complexity of investment opportunities in the last few years, with a sharp rise in Forex trading scams. While much foreign currency trading is by legal means, many forms of currency trading have been touted in these days to defraud many people.

Currency trading frauds most probably get the required promotion through paid ads in local newspapers, radio channels, and major blogs. Advertisements might publicize very high-return investing opportunities in foreign currency trading, or even highly-paid foreign exchange business opportunities. The CFTC thinks you should be doubtful when foreign exchange promoters proclaim their services will create high profits at low risks.

How to Find Information About Legal Entities

Normally, Forex futures and options contracts can be legitimately traded on an exchange that has approval from CFTC.

Binary and currency trading can be legally done, generally speaking, if at least one party involved in that particular trade is a bank, an insurance company, a registered securities broker or dealer, futures commission merchant, a financial institution, or an individual of high net worth.

Scam Warning Signs

If a company solicits you that claims to trade foreign exchange and makes you to deposit money for Forex trading, take precaution. Watch out for these signs provided below, and take the following precautions before submitting your money with any Forex and binary trading firm.

1. Do Not Believe in Opportunities That Look Too Great to Be Correct

Get-rich-quick set-ups, with Forex trading, are usually frauds.

Always remember there is never a thing as a “free lunch.” Show extreme caution if you got a big amount of money recently and are searching for a secure investment vehicle. In particular, old, retired people with their retirement money can be attractive targets for scam operators. Having your cash back once it is gone can be usually impossible.

2. Stay Away From Companies that Guarantee Big Profits

Be extremely cautious of online businesses that promise high returns. In many instances, those predictions tend to be wrong.

Provided here are instances of promises that are most probably fraudulent:

“Whether the market moves up or down, in the Foreign currency market you will get a profit.”

“Profit $2000 per day, every day”

“We are performing better than 89% of the world’s investments.”

“The major benefit of the forex markets is there is no probability of losses.”

“We promise you will create minimum 40-50% return rate in the next two months.”

3. Stay Away From Firms That Promise No Chances of Risk

Be cautious of companies that don’t talk about risks or acknowledge that written risk disclosure statements are formalities indicated by the governing body.

The binary futures and options trading is highly volatile and could carry substantial risks for unsophisticated traders. The currency futures and options markets are not the place to invest any cash that you cannot afford to lose. For example, your retirement money may not be deposited in binary and Forex trading. You can lose all or most of that money very quickly by trading foreign currency futures or options contracts. Therefore, steer clear of firms that make the following types of statements:

“With $6000 investment, all you can lose is $400 to $450a day, but you are sure to earn twice as much!”

“We guarantee to recover any losses you have.”

“Your money is secured.”

4. Don’t Trade on Margin Unless You Understand It

Margin trading could cause losses that are much greater than the money you deposited.

Many Forex traders ask customers to deposit money, which they sometimes call by the term “margin,” usually sums in the range of $1,000 to $4,000. However, those amounts, which are usually small in the foreign exchange markets, usually regulate much bigger amounts of money of trading, a truth that usually is not made clear to people.

Never trade on margin if you don’t know what you are doing and aren’t prepared for large losses that are larger than the margin amounts you paid.

5. Ask Institutions That Claim To Trade in the “Interbank Market”

Be wary of websites that say that you should trade the “interbank market,” or that they offer to do that on your behalf.

Unregulated currency trading websites normally tell customers that their deposits are traded in the “interbank market,” where high profits can be generated. Businesses, which trade currencies in the interbank market, however, are most likely to be regular banks, investment banks, and large companies, since the term “interbank market” is used to denote a loose network of currency transactions negotiated between monetary corporations and other major outfits.

6. Be Wary of Transferring Money on the Internet, By Snail Mail, etc.

Be cautious to the dangers of trading on the Internet; it is pretty easy to transfer funds on-line, but usually could be quite difficult to get it back.

It costs a Web company just pennies per ad to reach an audience of millions; phony currency trading websites have captured the Web as a cheap and effective way of reaching a large pool of potential customers.

Several companies offering Forex trading on the Web are not within America and may not display a physical address or any other data identifying their country on their website. Be aware that if you transfer funds to those foreign outfits, it may be extremely difficult to recuperate your funds.

7. Forex Scams often Target People of Ethnic Minorities

Some currency trading scams target people in ethnic communities, especially people in the Russian, Indian, and Chinese immigrant groups, through promotions in ethnic journals and television ads.

On occasion, those adverts talk about so-called “money-making opportunities” for “account managers” to trade in Forex. Understand that these “account executives” hired are usually expected to use their money for currency and binary options trading, as well as to recruit their friends to do the same thing. What appears as a nice job opportunity usually is one of the ways a large number of of these institutions gather customers into their scheme.

8. Be Sure You Get Information About the Firm’s Track Record

Research about the organization’s or agent’s performance record on behalf of other people. You should know, however that it could be quite difficult to do that, or to substantiate the information you gather. While firms and agents are not required to provide this data, you should be cautious about any agent that may provide you with incomplete or incorrect information. Also, know that even if you have been given a nice brochure or sophisticated-looking images, that the data they contain may be wrong.

9. Ignore Anyone Who Will Not Share Their History With You

Plan on quite a bit of checking of the info you receive to be sure that the company abides by its promises.

Gather info of the persons running or promoting the website, if possible. Don’t rely only on oral statements from the outfit’s personnel. Make sure to get all details in written form.

If don’t think that the agents with whom you deal are completely above-board, the right thing to do is avoiding trading through those institutions.

10. Danger Signs In Commodity “Come-Ons”

If you are approached by an institution to trade in commodities, look for the signals of danger listed here:

Avoid any outfit that promises or guarantees large profits with little or no risk.

Be wary of high-pressure methods to get you to send money immediately to the organization, via overnight delivery options, the Internet, or by wire.

Be doubtful about calls and emails about deposited money, from foreign agents or companies with which you are unfamiliar.


With these tactics, you should be able to avoid any scams in binary options and foreign currency trading. Trade only with recognized, verified organizations.

About the Author:

Lenin VJ Nair has publishing experience with a number of websites. He has experience working with technology companies like AT&T, HP, and Accenture. Now, he is a full time Web entrepreneur, with a new technology web log: Blue Bugle


This post was written by a Guest Blogger. Check above for their information. If you would like to guest post here at Dollar Dojo, please check the Guest Post page for more information.

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Guest Blogger
This post was written by a Guest Blogger. Check above for their information. If you would like to guest post here at Dollar Dojo, please check the Guest Post page for more information.


  1. Sarah Miller -  June 16, 2013 - 5:26 am

    Awesome article!!! This can help reduce scam trades and this can also increase my profits. Recently, I’ve also visited some sites that offer wonderful trading options. Hence, I can secure and increase my profits.


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