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How to spot trading scams – Three simple red flags


Investment, cyber and trading fraud are clearly paying off well as these types of crime show no signs of fading or going away. Moreover, the rise in these types of scams and frauds is doubtless far worse than we have data for, as it is likely under-reported. This is because the scammers and fraudsters are often able to leave their victims embarrassed and ashamed of being so unknowingly conned. Investment crime happens to everybody: inexperienced and experienced, old and young, female and male. This sort of crime is often seen as something that “happens to someone else”, BUT you could easily be the fraudsters next victim.

So, it makes sense to be aware of some of the key warning signs and red flags that may warn you that you may be about to be scammed

red flags about trading scams

1. The returns are “too good to be true”

Whether you are investing or trading, it should be a given that there are no guarantees for profits, that there is no “sure thing”, there are no sure fire, definite winners. The value of any trade or investment can go up and down. This is the very nature of all financial markets, the price move in swings.

Therefore, any investment “expert” who guarantees or promises you “failsafe” returns, or that it will “unfailingly” outpace the stock market, is probably a sham artist. A red flag should be waving for you! Positive returns on trades or investments can NEVER be guaranteed. Furthermore, anyone who is registered and regulated with any legitimate government regulator would never be guaranteeing profit or gains.

Always take legal advice if you believe you may already be a victim of a fraud or a scam. It is entirely possible that you have legal grounds for a claim against the scammer but acting quickly is critical.

2. You are not the only one targeted

Often, the fraudster will tell you that you were individually selected for the investing or trading opportunity. However, it comes to light that people you know have also been targeted with the same or similar opportunity. Or, maybe you come to a site like FX Explained, or do further research online and find that many others have been approached with the similar prospect. This is a key red flag!

forex trading scam

3. The opportunity is urgent and/ or game-changing

A regular scam approach is to tell you know that the opportunity that is being offered is for now and now only. There is a short time interval before the opportunity expires and you need to act now! Any respected broker would want you to review any investment decision as long as you require. If there is a very short time period for you to decide, then this should be a significant warning sign.

When approached by a “broker” it may be wise to ask yourself, “why am I being chosen for this amazing opportunity?”” Investments with potentially high returns that are maybe somewhat outside the norm, are not usually offered to the individual retail investor. They are mainly offered to high-net-worth individuals and institutional investors. As an individual that is “chosen”, a red flag should be raised. So, if someone approaches you along these lines, beware!

Countless individuals, however, are blind to the red flag as they become engrossed in the excitement of the potential opportunity. The scammer will likely look to heighten the euphoria, to pressure you into taking the offer.

Watch for these red flags

We are all prone to making a bad investment or trading choice from time to time. A dishonest opportunity for investment is very different, however, as there may never even have been an opportunity. Being aware of the above mentioned red flags will hopefully help you avoid being scammed.

Editor in chief

Steve Miley is the Market Chartist and has 32 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued

Please comment below

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    1. Thanks for the question PJ.
      We are really sorry to hear that you have been scammed. Why do you think that you have?
      The first thing to do obviously is try to clarify the situation with the broker, but we assume you may have already done this. Send a strongly worded email, demanding your money back and threatening to go to the regulator. You could also mention that you will be posting your experience on forums like this.
      They may cave in and not want the bad publicity, and give you your money back.
      You can, check up on them and report them. Where are they regulated? Have there been any complaints or investigations. You can check out our list of European Financial Regulators here https://www.fxexplained.co.uk/european-financial-regulators/
      We hope this helps PJ, please come back to us with any additional queries and let us know how it goes. Good luck!

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