The market does not have much in the way of regulation, although things have started to improve recently. The opportunity still exists for many forex scams, which tempt new investors with a promise of quick fortunes through “secret trading formulas” or algorithm-based “proprietary” trading methodologies. One of the challenges a rookie forex investor faces is determining which operators to trust in the forex market and forex trading scams risks of day to avoid. Signal sellers make a good example.
Basically, a signal seller is offering a system that purports to identify favorable times for buying or selling a currency pair. The system may be manual, where the trader enters the info and gets a result, or it may be automated. Some systems rely on technical analysis, others rely on breaking news and many employ some combination of the two. But they all purport to provide information that leads to favorable trading opportunities. Signal sellers usually charge a daily, weekly or monthly fee for their services.
Some analysts propose that many or even most signal sellers are scam artists. A frequent criticism is that if it were really possible to use a system to beat the market, why would the individual or firm that has this information make it widely available? Wouldn’t it make more sense to use this incredible signaling system to make huge profits? Other analysts distinguish between known scammers and more reputable information sources such as Metatrader, that offer a well-thought-out signaling service. Behind these opposing views lies a larger difference of opinion about whether anyone can predict the next move in a trading market. This fundamental disagreement won’t be settled any time soon.
Nobel Prize-winning Economist Eugene Fama proposes in his well-regarded Efficient Market Hypothesis that finding these kinds of momentary market advantages really isn’t possible. His economist colleague, Robert Shiller, also a Nobel Prize winner, believes differently, citing evidence that investor sentiment creates booms and busts that can provide investment and trading opportunities. The best way to determine if a signal seller can benefit you is to open a paper money or practice trading account with one of the better-known forex brokers. Be patient, and eventually, you’ll determine whether predictive signaling works for you or doesn’t. In the past few years, forex management funds have proliferated. Most of these, if not all, are scams.
They offer an investor the “opportunity” to have his forex trades managed by highly-skilled forex traders who can offer outstanding market returns in return for a share of the profits. The problem is, this “management” offer requires the investor to give up control over his money and to hand it to someone he knows little about other than the hyped-up and often completely false record of success available on the scammer’s website and brochures. The investor often ends up getting nothing, while the scammer uses investors’ funds to buy yachts and private islands. A good rule of thumb in the forex market, as with other investments, is that if it sounds almost too good to be true, such as annual returns of more than 100 percent, for example, it’s almost certainly a scam.