In a nutshell: Forex trading is a legitimate financial activity – it’s the buying and selling of foreign currency. The forex market is the largest financial market in the world, which means it also attracts a vast number of scammers. Protect yourself from these chancers by recognising the red flags.
You have been admiring Mr. Forex Trader on Instagram for weeks. Every week he has a new swanky suit or a shiny vehicle. This is while you struggle to make ends meet. He makes it sound so easy. Just deposit some cash and start receiving weekly returns…
Wait! Before you press “Send”, you should know there’s one golden rule when it comes to investing: If it sounds too good to be true, it probably is. Forex trading scams are rife in South Africa. Many social media influencers guarantee fantastic returns. But are they for real?
Nolwazi explains…
What is forex trading?
In its simplest terms, forex trading is buying or selling currency, like the US dollar, euros, and yen, to make a profit. It is a legitimate financial activity that is practised all over the world.
The forex market is the largest financial market in the world, trading about USD6 trillion per day – that’s approximately USD50 million per second! This global market is open 24 hours a day, five days a week. It closes in New York on Friday evenings and opens on Sunday night in Tokyo.
This market where currencies are traded, is decentralised, which means there is no single entity that regulates it. Instead, it is regulated by different bodies in different regions. For example, in South Africa it is regulated by the Financial Sector Conduct Authority and in Australia by the Australian Securities and Investments Commission.
And where there’s money and loopholes, there are scammers!
Before you entrust your money to a young, sleek-looking, social media billionaire, make sure he or she is legit. Use our checklist – every YES answer to these statements is a red flag, which means stay away!
- They are not registered with the Financial Sector Conduct Authority (FSCA). Check on the FSCA website whether the institution or broker may provide financial services, or call the toll-free number (0800 110 443). Make sure the broker’s information at the FSCA correlates with the information on their website. If you cannot find them on the website, it means they are trading illegally.
- You cannot find the broker’s licence number and regulator information listed on their website. Reputable brokers usually list this type of information in the footer of their website. It will look like this: (FSCA No.41234) and you can verify it on the regulator’s website.
- There's no credible information about the company on its official website, such as its history, financials, or address. You have to determine whether this person or company exists in the real world and is not just a digital imposter.
- They want you to pay in a cryptocurrency. Scammers prefer crypto payments because they're irreversible and hard to trace. Be cautious if someone insists on crypto payment. Legitimate forex brokers accept various currencies and payment methods, including PayPal.
- There are negative reviews of the broker or company online. Do an online search with the broker or company’s name and the word “scam”, “blacklist” or “scammer list”.
- They guarantee returns and/or the returns are unrealistic. There’s no way to get rich quick. Think about it. If someone has figured out how to make easy profits, why does he or she need your R500? If it is so easy, they can mos retire and live in Sun City after a year.
- The broker is offering profits, rewards or cash bonuses for opening an account. Often scammers want to create a sense of urgency and they play on people’s fear of missing out (FOMO). Again think logically, why the rush? The forex market isn’t going anywhere.
- They cite awards, but you cannot verify their authenticity. It’s easy enough to create fake awards online. If those awards were real, you would have been able to click on a link and view them (or, easily find them with a Google search).
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