What are Forex Signals Scams?
The signal seller scam is a scheme whereby a person or business offers data on which trades to take, claiming that it is based on expert projections which will definitely bring profits to a novice investor.
They often demand a daily/weekly or monthly fee for this service but never provide any details that will assist the trader in making money. To gain the investor’s trust, they typically have a large collection of supposedly genuine reviews, yet in reality, they do nothing to make predictions of lucrative trades.
The various ways in which signal scams operate.
Some scammers make money by selling indicators that are of no value. They may charge a low fee, which means that traders are unlikely to complain if they continue to face losses. Some swindlers go even further by generating fake signals that appear to be genuine, but actually lead to unsuccessful trades which only benefit the broker.
Retail companies or individual traders often advertise a system that they say will help you identify when it is the best time to buy or sell a certain currency pair. They may say that their system is based on expert advice and is straightforward to use, and will result in a good profit from trading. To get access to the signals, you usually have to pay for a subscription for a daily, weekly, or monthly fee. People selling these systems might talk about their own experience and trading skills, and may even have people who will swear that the system is perfect and has earned them a lot of money.
People who sell signals for investments often take money from customers and then never give back any profitable results. Occasionally, they may offer one or two successful transactions in order to con people into continuing to pay for their subscription. Although there are some reliable signal sellers, this area of trading has made it easy for fraudsters to succeed.
Why do traders fall for forex trading signal scams?
Many individuals are drawn to signals scams due to the potential of achieving large profits with minimal effort. These scammers typically misrepresent the process as being “guaranteed” or “foolproof” and suggest it is a hidden trading strategy that only a few people are aware of. They often make false claims that huge or steady returns can be earned only through their system.
It is possible that rookie traders lack the expertise to know when they have been scammed by a signal seller and might have already lost their money before they realize it. They can be told that although some bad trades are unavoidable, they will eventually gain profits with that specific system if they keep paying for it. A lot of beginners in the forex trading field are aware of the fact that losing money is a common occurrence. The signal scammers may encourage them to believe that those traders who experience financial losses are doing so because they do not have access to their exceptional tool.
When it comes to signal selling scams, one sign that should be taken into consideration is when traders are convinced that a system’s past performance is proof of its value. Scammers often make use of this belief to exploit vulnerable traders and provide fabricated numbers that demonstrate the supposed continuous success of the system. Even if the tool showed positive results in the past, there is no assurance that this will remain true in the future. It is best to check if the organization highlights this in their disclaimer, as this could be an indication that the provider is not reliable.
Uncovering if a signal service is worth exploring:
- Get confirmation of the trading record of the signal service on a reliable platform such as Myfxbook, ForexPeaceArmy.com, or FXBlue. If there’s no proof from a third-party, it’s best to move on.
- Great signals with a good strategy should have a trading record spanning at least six months and over one hundred trades. Without a minimum of one hundred trades, there is not enough statistical data to make a judgment about the strategy. If only ten trades have been done and they are in the green, it can be down to luck or a long-term strategy where you might be paying for a single signal each month or something similar. In my opinion, it’s not worth the cost.
- Analyze if the plan has a drawdown level that you are okay with; for example, could you manage a 30% decline? If you originally had a $10,000 account, that would be equivalent to a $3,000 floating loss. A few people may assert that a 30% drawdown is acceptable, however, others may feel that even a 10% drop is too much for them to take – they cannot withstand the pressure.
- It is essential to make certain that the fees for the subscription or implementation are reasonable so that you are able to make a profit at the end of the month. For instance, if you begin with a $200 account and the signals provide you with a 20% return, but the service requires $50 a month in fees, your earnings would not be enough to cover your monthly subscription.
- Are there any free trial options or guarantees of a refund available? I would be dubious if neither was available.