If it looks too good to be true, it probably is. Never has this phrase been more relevant than with financial trading, a sector swimming with sharks ready to take bites out of your wallet.
For those unfamiliar with trading, be it on stocks, bonds, currencies or commodities, the risk of being suckered in by malicious trading signals is high. The problem is, once beginners start searching for advice, they get promises of success by joining some malicious investment scheme, training system or market signal provider. There are many good pieces of trading and investment advice, but how to spot them?
The unwary might sign up to one of the dodgy scams and end up losing what money they had set aside for trading. In worst cases, they end up losing a whole lot more on top of that.
In this article, we’ll outline some of the most common malicious trading signal scams, and how to avoid them.
While it’s always recommended you studyto further your trading skills and education, this should be combined with opening free-money demo accounts with brokers so you can test your strategies. Once you have a solid grasp of how to trade, you’ll be more confident about finding genuine trading signal services to help you.
The dodgy trading signal subscription services
Unless you have first-hand knowledge of a signal seller’s background and success rate, like those offering signals on the Metatrader platform, why would you ever pay someone for tips?
Put it this way, if a man walked up to you in the street and said: “I’ve got a dead cert tip in the 2.30 horse race at Ascot this afternoon. Give me £20 cash now,andI’ll tell you what it is,” you’d politely tell him to move along. In the same way, if you see a website or email offer claiming to provide sure-fire profitable trading signals, all for a very fair monthly financial subscription, you wouldn’t think: “Brilliant. Easy money. Where do I sign?”
The signal seller may well have the best intentions, but you’re likelyto get a string of tips that make no financial sense at all. Placing your money on the marketmoving up or down, let’s say you’re on the USD/GBP Forex market, based purely on advice from a rogue signal seller, will always end badly.
If you did want to go with a genuine signal-selling service, either manual or automated trades, you should ask to see real-time examples of their work in the USD/GBP market, and the strategy and logic behind their decisions before parting with a single penny. What indicators are they using? What trading patterns are they looking for? Can you watch real-time examples?
It’s easy for anyone to go back over historical data and claim to have spotted patterns just ahead of a market move. You or I could do that now, looking at recent shifts in the USD/GBP price and claiming we identified a pattern just before it, listing how much we put on the trade, when we got out and how much money we made. But, of course, without seeing any of it play out, no-onecould ever know if we weretruthful or not.
The bottom line is: don’t part with your hard-earned money on trade signal subscription services unless you’re positive about the supplier being genuine. If the cost is minimal, and you’re fairly sure the service has good intentions, use the tips on a demo account first before risking your money on trades.
Read, keep reading, and read up some more to ensure you know whose advice you are taking, and why.
Other rogue trading scams to avoid
While offering unrefined trading signals for financial gain is quite easy to set up (and, as we’ve seen, get caught out by), more refined unscrupulous trading scams are out there. Always be mindful of the following if you’re approached:
Get rich quick investment schemes
Some signal sellers move up a gearand suggest that you can save yourself time while making even more money, simply by giving them your bankroll. They’ll invest it for you, promising a healthy return, and you don’t have to do a thing.
Unfortunately, they’ll take your money, fund their lavish lifestyle with it, and when you chase them, they’ll give you the surprising news that for once the markets conspired against them,andthey lost your cash. But you might consider transferring them some more money, and they’ll surely make your losses back, and more. Right!
Dark web insider trading
Some investment scams are less obvious than others.The dark web is a den of iniquity, housing all sorts of information and services that you wouldn’t want your mother to know about. It’s virtually impossible to crack, which is why some insider traders from banks or financial institutions are recruitedthere.
Unscrupulous criminal enterprises use information that shouldn’t be made public to either get in or out of amarket before news breaks (perhaps an acquisition or unfavourable financial results)or divulge secret information to manipulate a market to their advantage.
Boiler room stock scams
Boiler room cons occur when investors are offered huge financial returns for buying into a private company which is “about to become hugely successful”.Even though the private company appears genuine, by having a website and registered address, for example, it doesn’t necessarily even exist,andthe scammers disappear along with everyone else’s money.
The simple advice is, if a cold caller offers you a can’t-lose investment opportunity, put the phone down.
Stay alert, wise and solvent
By reviewing all the trading advice you receive with a cynical eye, you’ll stay one step ahead of the scammers. While receiving generic education about trading and investments, freely available from trusted sources on the internet, there’s no better way to learn the game than by trying it out on demo accounts first.
