Forex Trading: Understanding How It Works, Forex Scam, and Chargeback Process
September 29, 2021 (Investorideas.com Newswire) Forex trading, or FX as it's popularly known, is the world's largest and most liquid market. The global forex market in 2021 is worth $2.409 quadrillion, with around $2 trillion worth of spot transactions traded daily in forex markets by large corporations and investors. Moreover, thanks to the Internet and accessible computer technology, forex is accessible to everyone who has access to the above two resources.
However, foreign exchange is a relatively new market, unlike the stock market; there's no central regulatory authority and not appropriately understood by many. Taking advantage of this, scams and pyramid schemes have been fabricated around forex trading, just like stock, real estate, and just about any other legitimate investment option.
While many would do their due diligence, find a trusted broker, open an FX trading account, and start practicing correctly. However, not everyone is this sensible, and a small percentage of less fortunate traders find themselves in traps of scammers due to the get-rich-quick mentality. Here's a curated article to understand how forex trading works, avoiding scams, and a forex chargeback guide to recover your money if you have already fallen prey.
How does Forex Trading Works?
In layman's terms, forex trading is simply exchanging one currency for another. To understand the trading, let's first understand what foreign exchange is. Things like global travel, international business, and foreign trade require exchanging one currency for another.
Since there's no universal currency, the foreign exchange lets users exchange their own currency for the equivalent value of another currency. The foreign exchange rate of various currencies fluctuates daily, depending on a lot of factors.
This volatile nature of foreign exchange and constantly fluctuating currency value are at the core of forex trading. The whole objective of forex trading is to exchange your currency for the one traders expect to increase in value, thus earning them a profit on the trade.
To explain, suppose you buy 100 Euros at a EUR/USD exchange rate of 2, which means you will have to pay $200 approximately. Later, the exchange rate increases to 2.5, and you exchange those 100 Euros back to USD; you will now get back $250 with a profit of $50.
While this example is relatively straightforward, forex trading is a lot more complex. Many factors like the economy, natural disasters, and more play into the value of the currency and thus the exchange rate. This makes the forex trading market extraordinarily volatile and risky for those who don't know what they are getting into.
Since currencies from every country constitute the foreign exchange market, it is the largest market globally, with an estimated $6.6 trillion traded every day. The market is primarily unregulated and over-the-counter, which makes it lucrative to scammers.
How to Spot and Avoid Forex Scams?
One of the oldest adages of life is, "if it's too good to be true, it most likely is." This age-old saying fits the forex trading market perfectly. Ask any forex trader worth their salt, what's that one common denominator across all forex scams? You'll get unanimous, "abnormally large returns" from every single one of them. This is because scammers are targeting unsuspecting new traders, who are willing to take a shortcut to get rich quickly, and significant returns is a perfect bait to lure them in.
Therefore, if you come across a broker in your hunt to find the right one, who promises enormous returns with very little investment, rest assured it's a scam. Come to think of it. Given the volatile nature of currencies and unpredictability of factors playing into it, is it possible for anyone to promise guaranteed returns? Moreover, if somehow a broker has come up with a foolproof way of forex trading, would they share it with the world or protect it to get rich themselves.
The best way to avoid frauds is to educate yourself about various types of scams that exist. There are four broad categories of forex scams: forex Ponzi schemes, forex pyramid schemes, forex robot scams, and forex signal scams. While the first two are well-known scams, the latter two are relatively new and need caution.
A Forex robot scam is when the scammer flaunts a computer algorithm designed to place profitable trades in the forex market. On the other hand, signal scams are subscriptions offered by scammers to receive buy and sell notifications in the forex market.
How to Recover Money Lost in Forex Scam?
If you have already fallen prey to a forex scam, there are ways to recover the lost money. One of the best options is to hire a recovery service provider. These companies have a team of experts who analyze your case, gather evidence, confront the scammer with proof, and recover all or a part of your investment.
Additionally, you can gather all evidence of the scam and engage with the broker to understand what went wrong. If your broker has ghosted you, you can take popular public trading forums like Forex Peace Army to post your experience.
Since brokers operate entirely on their reputation, a viral post accusing them of fraud will force the broker to reach out to you and offer a refund or settlement to take the post down. Lastly, you can file a chargeback with your credit card provider or file a complaint with the financial institution used by the broker, as both are effective methods.
So, these were everything you need to know about forex trading and how scams work. Let's say it's always better to be safe than sorry. So, do due diligence and pick the right broker, start small in terms of investment, and take time to understand the nuances of the market.
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