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A while ago we picked up on the growing trend for forex scams on instagram, but despite everyone’s best efforts it seems to be getting worse, not better.
I’m not saying that I do follow reality TV “stars” on instagram, or even watch Love Island, but if I did I would know that they are promoting dodgy forex traders who take pictures of flashy watches, flashy cars and screen grabs of mobile trading screens showing daily profits.
The scam of course is that to follow the trades you open an account with a “recommended” offshore broker who doesn’t hedge client positions. Which means that if you deposit £1k in your account, and inevitably lose all your money the broker has made £1k from your losses. The instgram trader then gets a cut of this. That’s how they really make their money, not by being super clever traders.
For more info on brokers hedging client positions, you can read: What are STP/ECN CFD brokers and should you be using one?
For full transparency, in some cases that’s how we get paid too. If you click on a link in our comparison tables, we get a rebate for introducing a client. It’s called affiliate marketing, or performance based client acquisition if you want to get all technical. It’s a very effective way for businesses to get new customers and is used globally from car insurance portals, to holiday price comparison sites or pretty much on any fashion blog you come across.
But the difference is the brokers we feature are all regulated by the FCA and, are for want of a better phrase “good brokers”.
Crypto trading scams are on a another level to forex scams though….
It’s basically where the binary brokers have migrated to. You’re basically encourage to open an account with a broker off shore, who doesn’t even bother to do anything even remotely close to brokerage. You’ll get called every day, encouraged to put traders on until you’ve either lost all your money, or decided you’ve had enough and want to withdraw your money. At which point the broker will miraculously stop calling you (except maybe to ask for some more money for one more chance to make your money back) and you’ll never get your money back.
So if you want to trade Crypto here are some basic rules to avoid getting scammed…
Make sure you know what you are doing.
This is a bit counter productive, because you may want to trade crypto, but if you don’t know anything about it, or haven’t traded in the past, or don’t have a large risk diverse investment portfolio you really shouldn’t be trading crypto in the first please.
So, if you don’t know what you are doing don’t do it.
But a lot of people do things that are not really in their best interests, just because they want to really.
If you want to learn how to trade, be very careful about who teaches you, because a lot of trading educational providers have alternative motives. Some are good, but most are unregulated. One relatively safe option is to go with a brokers in house educational seminar or online material. You can find a bit of info on where to learn to trade here, but make sure that the broker you use for education is reputable and FCA regulated.
Even then start very small, as crypto is one of the most volatile asset classes and you can lose all your money very quickly.
Only ever trade with a fully FCA regulated broker.
If a broker is not regulated by the FCA it is illegal for them to operate and offer investment and trading services in the UK.
This means you have no protection from the FSCS, FCA or financial ombudsman if anything goes wrong or they decide to disappear with your money.
Don’t think you’re going to trade your way to millions
Trading is very risky. It’s not for everyone and most novice traders lose money and give up. The biggest hedge funds in the world, with the best research, desks of highly trained analysts and billions of dollars under management only return a few percent above the market (on a good year).
So be realistic, trading is not a living for the majority of people.
Trading is way to hedge overall portfolio exposure and trade a small percentage of you’re overall portfolio.
Don’t take crypto trading ideas from anyone.
The absolute best traders in the world have no idea where crypto prices are going (if you want to see what drives crypto prices see here) and if they did they certainly wouldn’t be phoning you ten times a day or plastering their trades or Bentley’s all over instagram.
Brokers in the UK are not allowed to give trading advice on crypto to private clients. So if you’ve got a broker phoning you up telling you they’ve got a great crypto trading idea, alarm bells should be ringing.
What do to if you think you’ve been scammed?
If you see dodgy adverts on social media, don’t just ignore them, report them as scams (there is usually an option to do so in the top right or left).
How not to get scammed in cryptocurrencies…
Cryptocurrency scams are rife, here’s our quick guide to avoiding getting scammed in crypto currency.
Cryptocurrencies are here to stay, but with all new asset classes, it’t a bit like the wild west out there until the regulators catch up.
Cryptocurrencies are more of a commodity are the moment, more like Gold or silver than the GBP or USD. Except of course they have no intrinsic value, other than what people will pay for them.
Here’s three rules to avoid cryptocurrency trading scams.
- First thing first, if you don’t understand something, stay away from it.
- Never trade or deal with a firm that is not FCA regulated (you can see FCA regulated FCA crypto brokers in our crypto currency broker comparison tables or check the FCA register directly).
- Always take independent advice before investing in anything.
If you suspect you have come across a cryptocurrency scam you can report it to the FCA here.
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Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.