Forex trading, or foreign exchange trading, is the practice of trading international currencies such as the US dollar, the British Pound, the Japanese Yen, and the Euro. It is the largest and most liquid market in the world. According to the Triennial Central Bank Survey conducted by the Bank for International Settlements, trading in forex markets reached a whopping US$6.6 trillion a day in April 2019.

Interestingly, 79% of daily forex trade takes place in just five countries: the United Kingdom, the United States, Hong Kong SAR, Singapore and Japan. The US dollar accounts for a vast majority of forex trading, comprising 88.3% of daily forex trading in April 2019. While the major players in the forex trading market are commercial banks, central banks, and hedge funds, the volume of forex trades made by individual investors is rapidly increasing.

Currency trading has been around since ancient times. There has been evidence of currency trading as early as the biblical era. Later on, the famous Medici banking family created a forex market when they opened banks outside Italy. As a thriving trading port, it is no surprise that Amsterdam had an active forex market in the 17th and 18th centuries.

Forex trading as we now know it began in the early 1970s after the US dollar was unpegged from the value of gold. This system, known as the Bretton Woods system, had been in place since the end of World War II to ensure stability in world currencies. The US dollar was pegged to the value of gold, and all other currencies were pegged to the US dollar and allowed to fluctuate slightly. Once the US dollar became free floating, all the other world currencies followed suit.

Despite the relative lack of individual investors in the market, the forex market is highly vulnerable to fraud. Even though it is the world’s largest market, there is no centralized market for forex trading, and there is very little regulation across borders. The size of the market and the lack of oversight makes it a haven for scammers. Retail investors are especially vulnerable as there are little or no safeguards put in place to protect them from scams. There are several types of forex trading scams which are common in the forex market.

The first type of scam is the expert advisor/robot scam. These scams involve touting the use of automated trading systems that use artificial intelligence (AI) to automate and execute trades, replacing human brokers and traders. While the use of AI can be beneficial, it does not guarantee profits. Unscrupulous brokers often endorse fraudulent software to lure naive investors into using it.

The second type of scam is the signals scam. This is when companies offer signals to investors that supposedly give them an idea of a good time to invest. These companies often charge investors a subscription fee to receive such signals. While such signals can be useful at times, they are not a guarantee. The forex market fluctuates wildly and signals may not always be a reliable indicator of when and how to invest.

There are steps traders can take to protect themselves and their money from these scams. The easiest way to do so is to identify scams so that you can avoid them. The first and most clear-cut sign of a scam is a promise of unrealistic returns. There is no software, signal, or broker that can promise returns, especially in a market as big and as volatile as the forex market. If it seems too good to be true, it probably is. Do not invest your money with companies which promise the moon — in all likelihood, they are a scam.

Traders should also go through a trustworthy and reliable broker. While there are several bad actors out there, there are regulated firms which will help traders make a profit. Traders, especially novice traders, should thoroughly research forex brokers before deciding which broker to use. Traders should also carefully check the terms and conditions of any contract before signing it. If there are any red flags, such as not being able to withdraw your money from your account, reconsider using this particular broker.

Fraud can have a severe impact on individual victims and society as a whole. Among the elderly, who are the most common target of financial scams, the emotional impact of being a victim of fraud often outweighs the financial impact. Widespread fraud can also undermine investor confidence in the market, leading to severe losses, not just for victims of fraud but for everyone who has a stake in the market. When trading on the forex market, investors should be extremely wary of what they do and who they trust with their money. It is always better to be safe than sorry.