Want to get rich overnight? Be prepared to lose it all overnight

Some of you may have come across advertisements in newspapers that scream out something like “Make $1000 per week with XYZ”. In these ads, XYZ could refer to Stocks, Options, Forex or other derivatives, depending on who or which company is advertising. These ads are blatantly misleading, and full of air and bull. Lines like “Little or no effort is required” only adds to the whole scammy atmosphere that surrounds these ads. The truth is, if you want to get rich overnight, be prepared to lose it all overnight.

If some company claims that they can trade for you profitably if you deposit a sum of money with them, be very skeptical. We have come across so many claims, and when we take a glance through their performance sheet, some of them can look pretty while others may contain incomplete information. Their track record could easily be falsified if they aren’t auditied by a reputable unbiased third party.

If any educational seminars make claims in their ads similar to “Make $1000 per week with XYZ”, we sincerely hope that the people who signed up for those paid seminars at least receive some solid trading or investing education, because if they are taught just one strategy, chances are slim that they would be able to “make $1000 per week”. Unless, of course, you are willing to deposit millions of dollars and make that $1000 off of just the interest rate.

Another seriously misleading claim is “Make $1000 per week with just $x00″. No matter how much people like to hear that they can make a lot of money with the least amount of money, to achieve $1000 profit with just a few hundred dollars of trading capital, it requires you to take an insane amount of risk, and that risk is enough to wipe out your capital with just one trade.

Even “Make $1000 per month with just $x00″ will require you to take on a big amount of risk because that will require you to apply high leverage on your trades. In the January 2007 issue of The Trader’s Journal, I wrote about the dangers of excessive leverage in forex trading.

Forex trading is not as regulated compared to stock or futures trading due to the de-centralized nature of forex. In the US, the Commodity Futures Trading Commission (CFTC) was created by the Congress in 1974 to regulate commodity futures and options market in the US.

Under the Commodity Futures Modernization Act of 2000 (CFMA), CFTC has the jurisdiction and authority to investigate and take legal action to close down unregulated firms offering or selling foreign currency futures and options contracts to the general public. In addition, the CFTC has jurisdiction to investigate and prosecute foreign currency fraud occurring in its registered firms and their affiliates.

On the CFTC website, you can see a list of warning signs of fraud relating to forex trading scams. An example is this:

2. Avoid Any Company that Predicts or Guarantees Large Profits

Be extremely wary of companies that guarantee profits, or that tout extremely high performance. In many cases, those claims are false.

The following are examples of statements that either are or most likely are fraudulent:

“Make $1000 per week, every week”
“We are out-performing 90% of domestic investments”
“We guarantee you will make at least a 30-40% rate of return within two months”

If you are interested to know more about how you can be more aware of forex trading scams, click here to see more signs of forex scams.

Posted in Categories: Scams.