Pitfall # 1: The Ponzi scheme

The Ponzi system involves a plan to use new investors' money to finance the profits of existing investors. Finally, when the money runs out, the whole operation will clear up.

When you think of the Ponzi scheme, the first person that comes to your mind is probably Bernie Madoff, but in fact, the Ponzi scheme is more popular than you can imagine. Recently, there have been many cases happening in the Forex market.
  • Ponzi warning signs to look out for:
  • Incredibly good profits.
  • There are almost no unprofitable trades.
  • The investment period is locked for a long period (eg, you cannot withdraw your money until a few years have passed).
Pitfall # 2: Penny stocks

According to the SEC, shares of any company that trades for less than $ 5 are considered penny stocks. These stocks are often high risk due to lack of liquidity, widespread or insufficient information disclosure.

Due to the lack of liquidity and oversight, penny stocks can be fertile ground for the intrigue of investment scammers such as front running scams or pump and stock promotions. dump).

Not every penny stock is a scam, some stocks are still legitimate companies with potential. Therefore, the difficulty for investors is decoding to see which is good and which is bad after the shell of penny stocks.

The "fake" penny stock warning signs to look out for:
  • Incredibly good profits.
  • Companies regularly carry out stock promotions.
  • Companies are not supervised or financially disclosed.
  • Marketing hype is about nothing significant.
Pitfall # 3: Boiler Room Scam

The Boiler Room scams can be seen in popular movies like "Boiler Room" and "Wolf of Wall Street". Usually, it refers to the performance of salespeople who use "dirty" tricks to sell poor investments like penny stocks (or just imaginary investments) to investors. little understanding.

Boiler Room scam warning signs to look out for:
  • Sales staff try to persuade you to invest over the phone.
  • High-pressure sales tactics - "limited" opportunities.
  • Brokers are not licensed, companies based in foreign countries.
  • Incredibly good profits.
Pitfall # 4: Scam news

Fraudulent newsletter operators send investment reports/emails to a large group of people hoping that at least some of them will see staggering returns and then decide to put money into their services. surname.

It works like this: the operator will send an email to 20,000 people, but half of them would be recommended to Buy, the other half recommended to Sell.

When the result is available, half of the target will win and half will lose. The operator will then send another 10,000 emails (with 2 recommendations), but only to the winners.

After that, 5,000 winners out of 10,000 emailed will continue to receive 2 Buy and Sell recommendations. Just like that, this cycle will repeat again.

Depending on the size of the activity, there will come a time when a small number of people will receive multiple correct recommendations in a row and they will be the target audience to request a subscription to a paid service. And of course, as soon as they sign up for the service, they lose money for these random tips. This is a scam that has been going on since the time of Jesse Livermore.

The warning signs of the fraudulent newsletter should pay attention:
  • Bad news or lack of history.
  • The small sample size for investment results.
  • The trading strategy lacks credibility.
  • Incredibly good profits.
Pitfall # 5: Demo trading scam

Another pitfall to watch out for is services from demo traders who don't trade real money but instead execute all of their signals on a demo trading account.

The problem with following these types of traders is that their trades are not under real trading conditions. Demo trading results usually do not take into account spreads, fees, commissions, slippage, and other factors. These factors can easily destroy the profits of a demo trader.

Typically, demo traders will use their demo trading results to convince "innocent" victims to sign up for their service or newsletter.

The demo trading scam warning signs should look out for:
  • Lack of verified or audited results.
  • Lack of commission or slippage in transaction results.
  • Incredibly good profits.
Pitfall # 6: The Broker is dishonest

There are many cases of fraud that arise from dishonest brokers and platform providers. In the past, fraudulent brokers manipulated prices and spreads, preventing customers from withdrawing money, stealing capital, and countless other scams.

The following fraudulent broker warning signs should be noted:
  • Broker's poor financial conditions.
  • Unmanaged, lack of information and history about the company.
  • Brokers located in foreign countries or tax-havens.
Snare # 7: Snake oil salesmen

With that said, the Internet makes investment fraud a lot easier and so you need to be wary of "solid oil sellers" - who have a very seductive persuasion talent.

Investment scammers will often yell out loud about their performance and try to lure you with images of material wealth.

The best traders and trading advisors often don't brag like that. They don't have a flashy website or thousands of followers on Twitter because they are too busy with their work. They also don't scream about all the money they have made because they know they can lose it fast.

The warning signs for investment scammers should pay attention:
  • People who are persuaded by an emotional response rather than detailing the content behind a product.
  • Mainly posting of wealth through social media like Instagram.
  • Marketers are always on the hook for the "next important thing".
  • Unusual statements/words online.
  • Incredibly good profits.
Pitfall # 8: Black Box trading systems and indicators

A trading system that can make money in the past doesn't mean it will continue to do so in the future. Furthermore, as a system trader, you can never be 100% confident in any trading strategy, because the future is never foreseen.

However, the Internet is full of trading systems without any such warning, instead promising huge returns with little risk.

There are still profitable trading strategies, but few and far between. Therefore, traders should always test before putting real money into any system or indicator!

System warning signs and Black Box trading indicators to pay attention to:
  • The capital curve slopes up with very few drops.
  • Unrealistic win percentage and drawdown threshold.
  • Lack of information about rules and source code.
  • Incredibly good profits.
Pitfalls # 9: Expert Advisors

The so-called EA is, technically, no different from a trading system. EA tokens are mainly used in the trading world and are used in tandem with MT4 to trade currencies on short timeframes.

While there are still profitable EA out there, the vast majority are loss-making systems minus the commission. However, there are many scammers claiming to get rich from their methods and blatantly marketing them on the Internet.

The warning signs of scam EA should pay attention to:
  • The capital curve slopes up with very few drops.
  • Unrealistic win percentage and drawdown threshold.
  • Lack of information about rules and source code.
  • Incredibly good profits.
Pitfall # 10: Duplicate trading sites

In recent times, there has been an explosion of websites and trading copying services, allowing anyone to follow someone else's tradings and even automatically trade on their signals.

There are still a handful of good traders on these sites, but overall, choosing the right person to copy is difficult between the countless loss traders and scammers.

The big problem with these sites is that traders who are in the top rankings often climb through luck, or through skillful risk management. If you have a large enough database of traders then for sure, there will be some winners and they will look convincing enough for a beginner.

The copy trading warning signs should be noted:
  • The leaders have unrealistic capital curves and a short-term history of results.
  • The leaders use ignorant trading methods like Martingale position sizing and grid trading.
  • The services promise easy returns, which seem incredibly good.

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