Beware the FX training scam: Exclusive investigation uncovers a nasty new trick
Until this year, the plethora of notorious wide-boy FX trainers who are self-styled egomaniacs had proliferated the FX training sector. Senior executives of FX firms, introducing brokers and software vendors are all too aware of the presence of such irksome entities, however there are clearly still enough retail FX traders who are taken in by […]
Until this year, the plethora of notorious wide-boy FX trainers who are self-styled egomaniacs had proliferated the FX training sector.
Senior executives of FX firms, introducing brokers and software vendors are all too aware of the presence of such irksome entities, however there are clearly still enough retail FX traders who are taken in by the slick, and sometimes forceful sales tactics that such trainers use.
From making movies of scalping whilst flying a helicopter, to peddling software from custom-built yachts, training courses for novice traders have long since been acknowledged to be a combination of expensive, often dubious, trading software, courses which make trading look as though it is very straight forward during which demo accounts are used for seminars instead of live trades being placed, and the forging of IB relationships with unregulated brokerages in less than salubrious locations.
This changed last year, when actual educational establishments began establishing trading courses, such as University of Essex Online, which offers a bona fide training course in conjunction with prominent news source FXStreet.
Thus began the new direction of training, in which new traders can have confidence in the pedigree of the institution handing down the knowledge.
There are, however, still some nefarious individuals on the loose, and it has been brought to the attention of FinanceFeeds that one particular practice that is being carried out by those with potential malintent involves attempting to dupe customers of defunct brokerages who have lost funds when an unregulated FX firm goes west.
How this works is relatively straight forward.
Trainers do not have to be regulated in any jurisdiction, as they register their companies as educational entities rather than financial advisers or brokers, and do not handle client funds.
Therefore, many of them become introducing brokers of unregulated, small FX firms and then not only sell software and training courses to their delegates, but also place them with firms that are less than well known in order to ensure that their initial deposit is lost, and profits are split between the broker and trainer.
Often, such small firms do not stay in business for very long, because their busines model is to profit from the losses of clients, therefore the idea is to take as much as possible until the leads eventually run out due to bad reviews on consumer forums, and then make off with the money.
Less than reputable trainers know this, and have often worked with brokerages which have indeed made off with the money. The trick that has been brought to FinanceFeeds’ attention that is now gaining popularity is that the trainers keep records of their clients that they had initially placed with an unregulated broker, and then when the broker runs away with the client’s deposits, the training firm waits for a few months, and then contacts the client stating that the funds were mishandled by the previous broker, and that another broker is now dealing with these funds on behalf of the client.
The other broker of course is the latest unregulated shop that the training company has a relationship with, and has absolutely no connection with the previous broker that has long since disappeared.
The sales pitch is intended to gain the confidence of the ‘wounded’ client who still perhaps holds out some hope that lost deposits could be recovered, and preys on the lack of industry awareness that a novice trader may have.
The training company then attempts to sell the idea of the client assisting with marketing, and being an advocate for such a good company that is now ‘helping out’ with recovering funds, and then solicits further investment in training whilst the new broker supposedly helps to recover the ‘mishandled funds’.
Once confidence is gained, the client may then deposit more funds. This is very clever on the part of the training firm because these are clients who had initially shown absolutely no objection to depositing several thousand dollars with unregulated firms having done no research to find the litany of bad reviews about both the training companies and the unregulated brokers which are publicly available on the internet.
Therefore, there is a high probability that such clients may see the training firm and the new broker as extremely helpful and deposit more funds, only for the same to happen again.
A quick search on the internet will root out all of the well-worn, overly enthusiastic methods used by the same notorious individuals.
FinanceFeeds recommends to only ever invest with a regulated brokerage in a good jurisdiction, and only to use bona fide training firms which are part of actual academic institutions.
Either that or save your money and use high quality charting and analytics software which can be provided via most reputable brokerages and has been developed properly by specialist industry experts. This is a FAR better option altogether.