Thursday, September 24, 2020

Forex scams in Africa and how to avoid them

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Staff Writer
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Foreign exchange (forex) trading in Africa is still pretty much in its infancy. But with the African Development Bank Group highlighting the regional economy’s continuous improvement, forex trading has been picking up speed in the continent over the past few years, as the region is fast becoming a popular destination for financial markets.

Of course, forex trading’s rising popularity in Africa comes as no surprise. After all, a post by FXCM on ‘What is Forex?’, reports that it is the most liquid market in the world with an average trading volume exceeding $5 trillion every single day.

Not to mention, its transaction costs are much lower compared to other markets, leading many established and new investors alike to try their hand at forex trading.

But recently, along with the success stories surrounding trading have come several disturbing reports about forex scams that have robbed Africans of their hard-earned money.

Forex scams

Just this year, infamous forex scammer Jabulani ‘Mr. Cashflow’ Ngcobo was sentenced to jail for several counts of fraud. Ngcobo is a self-proclaimed millionaire who was acquitted on similar charges back in 2017.

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Personal stories have also been reported, as in the case of an unnamed South African man who had been scammed out of more than R100,000 in May this year through the KontoFX website.

The man shared that after he found an article on YouTube claiming that South Africans are making money through forex trading, he opened an account on the website, and began trading.

However, he couldn’t get any access to any of his profits, along with the money he had invested.

There is also the new WhatsApp scam making its rounds on the continent, with the Financial Sector Conduct Authority warning the public to steer clear of a firm called Worldwide Investments.

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They have been reported to use a WhatsApp group to take money from the public. The scam operates as a purported ‘savings club,’ which users can join with R200.

Forex trading is a legitimate endeavour, but it can also be complex and risky. Aside from legitimate traders, the market has also attracted fraudsters and scam brokers who are looking to take advantage of beginner traders, especially the elderly and those with financial problems.

So, how then do you steer clear of forex scams? Listed below are a few tips to help you avoid them.

Educate yourself

Getting in and out of the forex market is simple enough, but forex trading is not as easy as the industry tries to paint it to be. Before investing, you need to make the time and effort to educate yourself about forex trading.

You can find a lot of useful resources online, such as forex articles and trading books that can help you understand the basics of trading.

You should also open a forex demo account and practice some demo trading to help you better understand the entire process before committing.

Be wary of offers

It’s easy to fall for enticing online schemes that offer large profits with little to no financial risk. Make sure to steer clear of any entity promising guaranteed returns because — and we need to make this crystal clear — there is no such thing as a 100% guarantee when it comes to trading.

The golden rule you have to keep in mind with investment offers is that if it sounds too good to be true, it most likely is.

Research your forex broker

Lastly, it’s also important to know which forex brokers you’re dealing with. The first thing you have to check with a broker is their legitimacy. Do this by verifying the legitimacy of the broker you’re looking at with the governing body that is in charge of regulating it.

Then, do a thorough research on the broker’s website and check all the available information available. And if you end up not being comfortable with the information you find, simply do not deal with that company you are considering.

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