How to Avoid Being Conned by a Trading Scam

Investing your money is one of the best ways to increase your assets, but as with almost everything, investment comes with risk. When it comes to trading, there are the usual every day shortfalls, such as stock prices lowering unexpectedly, which can catch you off guard and cause a loss in profits; However, this is something to be expected. There are other hazards on the stock market which you might never have ever considered a real possibility, such as being caught in an investment scam. It may sound far-fetched, but it is easier than you think for experienced con artists to part you with your hard-earned money, so it is important to be aware of how someone might try and trick you. Here is some information you might like to know about trading scams and how best to avoid them.

What to look out for

There are certain signs of fraud which you should be wary of and look out for when getting involved in investments. For example, a common warning sign would be if an individual were to approach you claiming that they can guarantee to increase your profits substantially in a short space of time. For one thing, you need to ask yourself what this person’s motives are: why have they approached you specifically? On top of that, there is no such thing as a true guarantee in trading, because stock prices can change at a moments notice.

If you feel pressured into making a snap decision on an investment, then it is better to just walk away, rather than to invest your money without doing the appropriate checks and proper research. If the salesperson you are dealing with is pushy, then it might indicate that they have something to hide or are working to a strict deadline: short time scales are common with scammers, as it leaves less chance of detection.

What you can do to protect yourself

Verbal exchanges are a sure-fire way for information to get lost in translation, so make sure that you ask for detailed information in writing regarding any deals and prospective investments. Make sure that you do your research: check out the company in detail and see what experience other people have had to invest with them in the past. You should also try and look into the stock and trade prices, and forecast trends by yourself, so that you can ensure you are not being fed biased information. For instance, the Ichimoku cloud indicator is a useful tool for estimating the prospective market trends and is quite simple to use if you want to keep an eye on stick value.

Types of scams

If you haven’t got a lot of experience in how someone might try and scam you, a common example of a stock scheme is called the ‘pump and dump’ scam. Though this is illegal, it is quite common and involves individuals buying stock while prices are low, usually that of a lesser-known company with an interesting sounding product. The scammers then spread false information about the company to mislead others into thinking that the company is coming into a large amount of investment, or about to launch a new and exciting product, and this, in turn, makes the stock shares go up as more people become interested in investing. Once these con artists believe they have boosted the stocks as high as they can, they then sell their shares for a massively increase profit, leaving other people with stocks which are worth next to nothing.

As you can see, the world of stocks and trading is not all black and white, and there are several people out their who are willing to exploit your trust and take your money through crooked dealings. This is why it is critical to keep cautious and make sure you are comfortable with any investments that you make.