Last post we touched the subject of how brokers can scam you and what you can and can’t do about it. We are going pretty quickly over all points because our goal is to discuss “retail scammers” in greater detail. I believe that after we conclude this study you will be able to have a better idea of how they operate and be able to avoid a lot of problems in the future .
Retail Scammers
They come in the most varied colors and flavors!
Despite your level of intelligence, trading style, or account size you can be sure that somewhere out there, is a scammer especially tailored for you. This kind of creature (the scammer) is very similar to parasites that live off of peoples bodies. They can’t survive on their own so it is imperative that they find one or more "hosts� so they can live off their accounts, despite what they seem to offer you at first. Their final goal is the inverse cashflow, which means money coming from you to them.
Scammers, just like traders, can be separated in various categories and levels like “IQ”, “organization”, persistence", skills, goals, etc etc…
At the same time you have some of them popping out of no where with a flamboyant and killer new strategy. You also can find others that prepare their sophisms for months, or even years, based on very Conservative and well established legitimate market approaches.
Some scammers are very naive and act so erratic that it’s almost laughable. They come up with such lame schemes thats it’s hard to believe somebody can fall for it. Other are so smart and organized that even the most vigilant traders are prone to fall into their traps.
The naive and disorganized ones are usually bankrupt traders like so many out there. They blew up several accounts , they are not very bright, and too undisciplined to succeed in this business
After all the pain they experienced through their multiple margin calls they decide to get their money back from the market by force. Since the brokers, banks, or the market itself is too big for them to fight, they go after you and me, and try and make the money they couldn’t make through legitimate trading.
The second class of scammers, the “bright” ones are usually composed by people who, during their whole life, were involved with some kind of scam or easy money making activity. They are the pros.
More specifically we can find , gamblers, unscrupulous salesmen, false insurance claimers, pimps, etc…etc. From my experience if we talk only about the forex world the gamblers and unscrupulous sales people are the most common. Having been in sales myself, I would like to say that I’m in no way talking about all those legitimate sales people who earn their living honestly every day. I’m referring here to the crooks who know what they are doing, and don’t mind, for example, selling that car that will break the next day for big bucks.
Ok …the gamblers. They came to forex for a world of excitement. Quick and easy money suits their style.
Sooner than later, though, they discover that the life of a successful forex trader is really boring and there are plenty of rules to be followed. And thats not even counting the fact that the “get rich quick” is not as quick as they envisioned. Knowing Las Vegas like the palm of their hand they know what an exciting life style looks like, so after a quick try they get that the forex market is just too plain boring for them. But hey…they’re hooked by leverage and the possible gains you can get with it. They actually like the kick and adrenaline rush of a big position opened as a scalp.
WOW!!! Man, made a killing in a few seconds !!!
Again it suits them well. Smart as they usually are, they realize that this form of gain is unsustainable on a regular basis, but again they are hooked . So guess what?? In order to sustain high levels of adrenaline in their bloodstream they go after your account. They figured out already that there’s a sucker born each minute, and going after those �sheep� is a lot easier and more exciting than exercising patience and discipline in the market
Whatever their background may be, the Scammer, for obvious reasons will not just come to you and tell you what he is up to.
Some of them pose as:
Beautiful women.
Handsome men (less frequent due to the fact that the vast majority of traders out there are hetero men)
Geeks
Mathematicians
Skilled, experienced and wealthy traders ( almost all of them, for obvious reason will claim this one to some degree)
Sent by god ( yes …I personally followed one with this kind of claim and the lack of capital G for their god is intentional)
Family guy
Friendly helper
Philanthropist ( very common also)
and the list goes on and on.
After the scammer decides which of those characters he will impersonate, the next step is to find some place where he can have the maximum exposure possible.
The environment we trade in today offers these people plenty of places to go, be heard and seen. Broker chats, forums, blogs, etc…etc are plenty, and since we are on the net where one can easily hide behind multiple email accounts and nick names, the scammer has plenty of resources. It is just too easy to come, for example, to FF and open various accounts during a period of time and create virtually a crowd of aliases so one will have some support in the chats and threads. When somebody starts to question his �skills� a bunch of zombie members will come to the rescue. Camouflaged in this virtual world, he or she can assume any form possible. Even sometimes creating arguments with himself just to come out winning the discussion and drawing more and more newbies into his scheme. Once he decides the place, or places where he will spin his web, and once his multiple accounts are set up, he is ready to move forward. He is under layers of disguise and has already set the stage with all smoke and mirrors he will possibly need. Now he is ready to gain peoples’ trust. He needs to make people believe in him in order to achieve his goal of inversing their cash flow. How does he do it?
Through a few steps
First he has to offer you something.
At least in the beginning, the perpetrator will always promise or even give you something. Be it some pips, a strategy, advice, or even some hope. He will, 100% of the time, come to you with something that is of interest to you. This looks like a simple and obvious concept but let me hammer it in because it is of such importance for both sides. Yours and the scammers. A lot of smart and otherwise very aware traders get caught in the scammer web right here.
What the scammer is trying at this point is to establish some connection with you. He will focus all his ability in trying to mesmerize you with what you want or need .
Maybe the first scammer you stumble into will not do it. Maybe not the second. But down the road you will surely find someone that will tell you something and you will say to yourself " hold on thats make sense!!"
Sometimes he will project an image in your mind, talking about his beautiful house, his life style, his vacation. Etc…etc . At first he or she may not even mention anything related to trading or the markets. His goal for now is to make you dream of the kind of life he “allegedly” has, and then the first link is established. You will end up craving for it.
Other times he will pose as a nice family guy showing pictures of his kids and wife and subliminally imprinting in your mind the idea that such a nice guy like that can’t be a crook.
Other times, using his or her natural charisma and sympathy he will conquer you as a friend…and people tend to do a lot of stuff for friends.
What about the geek posing as a smart a almost genius who, for some reason decided to teach you something proprietary and �secret�.
If you are a Christian like me you will be an easy prey for the guy that came with all the “God Blesses” he can say. Talking like a nice pastor he will convince you of all the plans of wealth and fortune that god has for you so you can help others, and make a difference in the world, yada yada yada (lower case g intentional).
What about the “supposedly” nice girl that will tap into all your fantasies of a smart, beautiful, and successful woman!! Why is she trying to help me? I must be special!!
It is essential that he project a winning image, not only to himself, but also to his system, strategy or indicator. Nobody will pay attention to something boring, difficult, complicated, or that will make just a few pips each time. So here the sales man shines. Even if the results he or she achieves are hard to replicate, it makes so much sense!! On top of that, they are so difficult to be proved wrong that a whole bunch of newbies, and even some more experienced traders, will fall for it or at least give it a shot.
Whatever system, strategy or indicator used, it is imperative that it not be too specific. Everything has to be a little vague and flexible because otherwise his trades will be spotted easily and he will get caught. You will never see a scammer lay down a precise set of rules for you to follow. They will never itemize a specific set of rules so you can specifically trade their �strategy�, �system�, or �indicator�.
Any decent trader out there knows the importance of following some simple but vital basic rules. Trade your plan, don’t add to losing positions, cut your losses short, discipline etc…etc
Those basic principles are oxygen in a trading environment. But in the perpetrators’ world all is flexible because the bottom line is that he can’t produce consistently winning trades. Hidden behind a set of flexible rules he can bend those �rules� and cover up, for as long as he can, the kind of trader he really is.
Once I was a part of a group that was taken in a scam plot. After winning us over in the FF forum, the guy brought us to a separate forum(more on this later) where he called his trades in �real time�. We were all there and just a few of us in the whole room realized what he was up to.
Basically the guy was putting his calls almost, in real time. When he was right, he was right. Some wrong trades he would admit to. But in the majority of his bad calls he would somehow, come out at 2 or 3 pips positive. Or he would break even. Or come out with a ridiculously small loss, while the rest of the room would fail and loose big pips.
When asked why he exited early in a spot where the system did not show any exit signal, he always had an explanation. And after the �explanation� would come advice to pay more attention to the system… yada yada yada. There was always a �stop loss�, a �take profit�, a �hidden clue�, to save him. And it was always explained after the fact. The calls were, again, almost in real time. But the reasons involved in his trading management always came after the fact. The result is that nobody apart from him, or his aliases could replicate his achievements, and at the end of the day we were the ones to blame because we were to stupid to follow the �strategy�.
Next time we will go through the next phases of the scam…stay tuned
