Learning from Bernie Madoff: Avoiding Trading Scams | Forex Trading Strategies

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Learning from Bernie Madoff: Avoiding Trading Scams

The world markets appear somewhat shaken from the news about the Bernie Madoff scam. Bernie was a Wall Street "elite" manager who was apparently running a very elaborate trading scam. The scam was essentially a ponzi-scheme that sucked in some of the biggest investment names in Asia, the U.S. and Europe. Estimated losses are currently running near $50 billion making this scam one of the largest of all time.

Trading Scams

I have noticed that most of us involved in the forex or options markets are actively studying anything new and trying to increase our repertoire of good strategies and techniques. In most cases, we are willing to listen to just about anyone because we know nothing is perfect and there may be clever insights that the newest beginner can share. Sometimes, like Bernie's investors we will also pay for access to information or services. We all pay a broker or dealer in some way to trade and I know a lot of us have computer programs, charting stations or other functionality that has improved our analysis.

However, because the capital markets are so free and relatively unregulated, it is rife with scammers, spammers and jokers of all types. I have noticed that there are some common denominators in their sales pitches. It is interesting that although Bernie's scam appears more sophisticated it actually follows a pattern established by smaller scammers selling "trading systems" on the internet.

I seriously doubt that we could find a legitimate company that has a sales pitch that fits this pattern as perfectly as the scammers. Here are some of the most significant common factors shared by investment scams.

1- Techniques, information or education is modeled after the "market elite." I call this the "Wall Street fat cats don't want you to know" pitch. Market elites are actually very interested in selling thier strategies to you as management, ETFs, mutual funds, etc. It doesn't take much effort to find out for yourself what institutional elites are doing.

2- The information they offer is hidden from normal participants. Only they can unveil these mystical signals of the forex. This is the "scarcity" part of the scammer's pitch. The idea is that they can provide exclusive access to information you can't find otherwise.

3- Regular profits will be seen by using their service. Although the returns promised varies from scammer to scammer, they all represent that those profits will be regular and smooth. We all know that isn't true in the forex, or any capital market.

4- Limited time offers are used to imply scarcity. In this video I have seen several scammers that have had the same limited time offer for the first 100 buyers since 2004. That is limited only in the cosmic sense.

Even very sophisticated investors can fall for a scam. Keep the warning signs in mind and you will stay a lot safer and a lot richer.