How to Avoid Investment Trading System Scams

Anyone wanting help in making money in the stock market will be interested in finding a trading system. There are plenty available. Unfortunately, there's so much baloney in the trading system marketplace that it makes you want to follow Mark Twain's advice about how to double your money: "fold it over once and put it back in your pocket." How do you separate the few legitimate investment trading systems from the scam artists? Based on research and experience, here are some good ways to spot trading system scams:

Method 1

Method 1 of 4:

Observing Real Success

Investing your money is not something you should rush into. To best avoid scams, you should first read up on the steps of investing. Make sure you know the basics ins and outs of investing your money, especially online, before you commit your time and money.
Successful trading systems can include hedge fund or mutual fund organization.^{[1]XResearch source} You want to be investing into something that has clear systematic knowledge-based information.
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An investment scam often does not include trial-periods or customer satisfaction. Before you invest your money, invest your time researching the terms and conditions of the products.
If an investor is registered with the Financial Industry Regulatory Authority, you may be able to get reports that include information such as investor qualifications, reliability, and employment history. ^{[2]XTrustworthy SourceFinancial Industry Regulatory AgencyNon-governmental organization responsible for regulating brokerage firms and exchange marketsGo to source} This can illuminate any past problems or concerns prior to investing.
Avoid Ponzi, pump and dump, and other common investment fraud schemes. In today’s internet marketplace, it is easy to share your financial information to scams. Do not pay upfront or pay anyone unless you are absolutely sure where your money is going to go. ^{[3]XTrustworthy SourceFinancial Industry Regulatory AgencyNon-governmental organization responsible for regulating brokerage firms and exchange marketsGo to source}
6
Recognize Ponzi schemes. The schemes pay the current investor by using money from new investors. It is a common fraud that collapse due to no legitimate income. ^{[4]XTrustworthy SourceU.S. Securities and Exchange CommissionIndependent U.S. government agency responsible for regulating the securities industry, which includes stocks and options exchangesGo to source}Some red flags include:
- Promise of high return with no risk.
- Unregistered and/or unlicensed sellers.
- Difficulty receiving payments.
- Secretive or overtly complicated strategies.
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Method 2

Method 2 of 4:

Avoiding Hypothetical Trading Systems

These are companies that spout credibility, but do not have records of actual trading on the market. They are most often scams.
This may also be known as a "all or nothing" or "Fixed Return Option" ^{[5]XResearch source} A binary option is different than a normal trade as its outcome relies on a yes/no outcome. ^{[6]XTrustworthy SourceInvestor.govWebsite maintained by the Securities and Exchange Commision’s Office of Investor Education and Advocacy providing free resources about investing.Go to source} These can be unreliable and are easily manipulated to be fraudulent. Sometimes, these binary trades can be regulated by finance regulatory commissions, but are often risky. These investments are not for amateur traders.
A great way to gather credible information about an investor is to read testimonials. You can often find these on third-party sites. You want to make sure the testimonials are not faked or were paid to be written. Check out government financial regulatory websites for testimonials.
^{[7]XTrustworthy SourceFinancial Industry Regulatory AgencyNon-governmental organization responsible for regulating brokerage firms and exchange marketsGo to source} Always check and see where the investment originates. This can be the website you found about an investment or broker or about an investment opportunity you may have heard about. It always pays to be extra cautious, especially when it comes to your money!
The Securities Exchange Act, passed in 1934, requires certain public trades and investments to be registered with the government. You can check the SEC website to see if a certain investment or company is registered under this act. ^{[8]XTrustworthy SourceU.S. Securities and Exchange CommissionIndependent U.S. government agency responsible for regulating the securities industry, which includes stocks and options exchangesGo to source}
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Method 3

Method 3 of 4:

Recognizing the Red Flags

1
Avoid the hard sell. Do not be pushed into investing or providing a large amount of money upfront. The resources should help to inform you about investments before asking for your money. Salespeople can be persistent and sometimes quite rude, learn to spot these scammers.
- If they require you to make a decision quickly, they are trying to pressure you and make you more stressed. Always take time to think about a situation.
- Do not let them personally attack or bully you. People will try just about anything to make a sale, including trying to undermine your intelligence or way-of-life.
You want to make sure a website is easy to understand and easy to read. Do not be conned into submitting your personal information (like banking or social security card) to get access to information. Always submit this sensitive information only if you completely trust the website and its provider.
3
Avoid “too good to be true” advice. This also includes a guaranteed return on your investment. If it is too good to be true, it probably is.
- For example, avoid working with a website if it sells a very costly manual on a technique they claim has "never before been revealed to the public." This is a common ploy that hides true facts and discredits regulations. If the information is not readily disclosed, it is not the investment for you.
Check and see if an investment has been registered with a reputable source. You can check if your broker is registered. Try and gather as much information as you can before making an investment decision. ^{[9]XResearch source}
^{[10]XTrustworthy SourceFinancial Industry Regulatory AgencyNon-governmental organization responsible for regulating brokerage firms and exchange marketsGo to source} There are numerous laws in place to serve as a checks and balance for the economy. This includes both national laws and international trade regulations. Check your government’s website to learn about trade sanctions. These laws are put in place to achieve market integrity.
Investors and investing products should be registered with a national or international trade regulation. This could be through a government run financial authority (like SEC) or a regulation authority, such as Financial Industry Regulatory Authority (FIRA).
Never make an investment without seeing the bond or stock paperwork. Paperwork can be forged or an investor can attempt to sell you an unsanctioned trade. ^{[11]XTrustworthy SourceFinancial Industry Regulatory AgencyNon-governmental organization responsible for regulating brokerage firms and exchange marketsGo to source} Make sure you receive and keep any paperwork regarding any sort of investment trade.
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Method 4

Method 4 of 4:

Saying No To Pushy Salespeople

1
Say no. Do not feel guilty or pressured into saying yes. If a salesperson is trying to make a sale, it is entirely within your right to say no. Be firm and stand strong.Try a few different tactics.
- “Thank you for giving me information about this, but I’m not interested.”
- “I do not feel comfortable making a decision on this.”
- “I do not feel I have enough information to make an informed decision.”
- “I do not feel you or your organization is being completely honest with me.”
2
Ask questions. If someone is pushing you into making a sale, turn the pitch around on them. #*Ask questions regarding all aspects of the trade.
- Ask if your broker is registered.
- Ask if the investment is registered with SEC.
Not only are there plenty of very credible websites to help you with investment opportunities, but also there are many outside sources. For example, if your company pays into a 401k retirement, perhaps contact your HR department for more information on retirement investments. ^{[12]XTrustworthy SourceFinancial Industry Regulatory AgencyNon-governmental organization responsible for regulating brokerage firms and exchange marketsGo to source}
If you feel pressured or harassed by salesperson, ask to be taken off of solicitation lists. You can request to be removed from both phone and e-mail lists.
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