Common Online Trading Scams:
1. Free Online Trading: Free online trading or no commission trading are one of the newest online trading scams. But beware, remember the old adage "If it sounds too good to be true, it probably is." Typically, these sites will earn money by charging exorbitant fees to purchase their software or in membership fees. Remember, no business can survive without income. You will end up paying in some way.
2. Hype and Dump Stocks: This scam involves heavily promoting a company's stocks through misleading statements. Scammers make huge profits by selling their cheap stock into the market.
3. The Pyramid Scheme: This scam involves promising big payouts for simply recruiting new members. It's illegal because there is no service or product actually being provided. The only ones' who actually make money are those at the top of the pyramid. The pyramid eventually collapses because the scammers can't recruit enough members to pay everyone.
4. Spam Stocks: These are basically unsolicited junk messages containing get rich quick stock offers. These messages come from companies that are unreliable and untrustworthy.
5. Ponzi Schemes: The ponzi scheme is a cousin to the pyramid scheme. In this scheme, investors are enticed with the promise of extremely high returns or dividends over a short period of time. Initial investors are paid huge dividends by the new investors. Profits are not created by the initially touted business but instead are fraudulently derived from other investors. In essence, there is no real investment. The schemers are robbing Peter to pay Paul.
To prevent being defrauded, be preemptive. Do your research. You can find background information on any company that involves stock trading by calling the state securities regulator. Find out if the company has been disciplined or if there are any complaints on file. You can also check out the government section of the phone book or visit the American Securities Administration Association website. If you want to find out more information on a commodity futures/options online trading company, visit the National Futures Association.
There is a lot of money to be made with online trading. However, you must be smart and perform your due diligence so that you don't end up being swindled out of your hard earned money.
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