How scammers exploit new traders

How scammers exploit new traders

• Understanding the new trading landscape
• Who are new traders?
• How do fraudsters exploit new traders
• How do new traders protect themselves?

Understanding the new trading landscape

Trading has become easier due to technological advancements, the boom in digitalization, economic growth in emerging markets, and increased ownership of devices that have increased trading on mobile devices and tablets, which explains the global interest in trading markets.

Trading markets have reached huge numbers and sizes, as the daily trading volume in the Forex market is expected to rise from more than $6 trillion to $7.5 trillion in 2024, representing more than 7% of the global economy.

While the US stock market, which is valued at about $60 trillion, represents 60% of the global GDP, statistics indicate that the volume of US stock traders increased from 15% to 25% between 2019 and 2021.

Recent statistics also confirm that there are about 14 million active online traders worldwide.

Thus, these statistics highlight the global spread of trading, which emphasizes the importance of educating traders, especially newcomers, on how to profit and avoid potential losses, which will be revealed in this article.

Second. Who are new traders?

Defining a new trader is easy at first glance, as it is a term that expresses a person who has decided or recently entered the world of trading, However, the description of a new trader may also to some traders who have already spent a period in real trading, but without gaining the required experience or striving for it as required, or that they have not been exposed to situations that increase their awareness and understanding of the various events taking place within any trading market.

Here, the need to identify some of the most important characteristics of new traders increases, so that they can be realized by those who have recently decided to enter the world of trading or those who are actually trading and still have these characteristics, which achieves many benefits, the most prominent of which are:

• The new trader learns about these characteristics and begins to deal with them in a logical and scientific manner.

• The new trader's awareness of these characteristics reduces the feeling of tension or pressure, thinking that they are characteristics related to him alone and no one else.

• The actual trader's awareness of these characteristics and his feeling that he still has them makes him able to deal with them, whether by developing his personal characteristics while trading, or modifying his strategies, or improving his educational level specific to the world of trading.

• Realizing and knowing these traits and measuring the extent of their continuity with the trader makes the trader always seek to learn about the most prominent methods used in dealing with these traits, or to learn about the various events and matters surrounding the markets that push the veteran trader to return to the traits and characteristics of the new trader without realizing it, which will be mentioned later in the characteristics of the new trader.

The following are the most prominent characteristics of the new trader that must be realized and monitored constantly:

• Emotional trading:

Where the new trader allows emotions to control and influence his decisions, such as fear and greed, which makes their decisions irrational, such as selling due to panic during a market decline and not selling after analysis and understanding.

• Excessive confidence:

This trait may represent one of the characteristics of new traders, specifically those who make successful deals in an illogical way, which prompts them to increase their self-confidence without it being based on logical and scientific analysis, believing that the market depends only on courage, boldness and recklessness.

• Lack of risk management:

The concept of risk management is absent among new traders, which leaves them without real protection against any loss, or unable to stop their losses and protect their capital.

• Chasing quick profits:

New traders always seek to achieve quick profits, either because they hear or watch success stories in achieving profits in short periods, which always pushes them to achieve quick profits without seeking to develop strategies and disciplined learning.

• Overtrading:

One of the things that new traders fall into a lot is that they make many deals either because of market turmoil, or in pursuit of achieving large profits, or in the hope that their chances of achieving profits will increase, so new traders here fall into the trap of great exhaustion, emotional impact, and increased costs that their profits may not cover.

• Failure to adhere to a strategy:

A new trader may not have a clear strategy, and the intended strategy in its simplest concept is for the trader to set a goal for his trading, clear dates, methods and techniques for learning, and to constantly adhere to his strategy, then develop it according to the circumstances that he himself or the markets in general are going through.

Third: How do fraudsters exploit new traders?

After reviewing the size of trading markets in general and getting to know the concept of the new trader and the most prominent features that characterize him, and the importance of getting to know the characteristics and qualities of the new trader even by seasoned traders, we come to define the most prominent forms that fraudsters take or impersonate to trap their victims, especially the new ones.

Given the connection between the world of trading and the world of the Internet, the possibility of new traders falling victim to fraudsters is increasing, due to the growth in the number of people joining the world of the Internet, as data from Data Report indicates that the number of Internet users will reach about 5.35 billion people in 2024, which represents 66.2% of the world's population. In fact, the company's data confirmed that about 97 million new users entered the Internet for the first time in 2023.

With the increase in the promotion of trading, and the increase in stories indicating the profits that can be achieved through various trading tools, the increase in the number of new traders annually will be logical, but some statistics indicate matters that raise the need to pay attention to new traders who may be exposed to problems and pitfalls that spoil their trading experience.

However, statistics indicate that 40% of daily traders leave work within one month for various reasons, while 13% of them continue for three years.

With regard to the demographic composition of Forex traders as an example, specifically in the American market, whose traders represent about 20%, Zippia Company indicated that more than 90% of American traders in general are men, and that the average age of traders in the Forex market is 40 years or more, which represents 58% of the number of traders in the Forex market, while the other category of young people 30-40 years old came at about 28%.

Through these statistics, new traders can be represented by a relatively young age group, aspiring to achieve quick wealth, without having the experience or financial awareness, or even possessing the basics of trading.

New traders from this young age group can also be affected by the promotional means offered to them through social media, which may be unreal, fake, or fraudulent.

To know the most prominent ways that fraudsters can use to trap their victims from traders in general, you can refer to what was mentioned in many articles published through the "Trading Transparency +" section provided by CFI.

However, the most important thing that must be realized by traders in general, and new traders in particular, is that fraudsters resort greatly to emotional manipulation that may make them greedy for profits or afraid of missing out on imaginary opportunities, in addition to using means of insistence on the victim by exploiting the victim's lack of experience and lack of familiarity with the world of trading and its details.

Given the huge amount of money that passes through the trading markets on a daily basis, fraud operations have become more complex, and fraudsters have become creative in inventing new methods and smart mechanisms for fraud to trap victims. Below, we will highlight the most prominent forms that fraudsters impersonate to trap their victims:

Electronic fraud:

Electronic fraud is the most common and most threatening form of fraud for various traders around the world, through a wide range of criminal activities that take place over the Internet, whether through phishing to steal sensitive personal financial information (such as using email), or through virus programs to hack victims' accounts, and ransomware programs (which force a person to provide money or information to retrieve previously stolen information, or restore a hacked system).

Government fraud:

Some fraudsters are skilled and possess tools, either personal or logistical, which makes them bold to impersonate the government to trap victims, and exploit the trust that people show when dealing with those who hold the government position.

This type of fraudster may cause losses by directly robbing people of their money, or by pushing them to make bad financial decisions either for personal purposes or for purposes that serve the parties they represent.

One of the ways that these fraudsters resort to implementing this in this capacity is through phone calls or messages, in which they tell their victims about financial problems or errors related to their bank accounts, and that they are able to solve them by obtaining some personal and financial information, or by giving some advice to push them to make wrong financial decisions that cause the victim financial losses.

Fraudulent Charities:

Some scammers exploit the social aura and trust factor of the public in the concept of charities, and create fake charities that do not exist, and create fake campaigns using flashy fake names, or promote support for well-known humanitarian causes in order to commit various forms of fraud.

Ponzi Scheme Scammers:

A Ponzi scheme involves making promises of high returns to investors, which they initially fulfill for new traders, through other funds belonging to previous investors, that is, using a continuous flow of money to trap victims and deceive them with the promised profits, and we will explain this mechanism in detail in an article about this scheme.

Fake Investment Advisors:

These scammers claim to be investment experts and advisors, and promise fake investment opportunities, and may create illegal or unlicensed entities to extinguish the aura that ensnares their victims.

Fraud by providing fake/false free signals:

Some scammers exploit free trading signals (to learn more about the concept of a free trading signal, see the article: The Hidden Dangers of Free Signals), by broadcasting a lot of free signals or promoting the success of their free signals in a way that is not difficult to verify, in order to exploit the new experience of the new trader in the world of trading and its secrets.

Involved scammers:

Some scammers may ensnare their victims to cover losses they incurred through original scammers, in which case these scammers are not the masterminds, but they participate in it to indirectly benefit from the people they previously ensnared.

In fact, this type of scammer may not be aware that he is directly scamming, especially if he is under the influence of the original scammer who practices many incentive practices to push them to bring other victims, such as the original scammer promising his victim that he will receive a reward or increase his profit percentage if he brings other investors.

Fourth. How do new traders protect themselves?

As mentioned in this article, understanding the characteristics and traits of a new trader in general is the first factor in protecting the new trader from falling victim to any fraud, as it is a gateway to developing skills and abilities in various forms.

New traders should also be very careful to adhere to certain traits, more than experienced traders, the most prominent of which are:

• Caution and scrutiny before dealing with any party.

• Research well before starting to trade.

• Accurate learning of the basics and not neglecting any part or skipping it before mastering it.

• Continuous learning and always being aware of the news surrounding the tool that the new trader wants to use.

• Learning the basics of risk management, which always enables them to identify new fraudulent means.

• Expanding the circle of knowledge, which is called financial culture, which contributes to a safe and successful trading experience.

Conclusion:

This article aims to identify the size of the most prominent trading markets in general, and the extent of the rapid growth surrounding these markets for many of the reasons mentioned, in addition to identifying the most prominent forms of fraudsters who can trap their victims, especially new traders, who represent an ideal environment for fraud, if they do not realize their importance to these markets.

Therefore, the importance of continuous awareness is an ongoing responsibility that traders must undertake to protect themselves from falling into the trap of fraudsters, in addition to the necessity of their commitment to important qualities that they must adhere to more than any experienced trader.