Forex trading is a scam! That is something that you hear thrown about the internet quite a lot. We are here to take a look to find out whether not trading and forex is actually a scam. Before we even get started, we are going to point out that the answer to this question is both yes and no, confusing maybe, but it will all begin to make sense as we go. There are so many different aspects to trading, so many different expectations from individuals and companies that it can make it pretty hard to work out, so we are going to do the working out for you, so let’s jump in and work out whether forex trading is a scam or not.
So to begin let’s take a very brief look at the history of forex trading, forex trading is simply the exchanging of one fiat currency for another and has been around for centuries. Bartering has been around since the year 6000BC, under this system, goods were exchanged for other goods. If you have looked at history, you most likely would have seen the massive ships cargo items across the sea, simply to trade what they have for something that they need, this was the first form of foreign exchange, as they sailed out to different countries and continents. In the 6th century BC, gold coins were starting to be produced which were then used as a currency due to their portability and durability, along with their limited supply. In the 1800s the gold standard was created, this meant that governments would redeem any amount of paper money for its value in gold. The foreign exchange market was backed by the gold standard during the 1900s, countries traded with each other as they were able to convert the currencies they received into gold. During the wars, this was abolished due to the needs and so the standard currency exchange resumed.
So for something that has been going for so long, it surely can’t be a scam right? In principle, no, forex is simply the exchange of currencies as we saw, so this in itself is not a scam and never can be, what could potentially cause it to be one, are the people behind it. When we talk about the people behind it, we are referring to everyone that has any part in it, this includes the brokers, investors, so-called educational gurus, and even the traders.
When it comes to retail trading you will need to go through a broker, and this is our first stop when it comes to potential scams. There are a lot of brokers out there, in fact, there are thousands of them if not more. Each one offers you the chance to trade on the financial markets with very little effort needed. Each broker offers different features, each one is run by a different company or individual (of course some are the same) and each one has a different level of trust within the trading world. A broiler is basically an entity that allows you to request a trade, they will then push that to their liquidity providers who will match the other side of the trade, the broker will then show you the value of your trade going up and down, you can then close it.
The problem comes from the brokers that are a little less trustworthy. Some brokers trade directly against their traders, so if you put in a trade, they will take the sell counterpart, it is then in their interest that you lose your trade, so they will do what they can to potentially influence the price in order to make your trade stop out, this is a tactic that used to happen a lot more in the past, it is quite rare now due to the way the brokers work and many people now go for STP or ECN accounts which do not allow this or at least make it far harder to achieve. Other brokers have been seen to manipulate prices, and others even worse, have simply outright refused to send their clients any money when they have requested to withdraw them.
Any traders would suggest that you look for a regulated broker, these are governed by bodies who are there to try and protect their clients, yet even this is not enough to completely prevent brokers from pulling little tricks on their clients. The best thing that you can do when it comes to a broker, is to look for one that has a long track record, good reviews, and one that you are able to talk to the support team of, in order to get reassurances and to know that they are still active and there to help.
The next things to look out for are the so-called experts and gurus that you find all over the internet and especially all over social media, there seems to be a lot of experts out there willing to help you make a lot of money, for a price. The first alarm bell should be coming from the fact that they are asking for money to help you make money. You need to consider the fact that if their strategy and information is so good, they should be making enough to not need to charge for it. Some will claim that they want to give back to the community or to help others become rich, but that is nonsense, if they were rich they would simply do it for free in order to get that satisfaction. If you see someone offering ridiculous results or returns, run the other way, there is no way they are real. If you want a mentor, then go for someone with a track record, with information about them available for the public, and someone that others have used, not a random person on social media promising the world.
Have you ever realised that the majority of people shouting on the internet about something being a scam, regardless of what it is are those that have lost their money, yet they do not actually say what has happened, just that they have been scammed. This is something to look out for, many new traders who come into trading and then lose due to a lack of understanding will instantly shout scam. When you see this, look to see whether there is actually anything to their story, if it is simply a scam, then they probably just messed up and are too embarrassed to admit it. It’s good to look for scam warnings, but be sure that you take them with a pinch of salt and actually read them, many legitimate brokers and companies have the same warnings about them even though they did absolutely nothing wrong.
Those are probably the three most prevalent forms of scamming or vocalisation of scams, if you are able to avoid them then you should be on a good track, there area few different tips to think about though in order to help avoid scams:
- Avoid brokers that are offering guaranteed returns.
- Avoid brokers that are offering ridiculously large deposit bonuses, you won’t ever be able to withdraw them.
- Any opportunity that seems too good to be true, probably is, they often prey on your desires or desperation to make you pay up.
- Ensure that you have good knowledge and education when it comes to trading and trading terms.
- Do not send money to anyone unless you know them or have done some proper research.
- Read the fine print for any sneaky bits that have been hidden within them.
- Do a background check on both individuals and companies.
- Be diligent, look after your money and look after yourself.
So we have now seen that trading and forex in itself is not a scam, the opportunity is there, you can make a lot of money, the problem comes from the people within the industry, so use our tips in order to try and avoid those scams and best of luck on your trading journey.