IS FOREX A SCAM?
Forex is just the foreign exchange market, the guiding power behind all currency exchange activities around the world, the unrestricted scene where all sorts of players have access to, from central banks and financial institutions to multinational businesses and low-level firms, to the ordinary individual exchanging money at the airport, or to someone who wishes to become a Forex trader and be a currency exchanger.
How can you be confident that the Forex isn’t a scam? For one thing, the foreign exchange market has the highest turnover of $6.6 trillion per day. Unfortunately, the possibility of creating such massive wealth in a short period comes with its risks. When large sums of money go through the rounds, there are bound to be a few guilty people who intentionally want to mislead you and defraud you of your money.
Although it looks too good to be true, you can relax knowing that Forex is not a fraud. If you have ever come upon FOREX.com and any other Forex trading system, you must have found that the currencies are typically listed in pairs. It’s because when you trade Forex, you buy one currency and sell the other at the same time.
IS FOREX TRADING A SCAM?
Traders, brokers, finance gurus will all inform you that Forex is nothing more than an investment tool that has been in place for many years, while the Forex system is being used by all international financial institutions to help ordinary people swap currency for an upcoming trip.
As of recent, the Forex market has been put in a rather odd position. No one would expect Forex to rise on such a large scale in the last few decades, the largest and most influential market in the world today.
Only a few years ago and Forex seemed to have been considered a niche, but now we’ve seen the tables turn, and the foreign exchange market has had record volumes recently.
With more and more ordinary people trying to become prosperous Forex traders, so many optimistic stories about making money from Forex, too many Forex gurus promising an instant gain to look up, it’s no wonder that the average citizen would doubt the entire idea and process of Forex, questioning whether or not there’s a fraud hidden behind all the popularity and benefit of Forex advertise.
What makes no sense are the illusions that Forex trading will make you a millionaire immediately or the belief that Forex can always offer you a win, and you can never fall upon failure or loss. People and companies who guarantee you any of the above listed are the reason why anyone would consider Forex trading a fraud.
And if you venture into the world of the foreign exchange market and start investing, you will quickly figure out that success and loss go hand-in-hand with all we face in life. Whether or not progress will overshadow failure is a matter of a range of factors, as well as your efforts as a trader. And there’s nothing dumb about Forex because it’s all about the risks you’re able to take.
Here are the common Forex Trading Scams:
Scams by Brokers
Forex traders from all around the world are still searching for the right brokers. Traders want to make the best of their investment returns, just as you do. But beware of Forex traders taking a jump on their customers.
Beginner Forex traders frequently complain about registering with brokers who have simply refused to withdraw from their accounts. Make sure to do your homework on brokers and their reputations. The footer of the broker’s website is a decent place to proceed. If you do not have any knowledge about regulators or any additional disclaimers along with their web address, you cannot believe them.
However, if the broker is listed in the Securities and Exchange Commission (SEC) Regulations, it is a good indication of a trustworthy broker. You may also run a fast search on Forexfraud.com for brokers with a history of incompetence and theft. Know, brokers must have the best interest, and their trading strategy must show that.
Signal Seller Scams
Forex traders rely on signals or charged information to forecast currency fluctuations and their value. This knowledge can be bought from companies, fund managers, or experienced traders called signal traders.
You may subscribe to the signal sellers for a charge on a weekly or monthly basis. Often, you’ll hear brokers quoting these outlets to persuade you on a trade. In such situations, ask your broker to provide you with a historical performance chart of their signals to determine the validity of their statements. Because most signal vendors have a mixed record of positive and poor advice, you will have a difficult time making a proper decision.
Brokers will exploit those grey areas and allow them the benefit of the doubt when letting you trade in a specific way. And if the exchange does not go as expected, the brokers will criticize the signal sellers for the damages suffered without taking responsibility.
The point-spread scam is among the oldest tricks of the game after Forex trading began, and traders have been using a computer-manipulated ask and bid spreads to trick the seller. Usually, Forex currency pairs are estimated at four decimal points. Crooked brokers will manually enter a particular bid and ask for a large spread in the fourth decimal point for higher returns, taking a massive bite out of your earnings without your knowledge.
In recent years, the point-spread scam has also been curbed, but not entirely out of practice. Comparing bids and ask spreads from many other brokers will give you an immediate insight into the point-spread scams.
The new development in Forex trading is the use of digital algorithms or “expert advisors.” These robotic systems search the data of different currencies and their previous history to assess and preset successful entry and exit transactions for you. From brilliant websites to bogus testimonials, many of those bot-based organizations are moving a long way to encourage you to believe that you can build riches on the autopilot without logging into your account for long days at a time.
The tech boom is so pervasive that a few bots have attracted Forex learners who want to make money while they sleep, only to discover too late that their money is gone. However, there are tried-and-tested bots on the market that have proven to be very efficient in their trade.
IS FOREX LEGIT?
Although foreign exchange ( Forex) investment is a genuine endeavor and not a fraud, several scams have been connected with Forex trading. Like in many businesses, there are plenty of competitors out there looking to take advantage of outsiders. Regulators have introduced protections over the years, and the market has strengthened significantly, making such scams increasingly rare.
Foreign exchange trade includes dealing in pairs of currencies.1 For example, someone could swap euros for US dollars. In September 2019, the value of one EUR usually ranged from about $1.09 to around $1.12. So, a trader who exchanged $100 for $112 when the value of the dollar was high could make a profit by swapping that $112 for euros when the value of the dollar dropped back to $1.09 per euro. Such a deal would result in a net profit of only about 3%, which would likely have been taken out by the broker’s commission.
IS FOREX A PYRAMID SCHEME?
A Pyramid Scheme is a marketing strategy that attracts members through a pledge of rewards or benefits to joining others in the system rather than investing or selling products.
Forex trade does not pursue a pyramid structure. This is partly because traders have absolute power over the selling and buying button as per their choice. You can close a trade according to your preferences, and you can not enroll others in your business as the original aim of your business. Forex pyramid scheme does not exist if you use regulated brokers. Forex trading is a legal business, just like stock trading.
Unfortunately, many people tend to make vague and false rumors about Forex. Some people might even say that Forex trading is just a pyramid scheme, But in reality, this isn’t the right thing to say! Forex trading never follows the pyramid scheme. The best part is that Forex trading gives you full control so that you can strike the buy or sell button as per your individual’s choice. You have the full privilege of closing the trade you want as per your preference. As a trader, you can undertake a thorough analysis of the available Forex signals to choose the most profitable trade which can help you earn profits in no time.
Now, having said the positive aspects mentioned above, you also need to take note of some of the malicious Forex trading schemes that may scam you! For example, you may find several advertisements that can assure you a quick lot of money in Forex trading. But, please, don’t ever be the prey of such fake promotions and offers! Please note that there have been no easy shortcuts to making a fast fortune in Forex trading. Therefore, please be aware of these false promises. For example, some webpages or apps may offer you that you can easily make Forex trading profits without doing absolutely nothing. Although such assertions may tend to sound pretty nice and comfortable, they are nothing but scams. Please avoid such scams diligently. Or else, in the end, they may ruin your net profit.
IS FOREX LEGAL?
The simple answer is that it changes depending on where you are. Before we explore where Forex trading is legal and where it is not, let’s look at why Forex has become extremely popular.
The Forex Trading Craze is now a global phenomenon accessible to everyone, driven by advancements in automation technology and the advent of mobile phones and tablets. These factors have led the ads of Forex and Forex brands to some of the top levels ever seen since the 1990s. Over the last 10 years, there has been a lot of internet penetration that has seen Forex trading move into regions around the world that have never heard of this 5-letter word before.
Despite the dispersal of Forex trading, the market is also a perfect location where there is a great deal of geographical inequality: in which things are easy for traders in some countries, there are all kinds of challenges for traders in others. Most of Forex’s online literature describes and portrays Forex in a way that suggests that all traders in all nations have equal access to Forex trade knowledge, skills, tools, technologies, and services. This is a long way from reality. The geographical position of Forex brokers is one place where there is a wide disparity.
Most of the Forex brokers in the world today are located in the United States, Europe (including the United Kingdom and Cyprus), Asia (Japan, Singapore, Australia), and the Middle East. Hardly any brokerage operation occurs in Africa, other than in South Africa. This has created a climate where those who trade Forex in nations where there is no physical brokerage operation are at the hands of offshore brokers and the guidelines imposed by the agencies monitoring those brokers.
Regulation of the Forex Market
Also, self-respecting Forex brokers, through whom people trade on the market, should be granted a special license verifying that higher authorities control them. The practices of any financial institution, including Forex brokers and trading centers, are also subject to mandatory registration.
For instance, the SEC (Securities and Exchange Commission) Forex control board, located in Cyprus, has the minimum level necessary to protect the client. Offshore companies are using their facilities.
Regulators in the United States:
- SEC – securities;
- CTFC – currency market and regulation;
- NPA – prospective non-governmental association;
- FINKA – independent regulator of financial markets;
- SIPC – Investor security.
The Swiss regulator is FINMA – control of the capital markets. FCA – Financial Markets Regulation is the UK regulator. In Australia, the Forex market is governed by the ASIC (Investment and Securities Commission). The International Financial Services Commission implements financial regulation in Belize. For example, the JustForex broker has an IFSC license.
European regulatory authorities:
- the Jurisdiction – an autonomous regulator of the European Union;
- MIFD – the EU Directive to serve the majority of representatives of the market of Europe.
Forex in the United States
One of the prevalent misconceptions by non-professional traders on the Forex market is that Forex is forbidden in the United States of America. It’s not real. Forex is not prohibited in the US! But in the American market, brokers’ work is supervised very strictly and carefully.
To offer Forex trading facilities, the broker must acquire an appropriate license and provide a security deposit of approximately $ 20 million. As a result, several brokerage firms from other countries, compliant with the requirements of US law, are warning on their sites on the internet that their services are not meant for US residents. This is because only a limited group of regulated corporations serves North American customers. However, American laws do not restrict residents of this nation from dealing with the Forex market.
Forex and Religion
Many people also believe that Forex is prohibited in countries where Islam is practiced. This is not exactly accurate, though.
Sharia Islamic Rule, i.e., the Rule of Islam, forbids the offering or obtaining of interests of any manner whatsoever. The reason for this prohibition lies in the belief that the adherents of Islam should only give, and not give, something back. Accordingly, contrary to these views, it is not Forex trade itself that is banned, but swap dealing.
Swap is a regular fee or deduction from a currency trader’s account for the movement of a free exchange position during the night.
But in that case, swap-free accounts or Islamic accounts without swaps have been created. Every commission in the field of profit is exempted from Islamic accounts. Thus, Sharia law is not violated, and Forex becomes accessible to all.
In the country, however, Forex trade is not forbidden. Besides, more and more traders come here every day who trade effectively and earn money. If you’re looking for a good broker, take a look at a foreign broker promising decent trading conditions and a secure deposit and withdrawal process.