Is Forex trading a scam? The short answer is No! and the Long answer is again No!, let’s find out why.
Without the forex exchange market, international trade as we know it would be extremely difficult. Forex trading gets called a scam because of the activities of unscrupulous individuals operating highly illegal online investment activities and using forex trading as a front.
The high and fast nature of the Forex market, the profitable nature of it gives an appeal to many people, making them believe that they can easily double their money trading the forex market. It does not help either that forex affiliate promoters, forex educators, etc. advertise high return rates making people believe that such returns are the norm in trading the forex market.
Before we delve deeper, let us understand Forex a bit.
Before any of the things we do in Forex trading became profitable, there was a system of exchange called the Bretton Woods system, under this agreement in 1944, countries promised to maintain a fixed exchange rate between their currencies and the United State dollar. We wouldn’t go into explaining the Bretton woods system in this particular post, that is a story for another day, but if you are interested in knowing more about it, click here.
The keyword to understand here is that the Bretton woods system was essentially a fixed rate system, this system however was replaced in 1971 with what we now have; the free-floating exchange rate system. There are a number of things that caused the Bretton woods system to collapse, which would be a subject for another discussion another day.
This free-floating system made it possible for people to trade in the Forex market, but this was limited to the wealthy few who could trade in at least a million unit of the currency they were trading in, as you might imagine, this cut off majority of people from participating in the Forex market.
Thanks to the advent of the internet, and advances in computers, what we now know as retail Forex brokers began to operate in 1991. Giving room for anyone with a computer and internet connection to partake in the Forex market, as you would imagine, many people did at the time, inefficiency in the market at the time made it possible for trader’s to make millions of dollars by sometimes exploiting loopholes in the broker’s system.
This easy money approach has been carried on for more than two decade’s and the general public believes that the Forex market is like a pool of money that traders fetch from at will. It is that belief that has led to so many scams on the internet, in fact, if you promised someone 10 -15% per annum returns, he or she might just laugh at your face, call you a greedy or incompetent trader and move to the person offering to double their money each year, or month or week.
With time, people have caught on to this, unscrupulous individuals, preying on the high return-seeking individuals, depending on the supposed anonymity of the internet to defraud people, leading to many asking if Forex trading is a scam. Don’t get me wrong, these criminals could use anything to scam people, but now Forex seems to have the hype of high returns, and the criminals are cashing in hard on that, next is bitcoin.
Is Forex Trading a scam? Not at all, can you be scammed thinking you are investing in the Forex market? Yes! you can definitely be scammed, be on the watch out, and protect your money. I wish you well, and I hope you protect yourself by learning to trade forex for yourself.
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