What is Forex?
The Forex market is a market where people can buy, sell, exchange and speculate on the world’s currencies. Participants in the Forex market include banks, commercial companies, hedge funds, investment management firms, brokers and investors.
The question as to whether Forex trading is ‘legit’ refers to two possible questions. First, is Forex trading a scam? Second, can a Forex trader be profitable?
Is Forex trading a scam?
Absolutely not! The Forex market is legitimate markets where honest traders do business. Forex trading isn’t a scam, but it can get a bad reputation due to several scams that are associated with Forex trading. The high quantity of scams is due to the less strict regulation of the Forex market, making it an easier target for scammers. The Forex market is particularly hard to regulate as it is the largest, most liquid market in the world. It is traded 24 hours a day, and there is no centralized body governing currency trading.
When the Forex market first became available to retail traders in 1999, the most common scam involved brokers who would collect fees from customers and then simply disappear. The majority of these brokers were located in unregulated countries, making it impossible to prosecute them.
A popular modern-day scam is known as the Signal Seller Scam. Signal sellers are individuals or companies who claim to have expertise on the perfect time to make trades. They make money by getting unsuspecting traders to pay them for their expert trade advice. Although some will recommend good trades, others will simply recommend random times.
One of the newest scams, known as the ‘robot’ scam, has emerged with the increased use of AI. This scam involves individuals who claim they have developed software that can generate automatic trades at the perfect time, ensuring an optimum profit. The scam artists make money by selling this software to unsuspecting traders. Much of the software has not been formally reviewed; therefore, it often outputs random trades, resulting in the trader no more than gambling.
The scams that are associated with the Forex market often result in people assuming that the Forex market itself is a scam. The Forex market is completely legitimate, but Forex traders need to be careful and watch out for scams. All traders should research brokers carefully and only chose reputable ones, who are located in regulated countries. Forex traders need to be weary of people promising perfect trading strategies. No strategy, expert or AI, will be perfect. However, with some diligence, any scammer can be avoided.
Can a Forex trader make a profit?
Certainly! The Forex market can be highly profitable, with a total trade volume of around $5 trillion every day. People often question its profitability because many traders are not successful on the Forex market. Ultimately, the lack of success is often due to a lack of market knowledge and a lack of other factors necessary for success, such as having a trading strategy.
Ultimately, Forex trading is very high-risk. Even with market knowledge, every trader takes losses sometimes. Forex trading is not for everyone, but if you have the correct expertise, have from someone with a strong understanding of the market, it is a good market to invest in. The Forex market can help improve your knowledge of the world, and can certainly make you a profit.
Interested in starting Forex trading? BetterTrader has tools that can help, like our BackTester. Learn more about why Forex traders should backtest, join us for one of our upcoming webinars, or get started on our web app today!
The tool: REAL-TIME MARKET SENTIMENT