The question of whether the forex market and forex trading are legit or just a huge scam is one that has lingered in the forex trading space for a very long time. A lot of notions that exist today about forex being a huge scam have to do with the general perception about forex trading that has been pushed out by those who have tried and failed at this activity. These notions, which have been pushed out as a narrative in many places, do not do justice to the subject.
What follows is a description of the legitimacy or otherwise of the forex market by someone who has been involved in this market for more than a decade and continues to be involved in this market currently. The truth is that forex trading is legit, pays legit money and can be a legit source of income if you approach it with the right mindset and attitude.
Here are the main reasons why forex trading is viewed as a scam by many people.
Perhaps the number one reason why forex is viewed as a scam in many quarters is because of the fact that more people will lose trading forex than will make money from it. Forex trading is a zero-sum game activity, just like many activities in life. Only a minority will ever be good enough at anything to stand out. In the same vein, only a few will be good enough at forex trading to make money from it consistently, over a long time. This has to do with the simple nature of human beings where most people will be comfortable with just doing enough to get by rather than with actually putting in the extra work that is required to guarantee resounding success.
Unfortunately, forex trading is not an activity you can just engage in by just doing enough to get by. If you do this, then you will be part of the 3 out of 4 unsuccessful traders. But if you really put in the work required to get things done, then you will have results that will stand out. In forex trading, a lot of discipline to follow the rules and not be blinded by prospects of returns is what is required to get through to the promised land. Of course, most people who do not make it will simply dismiss their inadequacies as being a result of the scam nature of the forex market when in truth these loser traders are not adequately skilled to trade forex.
Another reason why some believe that forex trading is a scam has to do with the way in which it is marketed to the public. There are literally thousands of forex brokers scattered across the globe. With so many brokers competing with themselves for prospective clients from around the world, recruiting and retaining forex traders has almost become a life-and-death competition among brokers. The end result is that many marketing campaigns by brokers are now designed to lure unsuspecting newbies by painting forex as a get-rich-quick scheme when in reality, it isn’t. These deceptive marketing campaigns end up painting a false picture of what forex trading is in the minds of intending forex traders, and blunts their perception of the amount of work involved in becoming a successful trader. With little or no training and a false perception of what forex trading is, these misguided traders hit the market unprepared and when they eventually lose money, they dismiss their own inefficiencies with the “forex trading is all a scam” toga.
Another reason why forex trading is viewed as a scam has to do with the fear factor that regulators have unwittingly succeeded in generating within the minds of retail traders. Regulation of the forex market is important, and it would be impossible to trade safely without it. Regulation serves to protect the end-users from unscrupulous practices of brokers and other service providers within the forex market. But when the regulation of the market becomes too strangulating and starts to work against the well-being of those it is intended to protect, then it becomes a problem. This is what regulation in some jurisdictions has become, and the traders are not the only ones being affected.
There is virtually no profession or vocation in this world where there is no element of risk. However, you do not see as many disclaimers or warnings about the downsides of these professions being shoved down the throats of those who intend to study to become professionals in those areas. For instance, those intending to become medical doctors do not have all the downsides of the profession thrown in their faces, or else there would be far fewer doctors practicing today. Nobody will tell an intending doctor that a needlestick injury could deliver a deadly blood-borne virus into the blood, and nobody goes telling them that dangerous viruses like the coronavirus or the Ebola virus are things they could contend with down the road in their careers. In the same vein, trainee pilots are not always bombarded with information about all the possible things that could go wrong when they are flying a plane at 30,000 meters above sea level. So one begins to wonder why regulators in some jurisdictions decide to use scaremongering as a means of risk reduction among retail clients of the brokers they regulate.
Regulators in some of the forex trading jurisdictions require brokers to always put disclaimers on their sites about how risky the forex market is, what percentage of traders lose money, and all that kind of stuff. These undue disclaimers make it look as if retail forex trading is a taboo area that should not be touched at all or should only be touch with a really long spoon. Yet institutional traders are not given such disclaimers. Indeed, the recent faceoff between institutional and retail traders over the shares of GameStop and AMC has led some to suggest that regulators are taking sides with the institutional traders and helping them make money off the retail traders.
With such scaremongering tactics now fully entrenched in some jurisdictions, some traders who dared to take the plunge and ended up on using side will be quick to say to themselves “oh, we were warned that we could lose all our money”, and unconsciously dismiss forex trading as a scam.
There is nothing illegitimate about forex trading. In the first instance, forex trading is simply the practice of exchanging one currency for another. While the aim is to make profit from the exchange rate differentials that occur within a time frame, it is possible to make losses if your analysis is wrong. For instance, it is possible to buy a product with the intention of reselling it for a profit, but if prices fall, then a loss will be made. People make losses from other businesses too. You can buy a house today hoping to resell it at a higher price, but you can make losses if the prices in the housing market collapse. You can plant crops to make a profit by selling them on harvest, but a collapse in crop prices could hurt your chances of making a profit. Does making losses in agricultural commodities or in trying to flip a house make the agribusiness or housing markets scam markets? Certainly not. So why would an industry that is worth nearly $6 trillion in daily turnover be classified as a scam industry?
Forex trading is not a scam. As someone who has traded forex made money from it, used the proceeds of forex trading to live life with better quality, and acquire some of the trappings of life that extra money can bring, I can categorically tell you that forex trading is not a scam. Have I lost money in forex? You bet. Every forex trader has lost money at some point in time or the other, but does that make forex trading a scam? Far from it.
Are there scams in forex? Yes, there are. Are there scammers in the forex market? You can be sure that they exist because wherever there is money, it attracts the good guys and scammers as well. Even the regulators have their shortcomings. But do all these make the forex market a scam? Definitely not.
Every human endeavor carries an element of risk. Succeeding at an endeavor is all about mitigating the risks and knowing how to do things right. Forex trading is no different. If you learn the ropes properly and do things right from the trading and risk management perspectives, you should be fine.
Remember, forex trading is not a get-rich-quick scheme. Factually, it serves as an avenue to make supplemental income. It is not a place to earn a living as a sole source of income. It can be a place to make money to start an online or offline business. Forex trading can genuinely make you money. But your mindset and approach have to be right. That is the only way the forex market can become legitimate to you.
In conclusion, forex trading is not a scam. However, there are operators within the space that can device mechanisms with which to scam unsuspecting traders. It is your job as a trader to separate the forex market (which is a legit enterprise), from some of the scam operators at different levels who try to take advantage of the participants. If you can make yourself scam-proof, then you can give yourself a genuine chance at making money from the legit forex market.