Forex trading - Real or a scam?
Before starting forex trading, aspirants always ask “Is forex trading legal?”. If we go straight forward with this question, then the answer is “Yes”. Now you may say that there are articles on the web that prove trading forex or CFD trading is illegal. You may have listened to some experts that say avoid forex scams. You are right. There is always talk among the traders about scams related to forex trading. What are these scams, if the trading is completely legal? Now, let's answer it with a deeper meaning. If you ask Google about these scams, it becomes complicated answering it. We are here to answer it in a very simple manner. Why there are scams in forex trading, why it is still legal, etc. every answer is available here in this post. Keep on reading and share it with your trading colleagues.
What Is Forex Trading?
You searched on the internet and found this post about forex scams. That means you understand about forex trading or know how to trade. For those who don't know what it is, FX trading is trading of currencies. In foreign exchange, there are currency pairs available to forex trade. As in the forex market you buy and sell stocks, In foreign exchange, you buy and sell the trading currencies. These currencies can be foreign or your own country’s currency. It is all up to you how you choose the right currency pair for you to trade. Price drops and price hike of currencies generates profit or loss for the traders. As usual, there are also brokers in foreign exchanges.
BONUS TIP: Never give your details related to your forex trading account or trading strategies to anybody.
Why Do People Say Forex Is a Scam?
Until now, we have said that the forex is legit. So why do people keep on saying that forex is a scam? Why are they saying this? It is a big question. It is all due to some scams held in forex trading or commodity futures trading. Now read it carefully. Forex is not a scam, it is very clear. But some people are out there that are doing scams in the name of forex trading. Try to understand it with the help of an example. Amazon is selling products, it is a very legit e-commerce trading platform, right? But someone comes out and fools people in the name of Amazon, then what will you say? You will say that person is a scammer, not the Amazon. Similarly, there are forex scams, but still, the exchange market or forex is legal.
Some Popular Forex Scams:
You can see some experts advising beginners to avoid these scams. Below are the all popular retail forex scams:
- Point Spreads Scam: Forex brokers don't make that much money with brokerage fees. That is why they use point spread scam to increase the spread and gain more profit from currency trader.
- Indicator Scam: No forex broker is responsible for this problem. Some so-called market experts give indicators and forex news. They claim that they can predict what will happen in the market better than anyone else on this planet. They charge fees to tell their prediction and best forex tips. Newbies always get caught by such frauds.
- Automation: Some companies and websites offer trading platforms for automatic FX trading. This automatic forex trading is also not very efficient for traders who prefer fundamental analysis. You pay money for their subscription plans and in return, you won't get that much profit from automated trading. They claim that as a trader you don't have to do it on your own, trading software will do it for you.
- Excess Charges: Some brokers are asking for excess charges from traders. This problem occurs when you are trading with a non-legit forex broker of the foreign exchanges.
Who Authorizes Forex Trading?
If forex trading is legal, then there must be someone authorizing it? Do you know who is authorizing forex trading? Let's make it clear for you. Each country has its own rules related to forex trading. Foreign exchanges follow these rules. For example in the United States, NFA and CFTC are authorized forex dealers.
Things To Consider Before Forex Or Currency-market Trading:
You must consider these things to avoid forex scams and free forex scams:
- Compare Charges Of All Brokers: Compare everything before you choose a broker for you. Compare the brokerage and other charges of some popular brokers. Also have a look at their charting and trading accounts.
- Choose The Registered Broker: Always go with a registered broker. Before choosing you must ask the broker for its details.
- Make It Clear With Broker: Always read everything before you start with any broker. Read the broker's prospectus, terms & conditions and make everything clear.
- Everything In Written: Every deal with a broker must be in a written form to avoid fraud.
- Check The History Of Broker: Must check the broker’s performance. Ask for previous financial year performance reports.
- Avoid Boom Profits: There are no overnight profits, avoid them. Also, avoid the brokers that claim overnight profits in forex trading.
Broker Can Be Scammer Not Forex
There are no forex scams, there are problems related to the online trading market. Some notorious people create problems for traders to make money. Some unauthorized or non-registered brokers are also the reason for these problems. People call these problems scams. But they are not scams, they are problems created by brokers. So you can assume that when a broker asks for more fees from the trader, then that broker will be a scammer, not the forex. Because there is no high brokerage in forex online trading. Brokers earn through the point spread of currency pairs.
BONUS TIP: Avoid brokers that say there are zero risks in forex trading.
Some Countries Made It Illegal
People from some particular countries are spreading the word that “forex is illegal”. They are saying it because of the different forex trading rules in their countries. Some countries made forex trading illegal. Some countries control foreign exchanges and make them regulated. The reasons behind these things are different for every country. Some countries do this to protect their currency and currency trading in the global market. For example, India has made forex trading regulated. Forex trading is a decentralized market in the whole world. But India has regulated it by adding it into its popular stock exchanges called NSE & BSE. You can only trade foreign currencies through these exchanges if you are trading foriegn exchange market in countries like India.
BONUS TIP: Before you choose a broker, read some unbiased reviews about them.
Let us summarize everything we have elaborated on in this post. The first thing that you must keep in mind is that online forex trading and commodity trading are legal. There is no evidence that forex trading is illegal. But there can be forex market scams and frauds. Brokers, some notorious people, or agencies cause these scams. Foreign exchanges are never going to do fraud with the traders. Foreign exchanges have existed for decades. People use to trade currency pairs in various exchanges and get huge profits every day. So there is no meaning to ask the question “is forex legal?”. Some countries have different rules for a forex trader, which makes it different for its citizens.
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