Is forex legit or a scam? 

There are approximately 10 million forex traders in the world today and around $6.6 trillion are traded in the forex market on a daily basis.

These numbers are, frankly, quite impressive. If $6.6 trillion is going into a market in a day, you wouldn’t think that people would worry about it being a scam, and yet here we are. This belief is not unfounded.

Unfortunately, there is cause enough for people to fear that the multi-trillion dollar market might just be a big pyramid scheme or scam.

There are many service providers and brokers out there who have built legitimate-looking businesses just to get a one-time benefit from new Forex traders. Ultimately, people learn but it’s often the hard way.

There are tips and tricks to avoid getting scammed in Forex and we will cover some of the most important ones later in this blog. But for now, let’s start from the root of the problem.

What is forex?

Forex is short for foreign exchange and it’s the currency market. It’s where one currency is bought or sold with another.

The forex market is not limited to one location or time zone. It exists everywhere there is currency. And it stays open around the clock, since it shifts from one time zone to the other.

Who trades in the forex market?

From central banks to 19 year old college students, everyone can trade in forex. In fact, when you travel and convert one currency into another, you are participating in the forex market.

Every currency conversion takes place through the foreign exchange. This is why, the daily trade volume of forex is so high ($6.6 trillion). All those who participate in it aren’t day traders.

Here are some of the main groups of participants in the forex market:

1. Central banks
2. Private banks
3. Investment companies
4. Hedge funds
5. Individual traders
6. International travellers

Is Forex a scam?

In light of the above information, the forex market itself cannot be a scam and it’s not. However, there are brokers and other service providers who might pocket your money with no intentions of offering a real service.

If you’ve been on Instagram recently, you might have seen people (read: bots) singing praises of random investment specialists and traders they weren’t asked about to begin with. A standalone comment under a cat video will read like ‘yes, I can’t believe that it’s real but… *insert a number they supposedly made in “just 6 weeks”*’.

While it is unlikely that anyone actually falls for these, this is where forex trading gets its bad rep from.

These are the people you need to stay away from and generally anyone who claims that they will help you make thousands of dollars. Even the most experienced of traders lose in the market often. If it were that easy, everyone would be doing it, after all the forex market is not a secret. It is the biggest market in the world.

How do you make money through forex?

Is there a legitimate way of making money in forex? Fair question and yes, there is. A simple trade based on price moves and the difference between your buying and selling price is the right way to make money through forex.

If you buy a currency low and sell it high, you make a legitimate profit off of this forex trade. If you sell a currency at a higher price and buy it back for less, you have just made a legitimate profit.

Even if you’re not actually participating in the forex market as a trader but you are dealing with currency as an international traveller, you might encounter chance profits of this nature.

How to prevent getting scammed in forex?

There are few tips to remember when dealing with any service provider in forex:

1. If you are being given unsolicited recommendations for service providers or brokers, don’t take any of them.
2. If a service provider shows a record that is too good to be true, don’t take the risk. Often times, in the world of investment when something seems too good to be true, it’s not true.
3. Don’t rely on testimonials on their own website. Either look at the reviews on their Facebook page (those reviews are often more honest) or go to third party forums and find out anything you can about the kind of experience people have had.
4. Research whether the service someone is offering is even of any value to a trader or not. They may make something very secondary and useless look huge to new traders.

In conclusion

The forex market is too big and conspicuous to be a scam. However, the way trading is presented to people and the sheer exaggeration when talking about profits can lead to expectations that are not rooted in reality.

The reality of forex trading is that it is unpredictable and there are no guarantees. Because the market is very volatile, one strategy won’t work the same way every time. And even the most experienced of traders lose often.

Having said all this, if you educate yourself on the forex market and take calculated risks, you might find it to be a worthy utilization of your time and money. Just make sure that you do not expect to make millions overnight and don’t risk what you can’t afford to lose.