Today we can see in the media a lot of bad comments about forex trading, CFD, risky investing. There are a number of allegations by clients about broker business. So, is forex legit?
Forex trading is a legitimate and profitable business regulated by global supervisory bodies. Several governmental and independent bodies supervise forex trading around the world and they set standards that all brokers under their jurisdiction must comply with. Forex trading is legit regulated business as same as stocks trading or commodities.
When ordinary people exchange one currency for another in the expectation that the price will change they are part of the trading mechanism. If you don’t have any experience trading, it is understandable that you might be wary of some of the options available to you out there.
Stocks, bonds, treasuries – all of it can seem like an entirely different world and one that is often far removed from what most of us do for a living.
But don’t think that you’re not sophisticated enough to trade.
In fact, you might already have the tools necessary to start trading in a commodity that all of us can understand: Money.
A-Grade brokers regulation
This is a strong reputation broker. This means high capital requirements, rigorous trading rules, laborious and high reporting standards and tougher (expensive) penalties for non-compliance. USA (Commodity Futures Trading Commission CFTC, NFA) – Japan (FSA Japan) – United Kingdom ( Financial Conduct Authority FCA) – Australia (Australian Securities and Investments Commission ASIC) – Singapore (Monetary Authority of Singapore MAS) – Hong Kong ( Securities and Futures Commission SFC) – Switzerland (Financial Services and Markets Authority FSMA) – Germany (Federal Financial Supervisory Authority BaFin)
B-Grade brokers regulation
Capital requirements, physical presence rules, simplified reporting standards, fit and proper tests, and lower tax rates. – The Bahamas (Securities Commission of the Bahamas SCB) – Cyprus (Cyprus Securities and Exchange Commission CySEC) – Czech Republic (Czech National Bank CNB) – Latvia (FCMC) – Malta ( Malta Financial Services Authority (MFSA)) – New Zealand (Financial Markets Authority New Zealand FMA) – South Africa ( Financial Services Board FSB) – United Arab Emirates Dubai (Dubai Financial Services Authority DFSA)
C-Grade brokers regulation
Little or no regulation compared to the other grades. – Belize (International Financial Services Commission IFSC) – British Virgin Islands (British Virgin Islands Financial Services Commission BVI FSC) – Cayman Islands (Monetary, Regulatory and Advisory Body of the Cayman Islands CIMA CIMA) – Mauritius (Financial Services Commission – Mauritius FSC) – Saint Kitts and Nevis (Financial Services Regulatory Commission – St. Kitts) – Seychelles (Seychelles Financial Services Authority SFSA) – Vanuatu (Vanuatu Financial Services Commission VFSC)
You can see the whole list for each country in a List of financial regulatory authorities by country.
How you might ask?
On the Forex market where traders buy and sell foreign currency for tidy little profits every day.
These licensing agencies make sure that the Forex market works smoothly and that traders are able to complete transactions with confidence.
Far from being a scam, Forex is actually completely necessary for conduction international trade and business.
Though there isn’t a centralized, global exchange system, the various regulatory bodies that exist around the globe make sure that the market works in as efficient a manner as possible.
Fraud and forex scams aren’t impossible (as, indeed, they are possible in any market) but they are harder to pull off in a Forex market due to the need for either massive collusion or massive volume to manipulate the market.
Forex is what is called a “zero-sum” market. That means that, like in an options contract, there is always a winner and a loser.
Both parties can’t make money in a Forex exchange because that would require both currencies to be equivalent in value to one another which, upon exchange, would not result in again.
In this kind of market, knowledge and market expertise lend an advantage to the trader with more resources and experience.
That doesn’t mean that making a profit is impossible, it just means that the time it takes for a trader to develop their strategy might be a little be longer than with other forms of exchange such as in buying and selling stocks.
Be wary of any group offering you guaranteed returns as it is most likely a scam.
And before you start trading Forex you should practice first with a free online simulation. These are totally free and allow you to learn in a simulated environment that mimics the market. Here you can learn the basics as well as strategies that work for you. In addition, you can determine how much risk you want to take and what currencies you think you want to trade.
One thing is certain: In any market, the big boys tend to win no matter what. The one way you can level the playing field in your favor is to learn as much as you can about Forex and hone your skills in a simulated environment before taking the plunge into actual trading.
Where is the problem – forex is a scam or legit
Main problem because forex trading has a bad reputation is this:
1) 95% of traders lose their money because of bad risk management, greedy, overtrading, lack of knowledge. When some traders realize that a quick-rich scheme is not possible in the forex industry they start to talk that trading is a scam.
2) Marketers in the trading industry (forex signals promoters, online course promoters, trading products promoters…) are creating aggressive and very often scammy and unethical marketing promotions. This bad faith promotion will destroy forex trading reputation.
A lot of traders think that portfolio (trading account) they can manage, risk 5%, 10%, 50% or more per trade and double their account every month. This is the wrong way of trading and a lot of people because of huge risks, lose their money. This is why a lot of traders ask themselves “Is Forex Trading Legit? ”
Investors around the world can now access active trading and investing and they can participate in a growing number of markets because of internet and electronic trading. They can decide to trade stocks, forex, or futures contracts, their decisions are made based on risk tolerance, convenience, or account size.
It will be difficult for traders to earn when they are not available during regular market hours to enter, exit and properly manage trades. Traders or investors should select options based on the time they can spend doing trading. There can be a steady growth of funds, earning dividends or a loss when stocks are devalued for persons who trade stocks.
However, today’s investors and active traders can access many different trading instruments, they can even learn to trade with virtual cash and trade risk-free. Other trading instruments such as blue-chip stocks, fast-paced futures, and others can be chosen, it depends on the preference of the trader.
Forex market (CFD business) and stocks market are in the same basket, regular business opportunity.
When we choose an Online Broker – we can see that forex business is legit
Every single broker needs to be part of some regulation body, get a license.
Choosing the best stock broker or forex broker can help persons to trade and lose less as brokers are trained and they know what to expect when they are trading. There are online brokers you can employ, you can choose an online brokerage that suits your needs. You need to decide if you want to be an active or a passive investor, the amount of money you are willing to spend on brokerage fees, and the level of risk you want to take. These are just some of the factors you will need to think about when you are choosing an online broker. Choosing a forex broker can be a technical process, it is always best to check on the reviews left by others before making a decision.
Professional traders will compare investing in the forex market to buying blue chips, indexes, and industrial.
“Buy and hold investors, are seen as persons who should trade in stocks, while short-term traders or scalp traders will prefer investing in the forex market”. Yes and no. A lot of traders hold a long position in the forex industry as well.
In this article you will see why investing in the forex market is the best option for traders, as price volatility is more pronounced there. There are many factors to be considered when persons decide to start trading and it is best for persons to get as much information as they can before they start trading.
Forex is a legit business for Smart investors
Knowing your risks and implementing strategies to avoid pitfalls, will help to grow a portfolio in a reasonable time. These investors are constantly thinking about their appetite for risk, trading objectives, and their level of experience. They know how important it is for them to be honest with themselves.
However, even when smart strategies are implemented traders lose money from time to time. Markets can be volatile, and mistakes can be made, but smart investors are always alert, and they know what signs to look for when they are trading.
Forex trading is the preferred choice that smart investors use whenever they choose to invest. Investors can choose from a wider cross-section of trading options.
Experienced traders can increase their earnings quickly by capitalizing on the sudden hikes in the market.
Forex trading is continuous as markets are always open and trading worldwide. Persons can find professional, experienced brokers who will trade on their behalf and keep om earning consistently. There is no need for traders to worry about waiting for their investment to grow, once they are trading with the right brokers or other professionals who know the forex market well.
Persons can find out who the successful traders are and try to Implement their strategies and become just as successful once they are willing to learn. When this happens, trading currency is the best investment option a person can find. As money is made every day and there is no need to wait for a company to pay dividends, as they do when they are trading in the stock market.
Traders learn trading strategies such as pullback trading, break out strategy, and many other strategies and use them to earn. The traders who know what to do are always earning. The persons who want to learn and earn from forex trading can easily find courses that they can take online and quickly learn about the things they can do to earn in forex markets.
A professional trader is astute, disciplined, not very emotional (practices risk control), does not give up easily. There are many persons who stop investing their time and money in forex trading because they tried it once and they lost some money. These persons will never become successful at forex trading and make money every day as they are not courageous and patient. They are not willing to find successful persons, who are making money every day by trading forex and learn from them. The persons who are unwilling to try because they heard that forex trading does not work and simply refused to do what they needed to do so they can be successful traders.
Since we know that the successful forex traders are the ones who lost money and still pressed on until they became professionals by learning the best strategies and improving their skills every day. We can say making money in forex trading is possible whenever persons are willing to be persistent. Forex trading is simply not something that the people who quit easily should do. These people simply need to understand that persistent traders make very huge profits every day.
Forex
The foreign exchange currency trading, Fx, or forex market is the most accessible and liquid market in the world and it is also the largest one. Understanding the technical, fundamental analysis and the macroeconomic analysis necessary for trading is important. Traders need to be sufficiently capitalized, so they can use the appropriate trade sizing and limit the financial risk by using smart leverage levels.
Trading in this market is different, as it involves selling and buying world currencies, as you make a profit from the difference in the exchange rate.
Getting into forex trading is easy, you can learn from other traders at the forum, do an online forex course, or simply open an account with a broker. It all depends on your level of competence and the level of risk you can afford to take.
Most forex brokers won’t charge a fee
The forex market tends to be less volatile in the long term than the equity market. However, trading can be risky, and traders should seek to be very informed as they can lose quite rapidly if they don’t know what they are doing. It is good to focus on the fact that, forex trading can earn high profits as well. Many brokers are compensated whenever bidding takes place.
One important fact makes that people are against the forex industry. Huge leverage. A lot of brokers will give traders the opportunity to trade 1:500 leverage and then 95% of them will risk too much per trade and lose all money. When more people lose money than earn money – than we have the question “is forex legit business ?”
Trading in Stocks
Trading in the stock market is risky and there can be huge losses when stocks lose value. The stock market is vulnerable, it is influenced by governments and what they do.
Fear is also, influences the stock market and you never know when people will become fearful. A lack of confidence can cause the market to become unstable and this causes a downturn and losses for investors.
David Rosenberg who is an economist once highlighted the fact that only 50 percent of New York Stock Exchange stocks are above their 200-day moving average. It was the first time this was happening since Donald Trump became the President and the hope of pro-growth policies like tax cuts and spending on infrastructure was expected. This caused a massive market rally because there was hope. You can clearly see that there is a great deal of uncertainty surrounding the operations of the stock market.
The lack of market breadth can be worrying, this happens when there is a lack of confidence and investors put their money where they think they will feel safe. This causes them to invest their money in a small list of stocks and this is bad for some companies that are listed on the stock market as their company shares might not do well.
There can be volatility break out in the market and this can lead to huge losses for investors.
Dividend payments can be small, and they are not always paid regularly, investing in the stock market is seen as something persons do when they are not planning to earn much from, their investment.
Stockbrokers always charge for their services, unlike the forex brokers who find other ways to earn.
Big investors and trading companies can make more scam and manipulation on the stock market than on the forex market because the forex market has volume, pure price trends without insider trading. Currency pairs can not be hurt by a journalist!
Trading is like anything: The more you know about it, the better your outcomes tend to be.
That said, it is also prone to scams and deceitful practices just like any other market.
In this article, we are going to talk about seven common forex scams that you will see in Forex trading, what they are, why they are bad, and how you can spot them and avoid them.
Knowledge is power and, when it comes to Forex, it also saves you a lot of time and money.
Here are the most common types of Forex scams that you might encounter in your trading career:
Signal Selling
You may have seen traders on YouTube (and elsewhere) promising you insider knowledge about what stocks to buy and sell to make a bunch of money.
Typically this relies upon little to no research and total ignorance on the part of the buyer (that would be you).
Signal selling does make one person money: The guy you’re paying for the “stock tips.”
Don’t get us wrong: Not all “stock tips” are signal selling. But, typically, anyone offering you a “secret list” of “guaranteed stocks that will make you money” in exchange for a weekly or monthly subscription fee is ripping you off and could be guilty of signal selling.
Wrong promotion in bad faith (holy grail expert advisors, holy grail signals, expensive online courses, etc. ) quick money scheme promotions, can hurt forex trading reputation.
High Yield Investment Programs
Often though not always, HYIPs are those that promise above-market returns and (typically) guaranteed security.
Think Bernie Madoff when you’re thinking about Forex scams in this area.
Because no trader can guarantee above-market returns without any loss of capital whatsoever, these traders typically pay out older members of the scheme using money brought in from new members or subscribers. Though an HYIP isn’t necessarily a Ponzi scheme or pyramid scheme, it can be structured in that manner.
To avoid this one just remember: If it is too good to be true, it often is.
Manipulating Bids/Asks
This involves your Forex broken manipulating trades so that they make money and you probably don’t.
Boiler Room Trading
This involves faking trades and running off with your money. It’s that simple. In Forex it is as easy as taking your money and then not executing on the trades though, when it comes to stocks, a boiler room typically involves an operation raising money for an as-yet-unlisted company and then keeping the money raised from investors for themselves.
You can avoid scams by educating yourself on the ins and outs of the Forex market. Knowledge is power and being forewarned is forearmed when it comes to Forex scams.
Conclusion
Trading in the foreign exchange markets is the best thing for investors to do, as there are many great books that are available and there are brokers who are willing to assist those traders who need help. Persons don’t need to lose money and sit in silence or sit and complain. Trading in the forex market is a learning process and those who are willing to spend their time learning the strategies will always be the ones who earn and become like the other successful forex traders.
Forex is a legit business because it is regulated and business where is hard to manipulate on currency markets because of huge volume from big banks and investors. Is forex a scheme? On the end, Forex is not a Ponzi scheme – it is legit business.
