Beware Of FOREX SCAMMERS Offering Get Rich Trading Courses
We have all seen the ads for ‘Easy Cash’ and ‘create passive income’ schemes, but most fail to live up to their promise.
On the face of it, FOREX, or foreign exchange, trading seems an ideal way of making money from your laptop. But is it really that easy?
The BBC show, Inside the Instagram foreign exchange craze – BBC Three, highlights the plight of young hopefuls sucked into a world of ‘get rich quick’ (which usually means they get rich quick and you get poor quick!) FOREX trading courses run by scammers who charge high fees and make ridiculous claims.
In the last year, more than 280,000 under-25s lost their jobs, and up to 400,000 more redundancies are expected when the furlough job retention scheme finally ends in September.
With few options during a lockdown, many people are looking for a way to earn money from home.
BBC reporter and presenter Dion Hesson, also saw Instagram posts for FOREX trading.
“I saw some friends posting Instagram stories saying, ‘if you want to make some money through trading on your phone, message me to find out more,” he says.
“Initially I thought nothing of it, but then it got more popular, with more and more friends posting about it.”
What is FOREX trading?
Foreign exchange is the conversion of one currency into another. FOREX trading is essentially betting on the value of a currency going up or down.
Caspar Marney is a former foreign exchange trader for an investment bank and the founder of Velador Associates, a company which gives legal advice to traders. He says the purpose of forex markets is “to facilitate international business”.
For the vast majority of people, the only time we would buy or sell currency is when we go on holiday, but for companies trading internationally the transactions are much larger.
For instance, “if a US smartphone manufacturer wants to buy LCD screens from South Korea, it may need to convert US dollars to South Korean won.
“In this case, the manufacturer would, through a bank or broker, make a FOREX transaction to buy Korean won for US dollars and then use the Korean won to pay the supplier.”
These types of transactions are one of a range of factors that cause a currency to change value – and it’s that shift in value that forex traders try to cash in on.
I had friends working in city offices with big open-plan offices, LED screens dotted with loads of numbers on them, but that’s changing and, like many industries, moving online.
In those days, only large trading companies and banks had access to the live trading software and facilities to trade currencies or stocks and shares. With the expansion of the internet, independent traders working from their spare bedroom can access similar live information that was previously unavailable to all but the large institutions.
The companies Dion observed on Instagram, promoted the idea of “being your own boss” and he saw many posts that “offered people the chance of becoming ‘financially free’, all by working from your phone or laptop”.
Dion decided the only way to put the promises of financial freedom to the test was to try it for himself, so he enrolled at IM Academy, one of many companies offering FOREX trading education. It cost £240 to sign up and had a £200 monthly membership fee thereafter. This fee gave him access to educational webinars, mentoring and eventually trading platforms.
As part of his journey into this new generation of traders, Dion spoke to some of IM Academy’s FOREX traders and mentors. They wouldn’t disclose their salary, but some of them said they were making “sexy money”.
Dion says this is backed up by the Instagrams of some influencers, which “show the lifestyle you can achieve through trading. There’s fast cars, holidays, boats, and because you then see these influencers teaching trading on webinars, you think, ‘this is possible, I can be one of them'”.
How easy is it to make “sexy money”? Caspar has concerns.
Some media influencers promote FOREX trading as a way to make a reliable income from a small amount of money, with little risk – which is unrealistic, he says.
He adds, “a trade has two sides. If one side wins, the other side loses. There’s also platform providers to take into consideration and brokers who charge transaction fees.
“Adverts and promotions will focus on attracting new subscribers. Influencers may try and attract new subscribers through showing bank account screenshots, exotic and luxurious properties and cars purchased through winnings, as well as the lure of financial independence, all through trading.
“This is problematic as it does not highlight the underlying risks and potential losses of trading. It is not at all representative of the average person’s trading experience.
“While a small few may win, many will be losers, and the average person will most probably lose, just like a lottery.”
Dion’s initially did make some money. After trading £100, he was pleased to find he made a 9% profit, however when you deduct his membership fee, he was in the red by over £330 and would have needed to trade over £2000 before getting in the green.
He adds, “if I actually wanted to make a grand a month I would have needed to be trading with over £13,000”.
Was it beginner’s luck for Dion? It seems likely. One study of individual Forex traders suggests that more than four in five lose money. In the case of IM, they don’t monitor their students’ trading so don’t know whether they counter this trend.
Getting paid to trade or recruit new members?
The more time Dion spent looking at these companies, the more he noticed many Forex education companies have recruitment and referral strands as part of their business.
Many companies do a lot of their promotion through Instagram and influencers, often appealing to people in financially precarious situations – especially people who didn’t have incomes during the pandemic.
In the case of IM, he explains, “getting other people to sign up was a way to waver your monthly membership fee, and also of earning commission. Within many companies there are internal ranking systems, so the more you recruit, the higher you go in that system and the more money you make”.
Dion put this point to IM, who disputed the recruitment claim and said traders were earning commission on product sales.
Warning ‘red flag’ signs?
Dion believes companies like IM Academy tap into a growing culture of “rejecting conventional experts and traditional forms of education”.
From the wannabe traders he spoke with, Dion found there was often a real desire to be “self-sufficient”, but warns “overlooking red flags can come at a cost”.
It’s something Caspar agrees with.
“It’s concerning. There is no such thing as a free lunch. Trading is a particularly difficult business to make money out of.
As with any speculative investment, you should never risk more than you can afford to lose or risk money on investments you don’t understand, like FOREX, Cryptocurrencies or in any of the markets (stocks, bonds, commodities etc.). If you are really interested Caspar says you should get a job with a bank or broker that offers FOREX services and is regulated by the Financial Conduct Authority.
There are of course many legitimate companies offering proper courses in FOREX, stock and options trading, property and money mindset. Just be wary of firms making wild claims or where people make more recruiting you than they do from trading, which is effectively MLM or even an illegal pyramid scheme.
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