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.
Becoming financially
free takes time and requires many hours of hard work and study.
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