Since forex has become more of a household term over the last few years, there have been a huge amount of scams and pyramid schemes popping up within the industry. With so many scams out there, it may lead newbie traders to wondering, is forex just a pyramid scheme? Let’s find out now…
Forex is not a pyramid scheme. The forex markets are highly regulated international money markets that banks and financial institutions participate in. However, there are many pyramid schemes within the forex industry, on the retail side.
Is Forex A Pyramid Scheme?
Forex itself is not a pyramid scheme. The forex markets are essentially just the international money markets. They’re highly regulated and used by everyone in the world, everyday, from banks to post offices, to you – buying things online! There is only $6.6 trillion going through these markets each and every day and it’s safe to say that they’re not a pyramid scheme.
The definition of pyramid scheme is where there is no true product being created, only the focus of getting others to invest. In this way, your initial ‘entry’ into a scheme is your ‘product’. The more you recruit people below you, the more money you make. This is why these schemes are also called multi-level marketing (or MLM) because there’s lots of levels that you can earn money from.
If you’re a legitimate forex trader, there is no marketing, no recruiting, no levels involved at all. It’s your job to work completely by yourself to enter positions in the market – hopefully for a profit. Typically, forex traders are very solitary and don’t socialise with other traders as there is no benefit/need.
However, there are a huge amount of pyramid schemes and scams within the forex industry. This comes from the fact forex trading is extremely hard – only 10-20% of traders ever make a penny. Many traders that fail, try to make some money from the industry. This usually comes in the form of a pyramid scheme, or mentorship (ironically).
How To Spot A Forex Pyramid Scheme?
There are a few fairly straight forward ways to spot a forex pyramid scheme…
1. No Real Product – As per the definition of pyramid scheme, there are no real products being created here. All that is being created are memberships to their ‘clubs’, which is really just them telling you how to trade. This is not the same as someone teaching you forex for free – this will be up front and centre that their main goal is to teach you to make money, not join a ‘club’.
2. Able To Replicate Success With Little Effort – A legitimate product or service needs time, effort and money put into it. This is known as an ‘investment’. It’s all well and good saying that you only have to work a few minutes per day, or making some success stories about how easy it can be with your system – but there are no guarantees in forex. No one will ever apologise for giving you bad advice, but there is always a risk involved.
3. Easy Money – This isn’t an industry where you make easy money at all. It’s a tough, competitive industry and it takes time to learn everything from your broker, indicators, strategies and more! If someone promises you easy money over night through forex, they’re making it up!
Legitimate forex trading is staring at your computer, alone, for 10 hours per day and executing trades. You should never need to market or recruit anyone into any trading program to make money. There are no levels to this, it’s all up to you – which is why it can be so tough.
How To Stay Away From Forex Pyramid Schemes As A Beginner?
It’s fairly simple to stay away from any pyramid scheme, once you know what to look for. It’s worth pointing out that you don’t need to pay anything to learn forex. However, you do need to read a huge amount of information. If someone is promising you any form of ‘easy’ money, run away!
The overwhelming majority of successful forex traders are busy trading, not selling anything. You have to be extremely cautious of ‘traders’ that sell courses, mentorships or these recruiting style projects that are ripping through the industry. This is even more obvious when traders are claiming to make $40,000 per trade – but they want $100 from your for mentorship? Really?
If I was a beginner in the forex industry, this is what I would do:
- Spend a few months studying on Babypips and YouTube.
- Use Tradingview to study the markets.
- Use Soft4Fx to backtest trading theories.
- Setup a demo account with a regulated broker.
- Study Smart Money Trading Concepts.
- Trade demo for 6 months, tracking results on MyFxBook.
- Go live after 6 profitable months.
You should never be paying a membership for some type of trading club. If you want to learn forex, there are more than enough free resources online. If someone is charging, or promising easy money overnight – avoid like the plague!
What’s The Difference Between Forex Education & A Pyramid Scheme?
Not just in forex, but every industry has bad eggs that’ll try and sell some sort of course. The difference is always in how transparent they are about their goals/motives, and what you get for your cash. A top quality education program should come with a money back guarantee. This will ensure that if the course isn’t for you, or was not as described – you can get your money back! In many cases, this will be a video course with examples and downloadable resources. If the program was not as described, simply get in touch and get your money back – these guys are usually trustworthy!
You should also NEVER be asked to promote your trading educator. You shouldn’t be tasked with marketing or bringing anyone else into the program in return for money.
Is Summary – Is The Forex Market A Pyramid Scheme?
In conclusion, forex is not a pyramid scheme. The forex market is one of the largest, most regulated industries in the world. However, if you are approached by someone offering easy money overnight or asking for your help to recruit other traders – it’s a scam!
If someone promises you easy money through forex, they’re lying – trading is tough and there are no shortcuts. Forex is not a pyramid scheme. Pyramid schemes are all about recruiting and making money, which is the polar opposite of what trading is all about!