Ever come across tempting ads of making thousands in a day from forex? Such ads like “join our platform and be a millionaire” are very common. Unfortunately, many beginners fall into the trap of these schemes every year.
In fact, such false schemes are not operated by forex itself. But this makes people question forex’s reputation. This post will clear all your doubts about the query: Is forex a pyramid scheme?
Forex itself is a trustworthy legitimate trading platform. Unlike pyramid schemes, it has nothing to do with enrolling others to share a marketing funnel. Here traders trade on stocks and commodities. However, pyramid schemes can exist in forex through multilevel marketing companies, fake brokers, and scam ads.
That’s why stay away from these multilevel marketing companies. By saying this, I don’t want to discourage these marketing companies. But the reality is that they have zero focus on earning through trading. All they want to do is to make money by enrolling others on their investor chain.
What Is the Pyramid Scheme?
Before we move on, let’s have a look at what does it mean by a pyramid scheme
In general, a pyramid scheme is an illegal unsustainable business model. In this system, recruiters enroll members by making the promise of profit from earning. The members then bring other members to this funnel. These newly recruited members then invest money to join the pyramid and their money becomes the profit of old recruiters. The chain of marketing networks keeps going in this way.
When the members double, they fail to get profit according to promise. That’s why these schemes are illegal in many countries. In this way, the pyramid scheme relies mostly on the profit from recruiting schemes. They rarely sell products.
This system depends on a constant flow of money. The situation gets worse when recruiting becomes impossible. In this scenario, investors stop pushing the chain up. As a result, most of the members don’t get a profit. This is the major drawback of this system.
The famous scheme of this type was Ponzi.
Is Forex A Pyramid
Now you better understand the concept of a pyramid scheme. It’s time to set a forex trading platform in a pyramid scheme. Does forex rely on a marketing funnel? Does forex rely on the money of recruiters? Does forex rely on a constant flow of money?
It would be unfair to call forex a pyramid scheme. It is an authentic foreign exchange trading platform. It’s better to match forex with the stock market. Still, there are chances of scams in forex. If someone’s trying to recruit you, maybe he would be one of those scammers.
However, there are tons of Multilevel marketing companies that are working with forex brokers. Here we can’t blame forex as a pyramid scheme. Simply, the forex pyramid scheme does not exist if you use authentic brokers and avoid scam ads.
How Is Forex Not A Pyramid Scheme
Why is forex not a pyramid scheme? There are so many reasons for saying forex is not a pyramid scheme. Check out the reasons below:
- Forex gives you full control to hit the buy or sell button.
- Forex also gives you the freedom to close the desired trade or continue it
- Forex traders have full freedom to choose the most profitable trades.
- Forex traders can do a comprehensive analysis of forex signals.
- In forex traders trade on currency pairs, stocks, and commodities
On the other hand.
- Pyramid schemes use investors’ money.
- In the pyramid scheme, members don’t have the freedom to control business.
- It grows with increasing members.
How Forex Pyramid Scheme Can Exist
Why do some people still call forex a pyramid scheme? The reason might be that the forex pyramid scheme can exist indirectly!
How? Let’s see:
Forex pyramid scheme can exist only when companies promote forex trading at multilevel marketing MLM. These companies are regulated by finance regulator bodies. In these schemes, traders spend more time enrolling new members rather than trading.
When you fall into the trap of schemes, you are told about the kinda dream world of becoming a millionaire. Though these are only trapping gadgets.
Below are a few ways through which this system works:
1. False Dreams
In this scheme, MLM recruiters will show you big dreams to change your life. In the end, you will be convinced to enroll in forex. But soon you may come to know it was not as easy as a recruiter was saying.
2. Product Sale
Sometimes multilevel marketing companies hire recruiters who sell videos, software, and tools for making forex profitable. They will convince you to buy these products. When you buy, they will get a commission from companies.
3. Goals are recruiting Only
The main goals of these companies are recruiting and boosting the sale of products. They have nothing to do with forex trading directly. But indirectly, they earn money using fame related to forex.
Tips to Spot Forex Pyramid Scheme
How to spot a pyramid scheme? That’s worth reading especially for beginners! Some pyramid schemes are negative and scam. And some forex course sellers are scamming people.
Below are the tips to spot these forex scams:
- The advertisement that may trap you to be a millionaire in no time is always a part of a pyramid scheme. If you use your common sense, you should know these are hypothetical. These are the only ways of trapping people.
- Sometimes these companies will offer you a big amount. But when you enroll, they will disclose their conditions later, which are impossible to meet at that time you may have submitted enrollment fees. So, beware of these scammers.
- Some websites make false claims that you can earn from forex without doing anything. Buddies are fake claims. In the real forex world, you may have to practice for months to earn your first dollar.
Whenever someone tries to convince you, always check the authenticity of the company. Never submit fees to any company that is not registered.
How to Avoid Forex Pyramid Schemes?
The simple rule of thumb is that trading is risky. To make it profitable, use the right strategy that risks 1% to 3% of your trading portfolio every time. Even if brokers say you that you can go far beyond this with low capital. You can make so much with a micro account. All of these are false claims.
Do proper research even if you’re trading with authentic traders. Stay on a demo account for more than 6 months and then jump to a real money trading account. Never invest a big amount before working on a demo account with any broker. You may lose your precious money if you start trading with any traders without withdrawing a single penny.
How legit is forex
Forex is a one hundred percent legitimate trading market. This system is not a scam itself. This is because it is a zero-sum market. If one trader makes money, the other will lose. However, there are tons of scams associated with this market. So do proper research before working with any broker.
But we all know that forex is not a waste of time and it worths the time.
Why forex a bad idea
Some people think that forex is a bad idea. The majority of these people are those who fail to earn money from this trading platform. It’s true that trading the currency pairs is walking on a double-edged sword. The risk of losing money goes side by side. But if you are consistent and have an effective trading strategy, forex is not such a bad idea for you.
Lastly, forex is not a pyramid scheme. However, the pyramid scheme can exist in forex indirectly in the form of multilevel marketing companies. These companies use forex indirectly to earn money through affiliate programmers.
They tend to sell forex-related videos and products. The chances of scams are high. So, beware of falling into the trap of forex scams as well as MLM companies. Always do proper research before trading with any broker.
That’s all that I know! But what you know is still hidden! Don’t forget to write whatever interesting info you have about this topic in the comment box.