Chasing the Forex Profits: Exposing the Education Scams and Half-Truths

Chasing the Forex Profits: Exposing the Education Scams and Half-Truths

The forex market is touted as a $3bn market. However, it is extremely difficult to consistently make money in this market.  This leads to frustration for many people that are players in the market. They know there is money to be made but can’t quite seem to crack the code to consistently pull in the profits. In the face of this, they end up setting up platforms supposedly targeted at teaching people how to make money consistently. The reality, however, is that they have failed at successfully making money and are instead, teaching theories that they could never really implement consistently in order to collect fees from unsuspecting newcomers in the market.  With this, their own profits in the forex market come from people finding their way instead from the market itself.

This piece looks at some of the most document scam in the forex education niche.

The Forex Special Courses Scam

You can find them all over the web with one quick search.  These courses promise to be everything you need to become a profitable trader. In reality, however, there is no one specific course that can transform you into a profitable trader. A profitable trader is borne as a result of experience, consistency and practicing proven techniques for capital preservation and trade management. All of these can be learnt freely online.

In many cases, the courses packaged for a fee are based on information gleaned in full or partly, free of charge from forex forums and the World Wide Web in general. There is nothing ground breaking about ANY forex trading course.  Even when there are indicators or Expert Advisors to be sold, they are usually designed off techniques that are already in the public domain, with little or no variation.  So when you are paying for the course, you are simply funding the lifestyle of a trader claiming to be an expert, who never places any trades.

So, is it wrong to by any trading courses at all? It is not. However, make sure that the information you are buying is not available in public already.  If you are convinced that the knowledge is worth paying for, read as many reviews as possible of people who have already bought the course and see what they think before you make a final decision.

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The Forex Trading Room Scam

Forex trading rooms are online chat rooms where a  professional trader supposedly dishes out profitable life trading calls. People are required to pay for access or buy a trading course to be part of this “special” room. In reality, however, most of such trading rooms are just a glorified chat room where other new traders gather to go back and forth on trades they have taken and potential trade entries (which is exactly what happens in other free forex forums). The supposed professional trader will almost never make a commitment to a trade position except when a move is pretty obvious to everyone slightly experienced in trading the markets.

The best you can get from some of the traders, is a commentary of what trades to watch. They will almost never make a real life buy or sell decision and you will never see them take these trades on their own accounts. So why should you be part of the room? Why pay for a trading room when you can meet other traders on dozens of forums online for all the chit chat and trade commentaries?

The Forex Signal Service Scam

This is another common type of scam in the forex market. Every trading decision taken in the forex market is a risk for the trader involved. Signal service providers aim to bypass this risk by making the trade calls for other people to follow, while they only make money in a risk-free way by collecting signal subscription fees.  

There are several downsides to paying for a signal service:

  1. You are not certain about the quality of the trade entries called. They could be firing off from an automated system.
  2. You may never be able to make any consistent profits due to divergence. This is especially so for intraday strategies where the targets are often a few pips. This means that when you get the signal to take a trade with a 20 pips target, you could be just 5 pips away from the target before you are able to act on the trade.
  3. Forex signal services force you to stay dependent on others for success. No serious forex trader used a signal service to grow their trading accounts. What would you do when the signal provider is no longer in service?

It is best, therefore, to ignore the signal service providers and focus on learning how to trade on your own. If signal services are great, why are the best forex traders and hedge funds not offering them? The answer is simple. You don’t sell the goose that lays the golden eggs. The hedge funds will rather professionally manage trading capital for investors than sell them a signal service.  So a signal service provider is either a struggling forex trader looking for trading capital (in which case you shouldn’t be backing them with your subscription and your trading account) or an outright scam without a live trading account, or both. Stay away.

The Third-Party Trading Scam

This is far more common than it should ever be. However, many people are too consumed with the thoughts of quick easy money that they lose all sense of judgement once a bogus trader presents a trading account with supposed large profits.  They start to offer them their trading accounts to manage for a fee. There is nothing wrong with investing in a trader, but handing over money to someone to trade for you, or handing over the log in details of your trading account for them to manage almost always ends in disaster.  The case of Keiko Kawamura is perhaps one of the most recent big eyebrow raisers against this approach.

She accepted money to trade the forex market for people but instead simply used the funds to finance her luxurious lifestyle without actually funding any trading account.

So when you give money to a third-party to trade for you, you are most likely financing their lifestyle. On the other hand, funding a trading account and handing the details over to someone else is also risky. There is no guarantee that they will replicate the kind of results that you are looking for. Secondly, their risk management may not sit right with you, which will lead to a clash of interests and the death of the account in the long run.

The Copy Trading Scam

In this era of social trading, many people are still falling for the copy trading scam where a trader’s positions are replicated in the accounts of all his followers. When the trader is honest, this can work excellently as every trade they execute will be placed in your account at almost the same time, with a time difference of less than milliseconds.  Unfortunately, the fact that the trader earns commissions on profits generated means that many of them end up taking unrealistic risks just to turn a profit. This is where you will find traders employing all sorts of dubious risk management techniques like martingale and generally becoming loss averse. With the latter, they quickly close any trade that goes in profit by a few points but hold losing trades for far longer.  With the former, they simply keep increasing their risk as the market continues to go away from them until they have blown the trading account and that of all their followers.

So in essence, the traders on most standard social trading platforms are more concerned about avoiding losses instead of following a strict trading strategy.

If you are looking for a trader to copy their trading signals for a fee, look for one you can vouch for their trading habits. The trading account should be thoroughly vetted by a third party and must be shown to adhere to strict money management before you proceed to allowing the account to be connected to yours.

Conclusion

The forex market is a hard one to navigate.  There are no shortcuts to consistent profits. Whenever you find someone offering a quick and easy fix, look beyond the surface and you will find a snake oil merchant.  Everything you need to succeed in the market is available for free online. Study, create a trading plan, follow it judiciously, manage your money strictly and you will not need any trading guru’s subscription service, trading room or online course.

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