Is Forex Trading Legit? Here's What You Need to Know

However, when you learn about the market, one question always comes up: “Is forex trading legit?” Many people have asked me this question. Every time I say, “Yes, it is a legit market.” I want to dig deeper into this and tell you all the info you need. So, you can know that forex trading is legit.

WHY DO PEOPLE THINK FOREX IS NOT LEGIT?

Before describing what makes forex legit, I want to clear the fog. Many people get the notion that forex trading is not legit. But why do they think this? Let’s find out.

There’s no doubt that the forex market is huge. A lot of players make up the market. So, when there are a lot of cooks, sometimes the broth spoils. Forex and shady business go hand in hand.

There are a lot of scams in the market. Scam brokers, trading robots, and signal services lead to this perception. (I’ll explain the scams in detail later.) So, that’s why people think forex is not legit.

However, even though uncertainty does exist, there isn’t anything to fret about. You just need a clear mind and a bit of research, and you won’t fall into the trap.

I’ll give you a brief on how you can avoid such scams later.

WHAT MAKES FOREX TRADING LEGIT?

The question is how forex trading is legit. I mean, there has to be a reason for it. I want to describe this reason.

Let’s draw an analogy. When you travel to another country, you need its currency. You go to an exchange office and change your native currency into another one.

There’s always a fluctuation in the rates, but you do make an exchange. And not just with traveling; countries trade with each other through currency. There isn’t any universal currency, so countries or people have to exchange.

That’s when forex exchange enters the scene. Currencies from every nation on the planet make up the forex market. That’s why it is the most liquid and biggest market globally. Over $5 trillion worth of transactions happen every day.

Let me remind you that a trillion has 12 zeros in it. You see, forex trading is all about currency swapping.When you trade a forex pair, you think one currency will appreciate or depreciate against the other. For example, let’s say you buy GBP/USD at 1.3500.

Later the value of the pair increases to 1.3520. You profit from the pair’s rise and make some cool bucks. Of course, it isn’t as simple as that, but you get the point. So, there isn’t anything shady about it.

You are exchanging currencies like you do when you travel to another country. Millions of people enter the market every day. Not only people but banks and major financial institutions also enter the market.

If forex trading was not legit, do you think those banks and institutions would trade? Of course not! That’s why forex trading is legit.

WHAT ARE SOME OF THE SCAMS OF FOREX TRADING?

As I mentioned earlier, people do think forex is not legit. This is partly because of forex scams. There are a lot of forex scams. So, I’ll describe them and later tell you how to avoid them.

Forex broker

A forex broker gives you access to a trading platform to buy and sell currencies. You do need a broker for forex trading. You open an account with them, and you start trading.

An example of a good Forex Broker is MaxiMarkets. However, not all brokers are the same. There are many shady brokers out there.

By shady, I mean that they don’t have a license from a regulatory body.

A bit about forex broker regulations

There are different regulatory bodies around the world. They monitor and protect traders from shady activities. When a broker has a license from a regulatory body, it shows trustworthiness. There are many regulatory bodies, but at the top of the heap are:

• FCA (Financial Conduct Authority) UK
• ASIC (Australian Securities and Investments Commission)
• NFA (National Futures Association) US
• CFTC (Commodity Futures Trading Commission) US
• CySEC (Cyprus Securities and Exchange Commission)

If a broker doesn’t have any regulation, then they are not answerable to anyone. So, if something shady happens, then you can’t do anything. If you want to avoid this, do proper research before taking the plunge. You can check our broker reviews to see which one is right for you. Thinking of a regulated broker, check Saxo bank and Teletrade.

Trading robot

The promise of making money while you sleep is tempting. After all, don’t you want to earn while just sitting there counting dollars? Many scammers portray forex robots like this. They say forex robots will do all the hard work while you just relax.

I have to say forex robots are a real thing. There isn’t anything shady about them. I know a lot of pro traders who use them. They take the hassle out of trading and automate the whole process. But when a forex robot provider says it can make you rich overnight, that is a red flag.

There isn’t a robot in the world that can do this. Yeah, robots do make money quickly, but they also lose quickly. One day you make $100; another day, it’ll blow your account. You have to understand this.

Forex signals

A forex signal indicates when to enter or exit the trade. There are a lot of providers who use forex signals as their business model. These signal providers charge you a monthly fee in exchange for signals. The problem is sometimes they don’t provide what they promise.

They charge you but don’t provide signals at all. These providers also pitch by showing you the results of their service. They claim to know the science behind the market. A quick Google search will tell you how to become a forex signal provider.

But you have to grasp that signal providers do not always tell the truth. Of course, there are legit signal providers, but you often bump into shady ones. The best way to avoid this is to look at their reviews and see if they have an account in Forex Factory.

Forex Factory is one of the most reliable sources in the industry. It allows signal sellers to create an account and show their results. So, you can look at their track record and decide which are the best signal providers.

Fake forex funds

It is a no-brainer! You see ads on websites claiming guaranteed returns. They post astronomical figures in quick time. However, forex is not a get-rich-quick scheme.

You make money in the market by learning the nitty-gritty. If something looks too good to be true, it probably is. You must refrain from falling into the trap and protect your funds. Only open an account with a reputable forex broker. Consider one of these: City Index, Vantage and Teletrade.

How can you avoid forex scams?

Educating yourself is the best way to avoid forex scams. Knowing more will make it less likely that you will be taken advantage of. Knowledge is the most powerful weapon. Do your research and learn more about the foreign exchange market. Grasp the terminologies, and know how the market operates. You can also check our blog.

We post content daily. From beginner to pro, everyone will find something useful there. Also, consider opening a forex demo account. This is a virtual account where you get virtual funds for trading.

It’s a good way to hone your skills before you start live trading. Remember to open a demo account with a trustworthy forex broker. And take your time when you invest. Take your time when you choose a broker. Ask a lot of questions and search for answers before dipping your toe in the water.