There is no doubt in the saying that scams and fraud activities surround one-third of the financial market. Forex market is not far from these types of frauds. The most common and popular scam of this market is the pyramid scheme. You must have read several questions on the internet related to this scheme: Is forex a scam? Is forex a pyramid scheme? What is a pyramid scheme? We have made it simple for you by providing accurate answers to these questions. The guide revolves around the following points:
About pyramid scheme
A pyramid scheme is a kind of illegal investment scam that depends on a hierarchical network marketing model. One of the most common and famous types of pyramid schemes is the Ponzi scheme.
Novice traders make up the foundation of this pyramid and give the so-called returns or funding. The fund is in the form of new capital outlays to the previous traders or investors placed above them in the model.
The selling of items is not generally involved in this pyramid scheme. The scheme totally depends on the regular inflow of the funds from additional traders, which works in a direction to the pyramid’s topmost point. It simply indicates that the multilevel market schemes do not fall under pyramid schemes and are not essentially fraudulent.
How does the pyramid scheme work in trading?
A firm or individual starts the pyramid-scam by recruiting a team that contacts various traders. This assures them high returns on a small investment. As the scheme started, the initial investor received a high return as promised by the provider. The gain or profit amount of these investors are paid by the amount provided by novice traders.
The pyramid model’s liabilities start to surge their assets from when the fraud is initiated. The only method through which these firms or individuals make wealth is by trapping traders in an offer that can generate extraordinary returns. The frauds cannot sustain longer; the same happens in this case. The pyramid collapses as soon as the firm fails to incorporate or trap another investor.
Is forex a pyramid scheme?
Forex trading is safe and undoubtedly not a pyramid scheme, but there are some other dangers and risks which investors should know about. A pyramid scheme is something where firms or individuals accept money from traders, guaranteeing them high returns. But after a certain time, the pyramid collapse leading to no returns.
In forex trading, the trader gets the foreign currency in exchange for its money. Later, when he wishes to return the foreign currency, he will get the amount in exchange. So, forex does not fall under the pyramid scheme. However, most (not all) forex trading firms can run such fraud. Their main aim is to wipe up your account or take away your hard-earned money by any means. They give only losses to their clients. If someone promises
you massive returns on a small investment, this is an alarming state that the firm or individual is fake and just traping you. Always try to employ stop losses in your trading to stay away from unwanted loose.
Hence, we can say that forex is not a pyramid scheme. It is a decentralized market for trading currency pairs. Now, we will move ahead in the article and talk about the methods to avoid forex pyramid scams through legitimate financial bodies.
The ways to avoid forex pyramid scam
A legitimate financial service provider is the only solution to avoid these types of scams. The broker is a vital entity of the financial world. It can make or break any trade. Your potential profit size depends on the trading features, indicators, and services which the broker provides. Thus, always check whether the firm you are opting for is authentic or not. There are several legitimate regulatory bodies that provide a license to these brokers. Before selecting, check the regulation and license number of the firm. Some of the financial bodies are:
- Banking Finance and Insurance Commission
- Cyprus Securities and Exchange (CYSEC)
- New Zealand Financial Markets Authority
- International Financial Services Commission
- Australian Securities and Investments Commission
- Financial Market Authority
- Capital Market Commission
- Federal Financial Supervisory Authority
- Autorite des Marches Financiers
- Central Bank of Ireland
- Securities Market Agency
- Authority for the Financial Markets
- Securities Commission of the Republic of Lithuania
- Financial and Capital Market Commission
- Portuguese Securities Market Commission
- Malta Financial Services Authority
- National Securities Market Commission
- Portuguese Securities Market Commission
- Polish Financial Supervision Authority
Legitimate financial service providers for forex trading
Choosing a legitimate financial brokerage firm is a hard nut to crack. Usually, traders cannot differentiate the fake and authentic ones. We have made it a bit simple for you. Some of the authentic firms are:
HFTrading:- HFTrading established in the year 2019, providing its trading service across the world. The broker is renowned, authorized, and regulated by two financial bodies, namely New Zealand Financial Markets Authority and Australian Securities and Investments Commission. The minimum charge to open a trade with the broker is $250 without any commission on trading. It earns through swaps and spreads. So, HFTrading is entirely a safe venture to invest in. The firm is legit, and your money, personal details, and transactions are safe with the firm.
The major markets covered by HFTrading are Cryptocurrency, forex, stock, indices, and commodities. Visit the site to open an online trading account.
Global TradeATF:- Global TradeATF was established in the year 2013 and is a trading brand of Bayline Trading Limited, regulated and authorized by the International Financial Service Commission or IFSC of Belize. The firm is also a virtual sponsor of the National team of Argentina. With the broker, you can trade commission-free on numerous tradable assets covering cryptocurrencies, indices, commodities, and stocks across three major types of trading accounts: gold, silver, and platinum, which are also available with Islamic swap-free charges. Clients can also opt for a demo trading account. Like Global TradeATF, the broker is authentic and facilitates trading on an affordable range.
The Bottom Line
From the article above, you must have got your answer that forex is not a pyramid scheme. The foreign exchange market or currency market, or FX market is over-the-counter (OTC) or a decentralized global platform for trading currencies worldwide. It is a real platform where any trader can participate and earn a potential profit. Just the need is to select the right brokerage firm to invest with. You can go with HFTrading and Global TradeATF, which provides all means to upgrade your trading standards at just $250.