This week, we are celebrating “Araw ng Davao” for its 80th founding anniversary. So, while I am enjoying visiting trade fairs and fun-filled activities in my area, let me welcome my online friend Ranga for his guest post today regarding forex trading seminars.
This article was inspired as a result of reading “Learn to Trade Seminar by Greg Secker at SMX Lanang,” article that was published few weeks ago.
What stood out for me from the article was that it was free and that the seminar was understandably, perceived by many as a way to make additional income. Well, even if some don’t agree, we all do agree though that the entire retail forex trading industry is built around this theme, “make additional income.”
If only it was that simple!
Before one starts to draw up conclusions about the seminars mentioned by Mrs. MFB, I must clarify that this article is by no means calling out names but should instead act as a cautionary tale that one must watch out for when it comes to trading seminars and the forex industry.
Hopefully, the next time around you will be a lot more cautious when you read or get an invite from someone to join one of these trading seminars.
Forex trading seminars – What are they and how they work?
A forex trading seminar, regardless of what it is called, investor workshop, trading school, or whatever other fancy term that comes to mind is one and the same.
The trading seminar is usually free (and you should be careful about these types) and marketed to the general masses as a way to make money. In most cases, the trading seminars are used by forex brokerages as potential hunting grounds for new clients.
In some cases, the company hosting or sponsoring the seminar is an introducing broker (kind of like an affiliate program where the introducing broker gets a commission for introducing clients). The modus-operandi of the trading seminar is to provide the attendee with enough buzzwords to arouse the curiosity.
This tends to push the attendee into the second level where they are primed to either become customers of a forex brokerage or to pay fees and become a forex trader within a month or two. Regardless of which option you choose, in more than 99% of the cases you will end up losing money.
Watch out for these traps at a trading seminar
There are some tell tale signs when it comes to trading seminars and there is a high probability that you will hear some of these terms. You should be cautious when you do come across these terms at a seminar.
The trillion dollar industry
Trading seminars can be very generic and tell you how big the forex industry is and then starts to hook you in by telling how anyone with just under $100 can start making big money.
Some even go as far as to dismiss the equity markets and swear by forex or currency trading.
And in most cases you will hear about the turnover in the industry. The word trillion has become a buzzword for marketers and for anyone looking to lure people who are unaware of the forex world.
While it is true that the forex industry has over a trillion dollars in turnover a day, the majority of it (>90%) is in the interbank markets (banks transacting with one another). The remainder of the amount is what is made up by the retail traders.
So if you dig deeper into the statistics you will find that the forex market (from a retail trading perspective) is actually very small.
Make money with just $100 or $500
You will also hear a lot about how easy it is to trade forex with just $100 (because you are at a seminar, chances are that you might hear numbers like $1000 or $5000). What you are not told is that leverage can be very dangerous especially when you don’t know what you are doing.
You can make big profits, but you can also lose your profits and your trading capital and possibly even more when you use leverage without knowing how it works. This issue has become serious to the point that most financial regulators (non-US) have already put a ceiling on how much leverage can be offered.
Take the course and be a professional trader
I really wish forex trading could be mastered within a week or a month, but sadly that isn’t the case. Quite often you will hear about trading coaches who talk about how they can train you to be a pro trader. Seriously now! Think about it. Do you really believe you can be a professional swimmer competing with the champions within a week or a month?
Yet, many continue to fall prey to this age old tactic, simply because the lure of easy money often blinds our judgment. There is nothing wrong within that, but it is something we need to realize.
So is all of forex a big scam?
Maybe and maybe not! For some, the stock market is one big casino, so forex isn’t an exception either. A scam happens only when you unknowingly become a victim.
Every industry has some rotten apples and this is more common in an industry where money is involved. Forex is one of them.
Remember that trading forex is risky and requires years and years of practice and dedication. It is not even remotely as simple as investing in a SPY (SPDR S&P500 ETF) and accepting the market returns. You can make big money in the morning and end up losing all of it by afternoon. That is the nature of forex.
As the cliché goes, if it is too good to be true, it probably isn’t!
Ranga is a full time forex and futures trader for over 5-years. He manages the blog http://renkotraders.com where he writes about Renko charts; a unique way to analyze the stock, futures and forex markets. Renkotraders is a website that is ideal if you already have some knowledge about technical analysis in the financial markets and curious enough to look at different options at analyzing the markets.