Forex trading with leverage is risky, so why are more people than ever before doing it?
Simple reason, in my opinion, people like the chance of playing the market and the top brokers are better regulated and therefore more transparent, attracting new customers.
(If you’re told the truth at the start, the more conviction you will have to take the risk).
Why? Because although the industry is getting bad press due to persistent scammers and some, weak regulators, more and more people are trading. One of the biggest players increased their revenue by 151%, second, by 148% in the first 6 months of 2021.
Don’t take my word for it, I got some figures to back this up.
I want to thank my friend Joshua Bentley from OvertEd Markets for this recent report, with some fascinating insights. CFD/FX insights | OvertEd Markets
The Forex market has been particularly active since the 1970s. It has become the world’s largest financial market, with the average daily trading volume growing from around 1.2 trillion in 1995, to 5.1 trillion in 2016, according to figures from the Bank of International Settlements. Although CFD/Forex retail traders play a small fraction.
The pandemic attracted more online traders, as we sat at home thinking of ideas.
How are they attracting new traders? Influencers, introducers via social media.
Most contested regions:
So, is trading retail leveraged forex online gambling?
This question has been asked nearly every day since I began my career.
My initial answer was that it was not gambling but speculating the market whilst making informed decisions. Great sales pitch!
This view changed when I became a broker and account manager and saw that the majority of new retail traders (individuals trading their personal accounts) had a tendency to trade for the sake of it with the aim of making quick easy money. I assume this is gambling.
What is the definition of gambling?
According to the Cambridge online dictionary:
the activity of betting money, for example in a game or on a horse race:
“Gambling can be an addictive habit”.
“He had to borrow money to pay off his gambling debts”.
According to the Oxford online dictionary:
the activity of playing games of chance for money and of betting on horses, etc.
Ok, this answers our gut instinct, trading online has many of these traits. The interesting premise is paying off debts and an addictive habit.
Let us go a bit deeper into the reasons some people trade, eventually calling it a scam.
Many people have no interest in the financial markets, economics or business, however, social/peer pressure often turns their attention to take some action in investments.
You go down the pub and a mate mention’s he made a killing on a certain stock and you would be crazy not to buy it. This arouses the other person to consider, should I go along and buy this stock, with no real understanding of the company or what buying the stock means. If this person buys or trades the stock without any informed decision, this is gambling.