Forex trading is a market with high liquidity and high competition. It has multi-level marketing (MLM) schemes that promise to earn money passively from forex trading. A trader must be very careful with these MLM schemes.
MLM schemes approach family and friends with the intent to make money by just signing up. This article will try to demonstrate the title ‘Is Forex Trading a Pyramid Scheme?
Sharon Lechter and Robert Kiyosaki, in their story ‘Rich Dad, Poor Dad,’ praised these new ways of making money. They said that the schemes force the people into this market and have no concerns with reasons for joining. Learn more about top 8 forex brokers in south Africa.
Let’s analyze those steps in which this system works.
1. Try to Win Victims Over
The purpose of a recruiter is to sell the dreams of financial freedom and convince the people that they can use forex trading to earn tons of money. However, the forex market is volatile for making money by trading forex, not recruiting people. A recruiter convinces the new people through his social media posts.
2. A Recruiter persuades to Purchase the Products
When a new person joins the trade, he is asked to purchase products. The products include trading signals, videos, and training modules. The recruiter makes statements that the success rate increases with purchasing more products. His commission increases when every purchase is added to his downline. The conflict arises when this chain continues. Everyone joins in trading forex, not to sell products.
3. Hiding the Losses in Forex Trading
Forex trading is not a cup of tea. According to a study, 80% of forex traders quit in less than three years. One must not ignore the fact that loss is also possible. Recruiters downplay this truth and the real fact that only 5-10% of traders make profits from forex trading.
To decrease your loss, you should go for finding the best forex signals providers to avoid taking any poor steps.
4. One Must Focus on Making More Recruitments
After getting many losses in the trade, people realize that trade is not easy for them. They must keep in mind that adding members to their downline is quite easy. Now, here again, comes the conflict of interests. They must recruit more and more, which forms a pyramid. The bigger the pyramid, the more the profit is.
5. Invest More in Products
It is very useful to incorporate the MLM concept, which influences buying more products. The buying of more products enhances trading skills. It also increases the members to their downline. The people on the top of the pyramid become spokespersons in the conferences organized by companies. The spokespersons encourage the juniors. The paid conferences allow beginners to gain more knowledge and expand their network.
Forex trading is thought to be the only mean of making money. But, the people who fail to make money from trading forex can make money by recruiting more and more people to their downline. By growing their downline, they can earn more profit. This process builds a pyramid which shows that forex trading is a pyramid scheme for making money.