Online forex trading has steadily been gaining popularity in the country. The end of the multicurrency system and the subsequent plummeting of incomes, not to mention the unyielding unemployment rates ended up pushing it beyond the boundaries of the campuses and schoolyards which had for so long been its mainstay. However, its rise in popularity does not appear to be accompanied by a similar trend in the fortunes of the participants. The underlying promise of financial success from the online trading of forex is a bit oversold—the question is by how much?
As the promise of high returns from a little bit of investment is roping in more and more people, from the starry-eyed college freshman to the parent who just wants to make ends meet, the time is ripe for a sober conversation about this seemingly legitimate money-making practice.
It is usually sold as a get rich quick scheme
If you are a regular user of the internet it is highly likely that you have in the recent past come across what at first seems like a genuinely interesting if somewhat over the sensationalized headline: An ordinary schoolboy from Zimbabwe earns 2000 USD a day. Regular internet users are now mostly blind to such blatant advertising but what is important to note here is that this fake story is only one in a set of increasingly shady advertising tactics used by an online forex trading platform/broker called IQ Options.
Yes, each one of these adverts is as aggressive and borderline unethical as the one before it. This is a company that deliberately advertises forex trading to the general public, regardless of their background, as an easy way to make money. That high earning young man in the previously mentioned advert is claimed to be only 16 and supposedly only has to work 1-2 hours a day. At worst this appears to be an attempt to make high-risk forex trading appear appealing even to impressionable teenagers. Despite such ill-advised advertising practices, IQ Options is one of the most used platforms in the country and the world. I am not saying that this company represents the industry and the practice as a whole but it serves as a great prelude to the points that are about to follow.
Most courses are (intentionally) oversimplified
There is a somewhat rude saying which goes something along the lines of, “Those who cannot do teach”. I do not know how generally accurately the saying is but when it comes to forex trading, it holds more than just an element of the truth. People who aspire to be forex traders often acquire a significant amount of knowledge, sometimes through expensive courses. After making significant losses in the trenches despite having all this knowledge, some of these people find their ability to stomach the risk and losses involved to be limited so they opt to use their knowledge in a way less likely to bring them financial ruin—teaching other aspiring traders.
To make as much money as possible from these courses, they are often simplified to make them appear to be more of financial investment rather than a time one and hence attract more participants. This has resulted in the courses which some estimate should take more than 2 years being reduced to single seminars that cost anywhere from 10 – 50 USD a seat. Such seminars are intended to benefit the organizers rather than the attendees most of whom leave with more enthusiasm than actual knowledge. Many aspiring Forex traders have and will continue to fall victim to such courses which are designed for maximum appeal over anything else.
Its popularity is driven by brokers and “teachers”
As demonstrated by the earlier example of the advertising practices of IQ Options—brokers benefit greatly from an increase in the number of people using their platforms to trade regardless of whether they are earning, losing or have any idea what they are doing. Other platforms offer “free” funds for people to signup while others reward their present members to sign up new users. While both of these are legitimate and perfectly acceptable means of acquiring new users/customers, this is often done in a way intended to downplay the difficulty and risk involved in forex trading. These entities, therefore, play a very significant and active part in fuelling the popularity of forex trading. Adverts promising outlandish returns are also very effective in a country like Zimbabwe with its chronically struggling economy and high unemployment rates.
Since teaching forex trading is becoming an industry all on its own, these schools have to justify their existence. To ensure that they get as many pupils as possible they have to make forex trading appear less intimidating. They also do so by downplaying the true difficulty of making money through the practice. This often requires that they go to the opposite extreme which oftentimes results in them selling forex trading as an easy and even “fun” way to make money in one’s spare time.
The similarity to gambling
As can be demonstrated by the aptly named demo accounts offered by most of these platforms, it is very possible to make money without even a sliver of knowledge about how the system is supposed to work through dumb luck. These demo accounts may exist for that particular reason—to convince novices that they have somehow mastered the art of trading. The problems start once you deposit actual money into your account. Most of the people who lack the appropriate experience and knowledge end up attributing their success to skill rather than chance.
The only reason that many aspiring traders stick with forex trading for as long as they do is the occasional profits that are due to chance. This means that without any other way to assess your skills or experience, forex trading can inadvertently become a glorified form of gambling. The worst part is that gambling is addictive.
This means that overzealous traders who overestimate their abilities often lose substantial amounts of money to these platforms. The problem is even worse for students who are trying to earn money on the side—attempts to temporarily “invest” their school fees monies can end badly.
Despite all this, most of the forex trading is still a legitimate means of making money if you know what you are doing. I would love to hear from any traders (both successful and unsuccessful)—maybe some of you can help me paint a less bleak picture of the state of forex trade in Zimbabwe. Contact me; share your war stories, your high, lows and everything else in between.