You would have come across many advertisements on Instagram, YouTube and other social media platforms where you would find a person’s interview claiming that he earns thousands of dollars per day just by trading. Some of these forex trading apps are even one of the sponsors of an IPL team. Heavy marketing and spending lakhs on influencers to promote their apps online leads to millions of people falling to the never-ending session of gambling eventually leading to heavy losses.
These apps run their own social media platforms where they upload high quality interviews of several people who claim that they have earned good money while trading in forex, gold and CFDs. To further bring credibility, they also upload hours of recorded webinars where they teach the viewers certain trading strategies which can reduce the risk to as low as 1 percent.
These apps not only run in India but many other countries where certain influencers have been publicly exposed and arrested for promoting such websites. These influencers will boast about their luxurious lifestyle and portray that they have earned this money from these websites and if you are watching it, you could earn it too. But in reality, they didn’t use any services of the trading apps, instead the company which ran these apps gave upto 80% commission of those losses borne by the user of their apps. So, if the user was losing 100 bucks, the influencer would keep 80 bucks and the company would keep 20. These apps also pay news channels heavily so that even news channels can promote these apps. Whenever you come across such news articles of positive reviews, scroll down to find a disclaimer just to realize that the information was distributed by the app company and not by the news outlet.
A question might arise, how can it be gambling when you are choosing your bets based on charts and probability. The same technique is used in stock trading where you rely purely based on charts and volume data. The differentiating factor is volumes. While trading in stock, you are relying on trustworthy stock exchanges which are obliged and bound to follow rules and transparency directed by the government. In forex trading via these apps, they are not legal and therefore, there are no boundaries set on them.
These apps can easily manipulate data as per their convenience and the user might just keep blaming their luck for the losses. In gambling, the house has an edge of approximate 5% to 10% whereas in these forex trading apps, the company has an edge of more than 20%. They will give you demo money to play where you will win (because it’s not real money), but when you start trading in real money, they will use all methods to make you lose. If somehow your luck is good, you might win but when the time to withdrawal comes, they will delay your requests for as long as 15 days. This is how, initially the user might win but in the long run, it is the company who wins and makes the profit.
Don’t follow any influencer blindly. They often tend to follow just a script given to them and say what’s written in it. There are good chances that the influencers wouldn’t have used any of the apps they are promoting.
Recently, RBI has stepped in and declared 34 forex trading apps as illegal. Some of these names include OctaFX, Binomo, Forex.com, IQOption, etc. These apps are registered mostly in Caribbean island-countries where Indian Laws don’t apply. They state the reason that they could offer much more leverage on your bets but in true sense, it’s just a foam factor for them in case they want to shut withdrawals or close operations, the user can’t claim via Indian law enforcement.
Such apps claim to be trading apps but are purely gambling/betting sides with more probability of the company winning and the user losing. If you haven’t used such apps yet, it’s good to stay away. If you are among the people who are lured after watching ads on YouTube and other platforms, close your account as soon as possible and just don’t look back.
Thank You For Reading!
Finance graduate with a strong desire to understand the complexities of financial markets. I make financial judgments for my investments based on the information I gained during my academic education. I write articles about financial literacy for finnute.in in order to promote financial literacy among the general public.