Brokers are telling you, “We give you free charts and tools.” You get calculators, you get charting software, you get everything for free. Now, again, right now, this is pretty much the standard. Most brokerages for stocks and options are also giving you free charts, watchlists, scanners, etc. But if you think a couple of years back, this is when brokers were still charging for everything from the data feed to additional features. Anyhow, with forex trading, it was always free, and it will always be free. Sounds good thus far, right?
Let’s talk about the fifth advantage here. You can actually start with as little as $10. Can you believe it? Most brokers ask you to fund your account with at least $500 or $1,000, and if you want to trade stocks and options, it makes sense to start with around $2,000 to $5,000, right? Here you can start with only $10.
I Googled “Best Forex Brokers” and I found the minimum deposits for these brokers are $100, $10, $0, $200, $100—super easy to fund, and you’re getting a leverage of 500 to 1.
What does this mean? It means that if you put $100 in there, you’re getting $50,000 buying power. I mean, amazing, right?
It seems that just looking at this, there’s so many pros why would you not trade forex? Well, let’s talk about the cons here.
First, let’s clarify what “forex” actually means: Foreign Exchange.
So you would think, like the New York Stock Exchange or the CBOE, the Chicago Board of Options, that there is an exchange, right? Here is the deal, and this is the kicker. Most people don’t know this, but there is no foreign “exchange”. So how are you trading them? Well, this is the deal…
You are not trading against other traders. You are trading against the broker.
Yep, that’s it. You are trading against the broker, and the broker is trading against you because there is no foreign exchange. Now, this is why here in the United States, forex trading has almost been banned.
There’s this commission we have here in the US called the CFTC, short for the Commodities Futures Trading Commissions. It’s a government institution, and they actually warn and protect us against foreign exchange currency fraud.
On the CFTC’s own website, they have an article titled Beware of Foreign Currency Trading Frauds, and here is a highlight from the article:
“Often, the investor’s money is never actually placed in the market through a legitimate dealer, but simply diverted—stolen—for the personal benefit of the con artists.”
Let’s go back here. It’s the most liquid market in the world. However, again, there is no foreign exchange, right?
There are no commissions, no fees, but these forex brokers, actually, sponsor race cars according to a press release from McLaren.com. They’re also sponsoring RoboMarkets, which is another forex broker.
You might say, “So what? They’re sponsoring a few cars, who are watching Formula One anyhow?” Well, keep this in mind, sponsors are sponsoring Formula One with $30 billion.
You may also be thinking, “Well, big deal. I mean, here in the US we have football, right?” I mean, we have 32 teams in the league. However, the NFL sponsorship is only $1.5 billion. This must be why forex brokers are not sponsoring the NFL. I mean, who watches NFL right? Kidding, but you get the idea. They are sponsoring race cars, which is $30 billion, 20 times as much as the NFL.
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