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Category: Money

The Truth of Online Currency Trading

Written on April 11, 2011 by Japhet Writ

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If you think that trading currency online is a good thing... Think again.

During the .com bubble, online stock brokers were famous for their creative commercials. The ads suggest that anyone could easily make a fortune in trading stocks online. But nowadays, online currency brokers campaigns about the type of currency that they trade.

Hence, The Reformed Broker’s Josh Brown revealed stunning facts about currency casino.

  • At least 75% of people who trade with online currency firms lose money.  That data comes from the firms themselves as they must now report this information to the CFTC.
  • Forex firms are seeing client attrition rates of between 15-25% a year, versus only 5% from traditional online stock brokerages.
  • Retail players are trading through brokerages whose very business model is to act as a counterparty to them.  Yet the marketing is predominantly of a “let us help you diversify into currencies” nature.
  • Industry-standard leverage levels, down from 100-to-1 to a still-absurd 50-to-1 automatically disqualify Forex as an “asset class” for investors.  The more suitable categorization for this activity is gambling. It is more akin to OTB or the casino than to stocks and bonds.

Indeed, there are similarities between currency trading and online poker.

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