The Most Authentic Guide on Personal Finance and Investments


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The myth of making money from Forex trading

While surfing the internet, you would have frequently come across ads showing ordinary people, like you and me, who made around $1000 in a week in forex trading (i.e. trading in prominent foreign currencies viz. dollar, euro, yen and pound). Further, these ads offer their expertise to make quick money for you too.

And as is well known, whenever there is a promise of "quick money", there is also a very high risk of "quick losses"... you cannot have one without the other. Besides, many such schemes border on illegality or are outright illegal.


Legally speaking, 
a) you are normally allowed to do currency trading on Indian exchanges like NSE / BSE only and
b) only if you have an underlying need. 

However, the overseas online trading is illegal. As per RBI guidelines:
a) "any person resident in India collecting and effecting / remitting payments directly /indirectly outside India in any form towards overseas foreign exchange trading through electronic/internet trading portals would make himself/ herself / themselves liable to be proceeded against with for contravention of the Foreign Exchange Management Act (FEMA)"

b) "As and when any bank comes across any prohibited transaction undertaken by its credit card or online banking customer the bank will immediately close the card or account of the defaulting customer and report the same to RBI."

Therefore, beware of such ads on forex trading — they could be illegal.

Secondly,  the promise of "disproportionate / exorbitant" returns is a myth 

My logic in this regard is pretty straightforward and simple. 

Let us suppose these experts are correct. They do make thousands of dollars every week using their expertise in forex trading. And that too with just a few hours of efforts. If that be so, why are they interested in earning nominal fees from you and me? And that too after spending huge amounts of money in advertisements and huge amounts of efforts in preparing / sending trading ideas every day, besides all the write-ups / literature / articles. 

Ok, let us assume that they are good-hearted people, who like to help the common man. If that be so, why not do it for free? The nominal fees that they charge is anyway small change for them... provided they do make thousands of dollars every week. My contention is that they don't and hence our fees are an important source of income for them. 

Norman R. Augustine's quote beautifully and succinctly captures this point "If stock market experts were so expert, they would be buying stock, not selling advice. 

Since these schemes do not stand up to this simple logic, you have no reason whatsoever to indulge in such fancy money-making schemes and lose your hard-earned money.

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