Why forex trading is exploding across Africa
restofworld.org
restofworld.org
How does the article not call this out? It even says
Just how much of that is paid for by trading profits is unclear, and influencers usually make their money by selling private courses or learning materials or by offering premium access to trading tips for a fee. Others work on commission and are paid by brokers each time one of their followers opens an account. And in some places, the lure of forex trading is simply that it offers the possibility of a regular income.
Classic pyramid scheme. It works great in poor countries since people aren't as educated, and are more vulnerable to get rich quick schemes. Same reason MLM's in the US target immigrants.
Bingo! Schemes like these were popular in Eastern Europe after the fall of the iron curtain where some people got rich and a lot were left holding the bags since most had no financial education but were poor and desperate enough to fall for get rich quick schemes as there were no laws against this sort of stuff during the transition phase to capitalism.
These fake millionaire lifestyle gurus are everywhere.
Aside from Albania & the 1997 unrest, where else had these issues?
So in a sense, every investment you do is with the hope that someone else is buying it for a higher price in the future.
> influencers usually make their money by selling private courses
> are paid by brokers each time one of their followers opens an account
It doesn't matter what the product is when operating a pyramid scheme, so long as the rubes buy the idea that it could make money. The scam has nothing to do with Forex trading.
Pure price speculation on stocks, without at least some cursory net present value calculation on the expected lifetime dividend income and a rough estimation of the liquidation value of the company's assets kind of is a Pyramid Scheme in that the only value of the asset is a hypothetical Greater Fool
I think people have recognized that MLMs, pyramid schemes, and Ponzi schemes are lucrative for early adopters and those at the top. Instead of avoiding the scheme altogether, they’re racing to cash in early before it collapses. It’s a gamble that they’ll be on the right side of the trade before it runs out of steam. The power of “but what if it works...”
Some of the more blatant Ponzi schemes operate in the open for years in developing countries. There can even be public outrage when governments try to intervene because so much of the population is invested in these schemes in one way or another. A good example is MMM global: https://en.wikipedia.org/wiki/MMM_Global
EDIT: Also GME is at 240, it's not even a short squeeze anymore it's just bizarre
I'm not sure how this is different from say bitcoin, where I've heard estimates of "100k by the end of the year" since 2016
Before anyone claims it’s the same for stocks: It’s not. Stocks are an actual claim on underlying businesses, their cash flows, IP, and their assets. Bitcoin’s attraction is that it has no underlying fundamentals to compare against, so proponents can say it’s going to whatever price they want and no one can point out how silly that is. As long as people continue buying, the price goes up. Why are people buying? Because the price goes up.
https://www.wsj.com/articles/bitcoin-to-come-to-america-s-ol...
https://www.bloomberg.com/news/articles/2021-02-25/investors...
This is not true.
If you buy a share of GOOG, you have zero claim on any of Alphabet's cash flows or assets.
The company doesn't pay a dividend and doesn't expect to pay a dividend in the future. So there's no income potential.
There is no scenario under which you can convert your share into any of the company's intellectual property or physical assets.
Your share doesn't even give you the right to vote on anything.
There is only one thing you can do with your share, and that's sell it to someone else.
So the only conceivable purpose in buying GOOG stock is the hope you can sell it to someone else for more than you paid.
I'm not aware of any long-term meme-stock trading "strategies" being peddled around - it's pretty clear that it's mostly gambling and people are simply making one-off bets.
On the other hand, the various "trading" schemes (whether Forex or crypto or binary options) typically rely on the promise of long-term, sustained profits, buying various courses or trading tools and referring other people to it.
Yes it does. The entire WSB narrative encourages everyone to buy more GME and never sell it. They’re not doing this as a favor to readers. They’re doing it because encouraging others to buy and hold is what drives the price up. Their “mother of all short squeezes” theory doesn’t match reality at all.
I have never seen a more lucrative spread market.
Every time these diamond handers have this thing range bound for a few days, spread traders are making like how many percent? A hundreds?
Sure these occasional blow offs can wreck the position, but its limited risk.
GME doesn’t issue dividends and they will need to sell stock to change course, this requires even more new investors than now to perpetuate.
There is an arbitrary distinction between pyramid schemes and respected financial realities. It isn’t really useful to draw the line, just play the game or don’t.
Still is. GME was $2.50-$20 across years. Now it's magically $239 (up 22% as I write this); up ~500% in ten trading sessions or so. It's a twisted joke on a whole lot of amateur investors that think they'll be the ones to successfully navigate the pump & dump and get out before it crumbles. The party will no doubt continue until the music stops (treasury yields rise too high).
The common say is that most car driver believes they are above average. ¯\_(ツ)_/¯
The same is true for state lotteries and other forms of gambling, but many people continue to participate.
I think of it like buying useless items too. "The state of anticipating and desiring a product may be inherently more pleasurable than product ownership itself." [0] This is very similar to gambling where you are essentially paying for the opportunity to feel hope.
[0] https://www.theatlantic.com/health/archive/2013/01/study-wan...
I don't know about the US.
Of course at some point you run out of customers and it collapses, but there are a lot of people in the world who are interested in getting rich off trading.
The early adopters are also generally equally fervent in supporting the scam and believing "it will work in the end".
For example, Finland, one of the top performers in Pisa scores had a famous scam using -yes - foreign exchange trading as it's angle "https://en.wikipedia.org/wiki/WinCapita
> Business has been good. “I make over $30,000 annually from forex trading now,” he revealed — a tempting figure in a country where public servants are paid some $177 a month. His earnings come mostly from his own trading, with student fees making up a small part.
Speaking from experience (I'm from Kenya), I've seen people make big bucks from Forex trading. A friend of mine makes enough money to pay for his rent (~$200 PM), furnish the house with not-so-cheap furniture and maintain his excessive lifestyle.
There may be a 'pyramid scheme' aspect to it, but it's not as rampant as you make it seem.
edit: maybe a better example. I am confident in $SPCE over the next six months, and I want to open a long position. I want to slightly reduce the risk though, so I also buy an OTM put from you. $SPCE keeps going up, so the put expires worthless. we both won here. you collected the premium and I got into a long position that I wouldn't have otherwise.
About stocks I absolutely agree - history tells us there's a long-term positive (US) market return so it's clear that an average investor should get exactly that return minus costs/fees.
Our cousin is 2 years ahead of my younger brother. He makes enough to find his side-lifestyle (he also works). My younger brother is still looking for work, and I was pleasantly surprised to see how much he's learn from YouTube, and that he turned a small profit.
Many of the bigger lifestyle focused people run scams. Some have been arrested, assets confiscated.
There's however a boom in the younger generation in their 20s, armed with $100 starting accounts, making money.
I mean it is certainly possible to make money from forex, in the same way that you can make money playing roulette. But that's not how the people in this scheme are actually making money - if they were making money on forex, why would they bother selling courses instead of spending all day trading themselves?
Here's a video about IM academy: https://youtu.be/eKXrrsIIEhI. All these people selling the courses pretend to be independent or part of a smaller organization so you don't Google the name, but ultimately they are all in the IM academy pyramid.
I've also seen people making big bucks from what they claim is Forex trading. Whether that's actually true is up for debate - I've heard somewhere that on average even people who do this for a living as a job average ~10% annual returns, so "big bucks" here from trading alone seems unlikely when even the pros can't approach that?
That kinda checks out to me given the overall markets tend to return ~7% to 8%
https://twitter.com/CryptoCobain/status/1369225313922736129?...
Iran has been moving towards an official legal framework for Bitcoin.
At least in western countries we have some regulation to require to warn individual investors that there is risk associated with investing.
I see offering this to people who are desperate to make living but are oblivious to the risk as exploitation.
The difference is rational, informed thinking.
I can sort of understand poor people playing lottery, if for a relatively small cost they buy a thrill of checking the results every day even if they net loose the money because they buy less than equal part of large prize.
It is entirely another thing to do the same for living and offer products to those people knowing full well they are unlikely to satisfy their need.
These people may "know" they run risk of loosing their money but do not "comprehend" this is not a productive way to get rich.
And I suspect in part it may be kind of "cargo cult" in that they observe rich people gambling on exchanges but they do not understanding that this is effect rather than cause of their wealth.
Somebody should tell people that, rather than wasting time and money gambling on forex they would be better off taking a book and learning something useful.
Seriously, if you don't have some kind of exquisite knowledge playing on Forex is basically the same as gambling.
If you read any stories about people who got wealthy, making good use of your money, time and focus is a constant theme.
If you read any stories about people who got wealthy, being born into wealth is a constant theme. The question is how do you get there without winning the rich parents lottery?
> if you don't have some kind of exquisite knowledge playing on Forex
And how do you get knowledge about forex? Maybe by trading small amounts of forex?
Lots of people feel like they're stuck at a dead end, and winning the lottery is the only reasonable way out.
I've seen lots of Nigerian scams, but I didn't know they went both ways!
Once again, Zimbabwe is a different country than Nigeria.
https://www.google.com/maps/dir/Zimbabwe/nigeria/@-4.3437998...
In some ways what these traders are doing sounds no different than gambling. But on the other hand who had a better understanding of these local economies and news cycles?
I let someone trade forex for me, I set up a subaccount with limited power of attorney. They were not able to withdraw (or it would have required some social engineering). They did okay. Oh, they did not approach me I hired them.
Anyway, yay, privilege.