Why are you losing money with forex trading? | De-influencing

Summary

This video script delves into the deceptive world of Forex trading platforms, highlighting the allure of high leverage and global market access. It cautions viewers about the risks of over-leveraging, which can lead to significant losses with minimal market fluctuations. The script also exposes the operations of CFD platforms, their legal status in India, and the tactics used to entice and exploit traders. It concludes with a call to action for viewers to be vigilant against the greed peddled by such platforms and to educate themselves on the realities of online trading.

Takeaways

• 🤑 Forex trading platforms often promise high leverage, which can be enticing but also extremely risky, as it magnifies both potential gains and losses.
• 💡 The script highlights the illusion of easy money through sleek app interfaces and aggressive marketing, which are designed to build trust and attract users.
• 📉 The concept of 1000x leverage means that a small deposit can control a much larger trade, but it also means that even a tiny market movement can wipe out an investor's capital.
• 🚫 The script warns against the dangers of over-leveraging, emphasizing that it's a strategy best left to experienced traders who fully understand the risks.
• 🌐 CFD (Contracts For Difference) platforms offer global market access but operate under lax regulations, which can pose significant risks to investors.
• 📈 The traditional brokerage model in India involves actual purchase and ownership of shares, whereas CFD platforms act as intermediaries without actual exchange of ownership.
• 💸 CFD platforms can become the counterparty in trades, meaning they profit when traders lose, which creates a conflict of interest and can lead to unethical practices.
• 🚫 The script reveals that CFD platforms may offer fake bonuses and manipulate prices to encourage losses, which are tactics used to lure and exploit investors.
• ❌ CFD trading is banned in India, and the RBI has issued warnings against such platforms, which are often associated with high risk and potential fraud.
• 💡 The overarching message is a caution against greed and the importance of understanding the true nature of financial products before investing.

Q & A

What is the main appeal of Forex trading platforms as described in the script?

The main appeal of Forex trading platforms, as described, is the promise of high leverage, global access to markets, and the sleek, easy-to-use interface that makes trading seem simple and enticing.

What does '1000x leverage' mean in the context of Forex trading?

In the context of Forex trading, '1000x leverage' means that for every unit of currency you deposit, you can control 1000 times that amount in the market. For example, depositing $100 with 1000x leverage allows you to trade with $100,000.

Why is high leverage risky in Forex trading?

High leverage is risky because it magnifies both potential profits and losses. A small market movement can lead to significant gains or losses, and since the leverage is so high, even a minor fluctuation can wipe out an investor's entire capital.

What is a CFD and how does it relate to Forex trading?

A CFD (Contract for Difference) is a financial instrument that allows traders to speculate on the price movement of an asset without owning the asset. In the context of Forex trading, CFD platforms enable traders to speculate on currency movements, often with high leverage and without the need to hold the actual currencies.

How do CFD platforms handle the trades of their customers?

CFD platforms often handle trades by taking the opposite position of their customers, meaning they do not match trades with other traders. Instead, the platform itself becomes the counterparty, which can lead to conflicts of interest since the platform profits when customers lose.

What is the issue with CFD platforms registering in countries with lax regulations?

The issue with CFD platforms registering in countries with lax regulations is that they may not have the necessary oversight or protection for investors. This can lead to unethical practices, such as manipulating prices or not safeguarding customer funds properly.

Why are CFD platforms banned in India?

CFD platforms are banned in India because they pose significant risks to investors due to their high leverage, lack of transparency, and potential for manipulation. The Reserve Bank of India has identified them as a threat to financial stability and investor protection.

What is the significance of the 'free $1000' offered by some CFD platforms?

The 'free $1000' offered by some CFD platforms is often a marketing tactic to attract new users. It is typically not real money but a virtual credit that cannot be withdrawn without meeting certain conditions, such as making a deposit and trading a certain amount, which encourages users to engage with the platform.

How do CFD platforms manipulate the prices shown on their apps?

CFD platforms may manipulate the prices shown on their apps to their advantage. They can quickly alter prices to induce losses for traders or prevent them from making profits, creating an illusion of real market movements that are actually controlled by the platform.

What is the role of testimonials and ads in promoting CFD platforms?

Testimonials and ads play a crucial role in promoting CFD platforms by creating a sense of legitimacy and potential for easy profits. They often feature success stories and celebrity endorsements to entice new users, despite the high risks and potential for loss.

What advice does the script give regarding the use of leverage in trading?

The script advises against using high leverage in trading, especially for inexperienced traders. It emphasizes the importance of understanding the risks associated with leverage and suggests that only very experienced traders should consider using it.

Outlines

00:00

📈 'The Allure of Forex Trading and Its Risks'

The speaker expresses frustration with traditional investment methods and discovers the concept of Forex trading through an app. They are intrigued by the global access and the high leverage offered, which allows trading with a much larger amount than the actual deposit. However, they quickly realize the risks involved, as a small market fluctuation can wipe out their entire capital due to the leverage. The paragraph ends with a cautionary note about the trustworthiness of such platforms and the influence of celebrity endorsements.

05:03

🏦 'Understanding CFDs and Their Operations'

This section delves into the workings of CFD (Contracts For Difference) platforms, contrasting them with traditional brokers. It explains how CFD platforms operate by registering in countries with lax regulations and opening accounts with various brokers to provide global market access. The paragraph highlights the potential issues with this model, such as the lack of regulatory oversight and the risk to investors' funds. It also discusses how CFD platforms evolved to profit not only from the spread but also by becoming the counterparty in trades, essentially betting against their customers.

10:07

🚫 'The Dark Side of CFD Trading Platforms'

The final paragraph exposes the unethical practices of some CFD platforms, including offering fake bonuses to entice new users, manipulating prices to cause losses, and creating a gamified environment that encourages risky trading. It also addresses the legal status of CFD platforms in India, noting that they are banned and included in the RBI's alert list. The speaker emphasizes the importance of being aware of the potential scams and the role of greed in attracting people to such platforms. The paragraph concludes with a call for feedback and suggestions for future content, highlighting ZERO1's mission to educate through data-driven storytelling.

Keywords

💡Forex trading

Forex trading, short for foreign exchange trading, is the act of buying and selling currencies in the global market. In the video script, it is presented as a potentially lucrative investment opportunity where one can trade on an app with global access to various marketplaces. The script highlights the allure of Forex trading with the promise of high leverage, which is a double-edged sword as it can lead to significant gains but also substantial losses.

💡Leverage

Leverage in trading refers to the use of borrowed funds to increase the potential return of an investment. The script uses the example of a $100 deposit (Rs.8000) with 1000x leverage allowing one to trade up to 80 lakhs. This concept is central to the video's message about the risks involved in trading with high leverage, as small market movements can lead to the loss of the entire capital due to the amplified effect of leverage.

💡CFDs (Contracts For Difference)

CFDs, or Contracts For Difference, are financial derivatives that allow traders to speculate on the price movements of an asset without owning the underlying asset. The video script explains how CFD platforms operate by registering in countries with lax regulations and offering global market access. It warns about the potential for these platforms to manipulate prices and act as the counterparty to trades, which can lead to significant risks for the trader.

💡Market Fluctuation

Market fluctuation refers to the constant changes in the prices of financial instruments due to various market forces. In the context of the video, it is mentioned as a critical factor that can quickly wipe out an investor's capital when trading with high leverage. The script illustrates how a small 0.1% market fluctuation can lead to the loss of the entire investment due to the magnified effect of leverage.

💡Stop Loss

A stop loss is an order placed with a broker to sell a security when it reaches a certain price, helping limit an investor's loss on a position. The video script mentions that without a stop loss, strategies become ineffective when trading with high leverage, as even minor market movements can lead to significant losses.

💡Regulation

Regulation in finance refers to the rules and oversight provided by governing bodies to ensure fair and transparent practices in the market. The script discusses how CFD platforms often register in countries with lax regulations to operate with less oversight, which can pose risks to investors as it may allow for less transparency and potential manipulation of trades.

💡Greed

Greed in the context of the video refers to the desire for excessive amounts of wealth or profit. The script highlights how Forex trading platforms and CFDs exploit this human trait by advertising high returns and easy money, which can lure investors into risky trading practices and ultimately lead to financial loss.

💡Sleek UI

Sleek UI stands for a 'sleek user interface', which is a design that is visually appealing, modern, and easy to navigate. The video script mentions that Forex trading platforms often have a sleek UI to increase trust and attract users. However, the script cautions that a good UI does not necessarily equate to a safe or reliable trading platform.

💡Endorsements

Endorsements by celebrities are mentioned in the script as a marketing tactic used by some trading platforms to gain credibility and trust among potential investors. The video warns viewers to be cautious of such endorsements, as they may not reflect the actual reliability or legitimacy of the trading platform.

💡Bait

In the context of the video, 'bait' refers to the practice of offering an initial deposit of money (e.g., $1,000) to entice new users to sign up for a trading platform. The script explains that this money is often not real and cannot be withdrawn, serving as a lure to get users to deposit and trade, potentially leading to losses.

💡Scam

A scam is a fraudulent scheme designed to deceive people, typically for financial gain. The video script uses the term to describe certain practices of CFD platforms, such as offering unrealistic leverage, manipulating prices, and providing fake initial deposits, which are all tactics aimed at exploiting investors and taking their money.

Highlights

The allure of Forex trading platforms is questioned, with a focus on their deceptively simple user interfaces and promises of easy money.

The concept of 1000x leverage is introduced, illustrating the potential for high returns but also significant risks.

A demonstration of how quickly a small account can be wiped out due to high leverage and market fluctuations.

The warning against using leverage unless one is extremely experienced and understands its implications.

Explanation of CFDs (Contracts For Difference) and how they differ from traditional brokerages.

The revelation that CFD platforms often register in countries with lax regulations to operate with less oversight.

A comparison of how trades are executed on a stock exchange versus how CFD platforms manage trades.

The shift in CFD platforms' business models from relying on spreads to becoming the counterparty in trades.

The strategy of offering free money to entice new users, which is not real and cannot be withdrawn.

The potential for CFD platforms to manipulate prices to their advantage, leading to user losses.

The legal status of CFD platforms in India, where they are banned and considered risky by the RBI.

The role of greed in the marketing of CFD platforms and the importance of being aware of the risks involved.

A call to action for viewers to critically assess the information presented and to engage in the discussion.

ZERO1's mission to demystify money through data-backed storytelling and the invitation for viewer feedback.

Transcripts

I'm sick and tired of this!

There's no way I can make money.

I've tried everything and my account balance is…..

Well, never mind!

I tried gold, I looked at equity as an investment.

What's this?

Forex trading? in an app?

This is quite interesting.

I think the best part about this is that I have global access to any marketplace in the world.

I mean, money and only money!

But you know what?

I get 1000x leverage.

What does that mean?

Very simply put, when I want to place a trade,

all I need to do is deposit $100, let's say Rs.8000 and I can trade up to 80 lakhs.

Rs.8000 deposit, 80 lakh trade.

It's all about money. Money, money…,Moolah and only Moolah!

So you see, I have cracked the code on how to make money and all I have to do is choose the direction.

Do I think market will go up?

Do I think market will go down?

Very simply put, I have a machine to make all this money.

But you know what's best? How do I trust such an app?

Because this app I'm talking about is endorsed by celebrities.

That's right!

So I think the solution is very simple.

Forget about everything.

Download the app now and get thousand dollars just for downloading it.

You see these Jordans. Hey, whsat happened to the lights?

Something was definitely wrong with that testimonial.

Forex trading platforms make you believe that money making is so simple, the UI is so sleek,

the money just happens so easily and it just looks so tempting. But how is it even possible?

So we thought in this episode, we'll de-influence Forex Trading platforms.

We'll talk about the good, we'll talk about the bad, because these guys definitely won't.

And we'll go through the entire process from opening an account, all the way to the riches.

Let's start with step number one.

So let's actually take the user journey.

So whatever ads we see on the Internet, we basically follow one of those ads,

and basically I can download their mobile application of a forex trading platform.

And let's see what happens. Let's do this together.

So I'll download it and I can see the account opening is free. There are no charges. Okay!

And then they even teach you how to place trades. Now, I have to be honest, this looks beautiful.

Like the app itself, the UI just looks so sleek and nice and

I'm sure they do this to increase trust because if something looks good, people trust it a little more.

But okay.

And what I'll do is we can see that you get a 1000x leverage. A 1000x leverage?

This means for whatever money you have, its 1000x, you can actually trade with.

And this is sold as a feature.

Which means if I put in $100 i.e. Rs.8000 times 1000 leverage, that is 80 lakhs.

So with just Rs.8000 I can access or trade with 80 lakh worth of whatever I'm trading.

So why don't we place actually $100 and I'll take a 1000 x leverage.

And I have to predict, predict where the market will go?

The market will either go up or down. So let me pick up.

And I pick and we can see that the trade has begun.

We can see the movement.

Doesn't this feel exciting?

Can't you feel the thrill with me?

And the account just went to zero in seconds!

You know why?

Because when I took a 1000x leverage,

my profit and loss is also calculated on the 1000x.

That means it's not calculated on the Rs.8000, the $100. It's calculated on 80 lakhs.

So 0.1%.

Let me say that again.

0.1% of 80 lakhs is equal to my capital.

So all that needs to happen is the market fluctuates, like it does by 0.1%

and my entire capital is wiped out.

No stop loss, no strategy, nothing will work here.

Because you are over leveraged.

Your money in the account has finished. So this trading platform exited

and I have basically become zero in seconds.

As a trader, you should never take leverage.

Leverage is a double- edged sword.

We look at it from a positive perspective, but it also has this negative side.

So unless you're really, really experienced and don't know how to use leverage, you should never use it.

Now these trading platforms are actually called 'CFDs' or 'Contracts For Difference'.

So what are CFD platforms?

CFD is an interesting idea on paper.

But before you understand that, let's understand how a normal broker works, right here in our country, in India.

When you want to buy one share of, say HDFC bank, you place a buy order on the stock exchange.

Now this happens via the broker interface.

But the point to be noted is, you're placing the order on the exchange.

Once you find a seller and that order matching happens.

Remember, this happens on the exchange level, not the broker level.

Once that matching happens, a trade is executed.

So stock exchange is a place where stock exchanges and order matching happens based on bids and asks.

And then of course we have all these intermediaries around this to ensure and safeguard you.

Now let's look at how a CFD platform does its trade.

So you want to trade abroad, you want to have access to all markets.

Could be European, could be South American, could be American, could be Canadian, could be who knows what.

But you want international access.

So the first thing the CFD platform does, is register himself inside a country which has lax rules and regulations.

So no one's really looking if they break a few rules like Belize or Cyprus or one of these places.

Once they've done this, they will open accounts with the US broker, with a European broker so on and so forth.

And let's say you deposit an amount with the CFD platform,

what they'll do is when you want to purchase say Nike shares, they'll take that money, purchase it with the US broker

and show a ledger entry to you on your UI that you now own one share of Nike.

Remember, the Nike shares that you bought were bought through this CFD platform.

The CFD platform placed an order with this US broker

and to the US broker the owner is not you, it's that CFD platform.

And the money you put is also owned by that CFD platform.

Now the biggest problem here is that if there's a dispute who will you really go to?

It's based in a country with really lax rules.

Anyway, this is how they give you global access.

And compare this to what happens in India.

When you bought those shares of HDFC bank they were actually held by you in your name in a DMAT account,

regulated by intermediaries and making sure that nothing goes wrong in case there's an issue.

This is how an evolved market works and how say USA also works.

But in the CFD's case this entire chain of command has changed.

Now everything was going really well for these CFD platforms in the 90s.

Things were going well. They had traders, you had investors, people would open accounts,

they evolved their advertisement, people would place orders, they would place it in the country,

show a ledger balance and things were good.

And the way that these CFD platforms earned was via spread.

They didn't charge a brokerage, there was a spread between the buy and sell and that's how they made money.

But over the years they had another idea to make money.

Apart from the spread, they looked at all their traders and noticed almost all of them were losing money eventually.

So what if they became the trader on the other side, which means there is no exchange happening.

You simply take the opposite position of whatever your customer puts.

So if he is trading currencies and he buys them. You simply take the opposite position, that's a sell.

The actual trade with another trader never happens.

This meant the platform is not an intermediary anymore.

It's become sort of an exchange by itself.

It’s become its own regulator.

It's become its own clearing corporation.

It's become everything.

In a country that does not have crazy good laws, that's a problem.

So now let's imagine you and me, both of us,

we own one of these CFD platforms, and we have to make money.

And, dude, the only way we can make money is if our customers lose,

because in this case, I'm not charging a brokerage.

I don't care about the spread.

We are trading against them.

It's totally legal, by the way, because this country doesn't care.

The first thing we can do is give them lots of leverage.

10x, 20x. No, just give them 100s of x of leverage,

and as soon as there is some fluctuation in the market, take them out,

which means all of the money that they put in the trade is now ours. Nice?

The second thing is, we'll run a lot of ads to show them

in testimonials that money can be made and we should gamify it.

We should make it simple.

Don't put all this limit, stoploss.

Simply ask them, where do you think the market will go, up or down?

And with that bet, because this is essentially a bet,

and this is now a casino, and we are the owners of the casino, and the house always wins.

Third point.

Now, you'll notice a lot of people clicked on our ad, but a lot of them are not signing up.

So what should we do?

As soon as they open the account, we'll just deposit $1,000 for them, for free.

Sir, but where will the $1000 come from?

Guys, it's a digital platform. We'll just show them $ 1000, but won't let them withdraw it.

We'll simply say, you can't withdraw right now.

You must deposit and trade before you're allowed to withdraw.

Simple!The $1,000 is not real.

It's bait for them to open the account, and hopefully, after some time,

they'll deposit money, get addicted, and that's how we can earn.

Another terrible thing, team ZERO1 found while researching this,

is that the prices you see on these apps are not even real.

They'll change them based on how they want to make money.

So if they want to show a lower price so you make losses, they'll just do it really quickly.

Or the opposite, if you're short.

My point is very simple. It happens so quickly, it'll feel like it happened for real.

But it's just designed to suck you into the scam and all your money out.

So now let's talk about the legalities in India.

First thing is CFD platforms are banned.

There's also a list by the RBI.

It falls under the alert list of all platforms you should be wary of.

Links for both of these are in the description.

Check them out.

For further reading, we have a bunch of other links in the description.

Do check that out.

Tell me what you think.

The entire de-influencing series, all these episodes that we've actually done, have one thing in common.

The people are selling greed to us,

and sometimes, somewhere in our lifetime, we fall prey to it.

So tell me what you think about it. And our intention is to basically make sure

you know what's good and bad, because the Internet can really be misleading.

What are the good things you liked in this episode? Please write in the comments.

ZERO1 is a new age media company that's trying to demystify money through data backed storytelling.

So tell me what you liked and didn't like in this episode. Give me more suggestions of

what you'd like to see in the future and see you in the next episode!