Is Forex Trading a pyramid scheme? The short answer is no. However, there are many multi-tiered forex trading programs which resemble pyramid schemes.
Forex trading is simply trading different currencies as stocks are traded on the stock exchange.
Forex is short for “Foreign Exchange.” Technically, anyone with a forex account at an exchange can begin trading on their own. Hence, there is no multi-level marketing involved, and the structure inherently doesn’t resemble a pyramid scheme.
Forex Trading has been active throughout the world for over half a century
The first foreign exchange was established in Denmark in Amsterdam 500 years ago. The objective was to trade currencies across the world to stabilize the currency exchange rates. So, there was nothing about the forex trading mechanism which resembled a pyramid.
However, in the 21st century, much like many other trades and businesses, forex has fallen prey to MLMs.
There are mainly two types of forex businesses that resemble a pyramid scheme:
- Classic Pyramid: Businesses that are constructed in such ways that each subsequent user finances the income of the previous victim. The profits are paid from the newly attracted deposits.
- Fraudulent Projects: These businesses don’t pay their employees and set unrealistic demands. They stall for time and create excuses for why withdrawals can’t occur at certain times under convoluted pretexts.
However, under the basic structure of forex trade, there is no such pyramid. Each broker or each trader can make money for themselves. They are allowed to take most or all of your fees from your brokerage trades. There is no mechanism in place for you to withdraw your profits without going through their system first.
In this guide, I will discuss the Forex Trading business model and how much you stand to earn as an individual trader. I will also dive into the various pros and cons of working in a forex exchange and give you person insights from my experience.
My objective is to show you how Forex MLMs operate and why they resemble pyramid schemes. It’s much more profitable for you to individually trade forex.
This article is written by our Editorial Team at Incomepedia with the help of a former Forex Trader.
My Personal Experience
I had known about forex trading for more than a decade before I became a forex trader myself in 2019. It was the only market that dwarfed the stock market in terms of market capitalization.
I traded Euros, Dollars, Pounds, Dinars and Dirhams. However, getting started was easy. Getting good was not.
Trading forex, just like trading stocks, requires a specific knowledge of current events as well as focusing on the right information. The value of different currencies depends on a variety of factors including national reserves, economic policies, political stability, and trade policies.
Hence, it’s not as easy to play the long game as most people think.
This is part of the reason that forex MLMs are so attractive to new traders. It has all the main elements of a pyramid scheme including:
- The pitch of a once in a lifetime opportunity
- A program which teaches a new recruit how to multiply income
- Referencing famous entrepreneurs like Robert Kiyosaki and Sharon Lechter
- Focusing on recruitment rather than sales
- Earning by affiliate commission under a pyramid structure
- The promise of financial freedom
My Personal Experience With iMarketsLive (IM Mastery Academy)
One of these Forex MLMs is iMarketsLive. It was founded by Christopher Terry in 2013 and specializes in offering forex trading opportunities to new recruis.
A broker can offer clients favorable terms if they are willing to promote their services to other potential customers. This usuall include promotion tactics such as affiliate marketing, discount codes, etc.
iMarketsLive Business Model
The iMarketsLive business model centers on financial trading software and education materials. They advertise that they can take someone that knows nothing about investing and turn them into an expert.
Once you purchase a subscription to the software, you can watch experts trade live, etc. By monitoring their buys and sells, you can learn strategies. The platform also allows you to use the same pograms as they do, but on autopilot.
That way, you can make the same trades.
IM Mastery Academy, as the platform is now known, is mainly an educational entity. If you go to the YouTube channel, it is filled with videos on how to take control of your financial freedom. The videos mainly feature people claiming to be educators and dishing out useless platitudes which can be found for free online.
With video titles like “Educate, Enrich, Empower, Elevate” and “The Power of Unity”, the YouTube channel is filled with videos that ostensibly show you how to get rich.
If you visit IM Mastery Academy’s website, then you can find courses with high monthly fees. It costs $324.94 to enroll and $274.95 to renew monthly memberships. There are also several testimonials which show people praising the platform for “forever changing” their lives.
The website also talked about live mentorship to “accelerate your growth and achieve excellence”. There is also mention of strategies to expand one’s learning and mentorship with simple and unique strategies.
When I first saw all this, I was receptive, since I’d recently gotten a paycut at my job. Termination was all but certain as a cost cutting measure at my company because of COVID. So, I tried to dive in and see how IM Mastery Academy was for a trial period of a month.
However, the red flags started to show themselves almost immediately.
What is iMarketsLive Forex Trading?
iMarketsLive was founded on the notion that a huge pool of forex traders upon forex traders could benefit from this market by acting as independent agents.
iMarketsLive was founded by Christopher Terry in 2013. It specialized in MLM where product offerings are promoted by independent agents. The brokers offered clients favorable terms to promote their products to other potential customers.
Christopher Terry is an experienced businessman who has invested in everything from real estate to trade, to philanthropy and construction. In 2013, he created iMarketsLive, which has now changed its name to IM Mastery Academy.
His main motivation for investing in the venture was to “bring wall street to the main street”. He formed the company with his wife Isis Terry on the 4th of July in 2013 to give people back their financial freedom.
IM Academy has been a resounding success as a business. It has moved to a mainly educational model now. In fact, it is now the number one trading education network across the world according to Forbes India.
CEO and Staff
Forex Trading’s current CEO is Christopher Terry. He has remained CEO since 2013. Along with him, his wife Isis Terry is co-founder and CFO of the company
Forex Trading officially has approximately 700 employees at its corporate offices.
IM Mastery Academy is a Pyramid Scheme
There are very clear reasons and signs that show that IM Mastery Academy is a pyramid scheme.
IM Mastery Academy Doesn’t Have Any Forex Licenses
You heard that right. IM Mastery Academy is not a licensed forex broker and is not regulated by the US government. This means that they don’t adhere to the same legal standards as regular forex brokers.
IM Mastery Academy Makes Wild Claims About Consistent Income
You have to also consider the claims that they make with clients earning easy and consistent income.
Consider the fact that only about 10% of the forex traders in the market make consistent profits. This means that 90% of the forex traders don’t. In fact, 90% of forex traders are forced to close up shops since they don’t succeed at all. Certain periodicals have posted failure figures as high as 95%.
Hence, IM Mastery Academy’s grand claims are categorically and verifiably false.
IM Mastery Academy Was Fined $85 Million
In 2018, the Federal Trade Commission of the United States filed charges against the IM Mastery Academy (then known as iMarketsLive) worth $85 million. Regulators in Belgium, France and Spain also banned the platform since they said it resembled a pyramid scheme.
Is Standard Forex Trading a Pyramid Scheme?
According to the latest estimates by the world bank, the total market capitalization of all stocks worldwide is a little over $60 trillion. The figures for the forex market are even bigger, with $6.6 trillion trading every single day.
So is Forex Trading a pyramid scheme? According to the SEC, this is not the case. Pyramid schemes are supposed to be fraudulent businesses which extract as much money from participant fees and generate very little revenue outside of that model.
The SEC also states that pyramid schemes have the following elements:
- No genuine services or products are sold to buyers or employees;
- High returns or great success is promised in a short amount of time
- There is a promise of passive income with little effort
- Retail sales don’t generate any demonstrable revenue
- Members have to make a purchase to sign up
- There is a complex commission structure
- Recruitment is the basis of the business model
None of these things actually apply to forex trading. Buying and selling currencies, the very things that give all other commodities and services value, is the name of the game.
Why Forex Trading Isn’t a Pyramid Scheme?
Forex Trading doesn’t count as a pyramid scheme because it doesn’t meet each of the criteria mentioned above. It differs in these areas because:
#1. Forex Trading Is About Currency Exchange
Forex Trading has been the exchange or selling or buying of currencies around the world for centuries. This means that it features verifiable transactions through regulated entities at an international level.
Unlike Forex MLMs, it doesn’t depend on continuous recruitment or promotions for profits.
There are regulated foreign exchanges around the world which allow the trading of different currencies like dollars, pounds, euros, dinars and dirhams.
#2. Individuals Can Trade On Their Own
Forex Trading allows individuals to setup brokerage accounts and buy and sell currencies. This doesn’t require recruitment at any level. You can earn through commission as a broker, or trade for yourself and earn profits.
#3. There is Demonstrable Revenue Generated from Sales
According to the Traders Union website, a trader’s earnings with a deposit of $5,000 can range from $50-200 per day. While this revenue is small, it is demonstrable.
The biggest traders, which are in the minority, can earn upwards of thousands or even hundreds of thousands a day.
How Much Money Can You Earn from Forex Trading?
Forex Trading can allow traders to make hundreds of thousands of dollars each day depending on the investments. However, a decent strategy nets you between 5% and 15% every month.
So, how much can you really earn? Well, according to Ziprecruiter, you can earn an average of $81,910 annually. While that is not extremely substantial, it is higher than the average salary of a US Citizen which is currently $54,132 per year. How to Earn Income Through Forex Trading?
Forex Trading offers you an opportunity to make money in two basic ways. These are:
- Earnings from buying and selling currencies and cashing in on the profits
- Earning commission as a Forex broker on every trade
Method #1. Earnings from buying and selling currencies and cashing in on the profits
Just like buying stocks, you can buy low and sell high and cash in on the profits. Currency rates rise and fall all the time. Just like stocks, the higher the investments, the higher the profits.
Method #2. Earning commission as a Forex broker on every trade
As a forex broker, you can earn commission trading with other people’s investments. With each trade, you can earn commission. The average salary of a forex trader is a base of $98,652 with $25,000 extra from commissions.
3 Great Advantages of Becoming a Forex Trader.
Pro #1. The Sky’s the Limit
Forex Trading allows you to earn as much or as little as you can. It depends on a lot of factors like key investments or keeping an eye on the news, etc. However, some of the best forex traders make upwards of hundreds of thousands of dollars a year.
Pro #2. You Can Take Advantage of the Largest Trading System in the World
Forex is the largest fiancial market in the world. It deals in many times the money of the stock or the crypto asset market.
You can sign up for a Forex Trading Franchise using a simple form on their website. Source: Forex Trading
Pro #3. You Can Earn a Stable Salary as a Broker
As a broker working for a trading exchange, you can earn a stable salary, plus everything you get on commission. Most traders make upwards of $100,000 in the US every year.
Key Disadvantages of Becoming a Forex Trading Member.
Con #1. Most Forex Traders Don’t Succeed
The major disadvantage as a forex trader (not a broker) is that you will most likely not succeed for a long time. The numbers don’t lie. 90% of all forex traders don’t succeed. You’re better off just investing with a broker to help you profit.
In summary, Forex Trading does provide a good income source for people looking for flexible hours and exponential growth in a new sector.
However, there are Forex MLMs out there which will fool you into thinking you can succeed if you take their courses. Instead, you will have the same shot as everyone else if you just start trading on your own. You, at least, won’t be robbed of thousands of dollars.
Who Would Forex Trading Be a Good Fit For?
I think Forex Trading would help those looking to start a career in securities or currencies trading. It’s one of the most demanding and challenging careers and keeps you alert to your surroundings. This includes economic and political events around the world.
This is a great place to start for people who are interested in increasing their income but also learning the lay of the land in the securities and exchange business. The initial investment of time and training, while not guaranteed to pay off with high returns, is at least not a pyramid scheme.
Frequently Asked Questions
How Many Forex Trading Locations Are There?
It’s hard to tell, but there are at least hundreds of forex trading apps out there. You can either sign up there, or get a job at a forex trading agency.
How Do I Start My Forex Career?
You need to create an account at a registered forex brokerage house. Then you will need to invest money and start trading. It’s that simple. However, learning to trade effectively will require patience and learning.
- Forex Trading History: The First Foreign Exchange
- iMarkets Live Article: iMarketsLive Article on Forbes
- iMarketsLive is an MLM: iMarketsLive Review
- Forex Trading Average Salaries: Forex Broker Average Salaries
- IM Master Academy Employees: IM Mastery Academy LinkedIn Page
- Securities and Exchanges Commission Pyramid Scheme Definition: Pyramid Schemes