Is Forex Trading Legal?

Is Forex Trading Legal?

What is Forex Trading and is it legal? Let’s face it, the thought of making lots of money in a short amount of time is tempting for most people. So when I see posts on social media about how people make money online by trading foreign currencies, it definitely got my attention.

But I also know from my experience in the field of cybersecurity, that with the promise of making money also come scams. So I took a critical look at how Forex Trading works. And I familiarized myself with the common scams associated with it.

This is what I found along with the ways to avoid being scammed while still having a chance of making a profit.

Forex Trading is legal in most countries including the United States and the United Kingdom. Most countries have restrictions on trading foreign currencies. A few countries such as North Korea, Cuba, and some African countries ban it completely.

What is Forex Trading

Forex stands for foreign exchange. The meaning of Forex is for the buying and selling of currency (money). This happens all over the world 24-hours a day, 5 days a week.

Understanding Forex trading means knowing how exchange rates are established. There are countless ways in which the rates fluctuate. That is because their value is a reflection of what weight or significance the public holds with a certain country’s currency.

Countries with weaker economies do not have a valuable currency. As relative to other countries That produce more profit. So, if I were to sell something to a person in another country I would want the quantity of their currency where I could buy a similar or greater item in their country.

For example, imagine you are a winemaker selling in the United States. Your bottle of wine is worth $100 USD. I would have to do research if someone in Canada was to purchase this wine for 100$ Canadian dollars (CAD).

The reason being is that currently, the rate of USD is more valuable than CAD. That means that when selling the wine for 100$ CAD, you would have to exchange that for USD that is accepted in your country. The amount of USD that you would get in exchange would be less than $100 and therefore not worth the value of the wine.

Forex Currency Exchange

Forex While Traveling

When traveling to different countries you have to trade your money for the currency used there. That’s because each country chooses which currency to accept. This way exchanges do not need to occur upon every purchase. So before returning from your trip, you would then exchange the currency back. Your currency would return to the type accepted where you live. Now merchants, where you’re from, will accept it.

Most major credit cards in recent years can already do this exchange on the spot. However, depending on the company they may charge an exchange fee for every purchase. Therefore, sometimes it is still worthwhile to make one larger exchange in advance than it is to make multiple transactions.

This exchange does not change the value of money. This is just an equal swap for what it is worth compared to another country’s money. This allows the trading of goods between countries because products are paid for in the currency useful to the seller.

Forex vs Stocks

As opposed to Forex, stocks are the actual ownership of a company. Although this level of ownership is relatively insignificant. Company executives do take the opinions and concerns of shareholders into consideration when they make major decisions. However, these decisions are based on the shareholders as a whole and may not align with your particular wishes.

Is Forex Trading for Real?

Countries Where Forex is Illegal
North Korea
Many African Countries
Countries Where Forex is Legal
United States (USA)
United Kingdom (UK)
South Africa
Iran & Iraq
Saudi Arabia

Restrictions on Forex Trading

While the legality of forex trading in India is not in question – it is legal. There are heavy restrictions that apply due to the religious and cultural climate of the area.

Despite heavy restrictions, Forex trading is legal in Saudi Arabia. They see certain money-making practices as being morally wrong.

Similarly, Iraq, Iran, and other countries under Sharia law have many restrictions. However, it is still legal in these locations.

There are restrictions on advertisements for Forex in France despite the actual trading being legal.

Forex trading is legal in South Africa. This is interesting because it is not legal in many of the surrounding countries in Africa. This shows some of the differences between the south with other parts that are struggling economically such as the west.

Legal Age to Trade Forex

It is illegal to trade Forex under 18. In the US and the UK, you have to be 18 to trade Forex.

Using Forex Bots

Forex bots are legal. They are widely available in many software applications popular with traders.

Is Forex Hedging Legal?

Forex hedging is not legal. In the early 2000s, hedging was deemed illegal in the U.S.

Restrictions on Leverage

The most widely legally accepted from of leverage in Forex is restricted to 50:1.

Forex Trading Signals and Advice

Whether you are in the market for Forex account management or are considering offering these services, they are legal. The same is true for Forex signals in the US and UK. The selling of Forex signals is legal. Likewise, it is legal to give forex advice.

Bitcoin on Forex

You can trade Bitcoin on the Forex market. Most brokers accept cryptocurrencies and will exchange them for the foreign currency of your choice. Not all brokers offer these services. You would have to request this depending on the broker you choose.

Lack of Trust in Forex

You may hear from people who do not trust Forex. The reasons they describe typically don’t apply to Forex. What they are describing are the associated scams.

For example, if I sold you the new-in-box iPhone. You may go home to open the box and find the phone was replaced with a brick. This would be a popular scam.

However, you cannot say that buying an iPhone is a scam. The same goes for the marketplace through which you purchased it. All you can definitively say is the person who sold it is the scammer.

Why Forex Trading is Legal

Forex is legal because the premise is very basic and necessary. The concept involves one currency being more valuable than another. Betting if the difference in value will go up or down can make money. This principle is easy to understand and common in most economies.

It is also necessary that foreign exchange exists. This is so international travel and commerce can be supported.

For example, we might miss out on some of the best wines in the world. Someone making wine would have no reason to sell it to people in other countries. They would have no use for the currency they would get an exchange. But because the currency can be exchanged for their own, they accept it.

Forex Scams

Forex is not a scam. It is regulated within each country that participates in the market. Regulated forex brokers are held accountable by the individual countries where they are located. There is no centralized regulatory body that oversees all countries.

International regulations are weak for Forex because of the individual sovereignty of the involved countries. It is regulated in the US by the U.S. Securities and Exchange Commission (SEC). However, the SEC has no powers over brokers outside of their jurisdiction. The best they can hope for is the cooperation with regulators in that country.

The SEC has a PDF document about Forex Trading.

Unrealistic Expectations

Forex Trading Scammer

On social media, you are sure to find people bragging about their success. This is also called flexing. That is because you flex your muscles to show off your hard-earned results at the gym.

The best way to spot these types of posts is those that show a large amount of money fanned out. Another way is the display of high valued items such as watches or even clothing. Sometimes people try to be subtle when they talk about the products of their success. This is apparent when it is out of context.

Props are another way to subtly suggest they are successful. Other times they are directly referenced in order to claim outright they are something the person watching can obtain if they trust this person. They are trying to portray this level of success show you will believe they are capable of showing you how to do the same.

Scammers try to convince you earning this kind of income on a regular basis is easy. They also claim it is risk-free. There is no easy way to earn lots of money fast without any risk. Yet those are the ways these scammers attract their victims.

Forex Trading Fake Claims

Reality Check

In reality, the cash scammers flash is not a true representation. What you can expect to receive is little or nothing. The money they show may be real. But oftentimes it is either borrowed or earned over an extended period of time.

What you should expect in reality if something is not a scam is there is a risk. It is a moderate amount of money that you need to build over the course of time. Also, it is not easy or everybody would do it.

What you can expect if it is a scam is you will lose all of your money to the scammer. You will also have wasted your time.

Those Who Can’t, Teach

Be wary of companies selling training instead of actual trading. They promote Forex trading for beginners. You may be under the belief you are investing in the Forex market.

Instead, you are paying someone for their advice. What they are selling are Forex trading strategies. In these cases, you are paying for information and not for foreign currencies holding value.

BabyPips is an example of a legitimate learning program. They make their money by offering education about Forex. I trust them because they are honest about the service they provide. This company does not promote unrealistic results.

It is important when paying someone to learn how to trade you do your due diligence. Research them first to make sure they’re not making any of the unrealistic claims of success.

Make sure their rates are in line with other companies offering similar services. If the price is too high, it may not be worth the investment. You may never earn enough or lose interest before you can make this money back. If the price is too low and it may provide little or no value. The scammer knows this so are satisfied with accepting the little money they can.

Multi Level Marketing vs Pyramid Scheme

Multi-Level Marketing, or MLM, involves the ongoing recruitment of affiliates to sell a product. Each member recruits new members to recruit and sell. This process is repeated much like what you would expect a pyramid scheme to look like. That is because the structure is very similar.

The difference is that with pyramid schemes there is typically no product. Here, the member makes money only by recruiting instead of selling products. Sometimes a product is suggested as a cover. But in these cases, there is no market research. They are no worried about supply and demand as a normal business would.

If you are investing in Forex with a broker, what you can sometimes find are referrals. Referring someone to this broker can reward you with stock or other assets. This is a little different than a pyramid scheme or MLM because you are not receiving any benefit from the person that you recruit.

You are not suggesting they must recruit or refer other people unless they deal directly with the broker. Anyone they refer in the future would not benefit you.

Simply make sure trades are being made. You can make referrals and be compensated without it being a scam. But be wary of any startup costs. They are another sign of pyramid schemes.

Forex Trading Brokers

Brokers make money because they are facilitating your trade. They do not need you to recruit other people. What they need you to do is to continue to invest in the market. Brokers are not going to turn down more clients. But that is why they do marketing. Their main focus is not to pay their customers to find future customers.

An example of a Forex broker would be eToro. They can be your go-between with the market. They are like a middleman between the person buying and selling the stock and the exchange. The exchange is the system where each country connects to communicate their transactions.

Brokers allow for this process to be much more streamlined. Rather than having just anybody who’s new and don’t know what they’re doing. Not just anyone can communicate through these channels. So when I want to buy or sell a currency, I tell eToro. They are authorized to make the transaction on my behalf as a proxy.

To learn more about how proxies work I have an article that explains Internet proxies in great detail. But basically, whether it is a broker or an Internet proxy, they do the work at the request of someone else. So eToro makes the exchange. Then they credit me with the result which is new stock, currency, or crypto.

No matter which broker you choose, make sure to do your research. There are more fake Forex brokers than real ones. A quick Google search will turn up the latest Forex scammer lists.

How to Trade Forex

Becoming a Forex trader is no simple task. There is a lot of information circulating online. This information can be either right and wrong depending on the source.

 The hard part is sorting through all the scams and misinformation and finding that with actual value. Many people offer their trading strategies for Forex at a price.

First, consider conducting research on your own. This will ensure the market will keep your interest. Remember, you’re looking to make money not lose it. There is plenty of free material out there.

To be a Forex trader, you have to understand how world currencies are influenced. This can be seen publicly by major news events. War and natural disasters can make some difference. On a more frequent basis, changing government regulations and international agreements are important.

Once you know all of the impacts on the value of a currency, you have to learn Forex trading best practices. This includes actually trading on Forex and how the exchanges are made.

Direct Speculation vs Carry Trade Speculation

Direct Speculation

This refers to the educated risk by an investor that the actual value of one currency will increase or decrease. If an investor believes the value of a currency will increase, they will purchase this currency as it is currently valued. Then, if they are right they will sell it later for a higher value. Their profit will be the difference between what was originally paid.

However, if the currency decreases then the opposite is true. They will have lost money once it is sold for a lower value. But it is possible the value of a currency an investor owns decreases but they have yet to sell. At that time the investor has not actually lost money.

Because they still own the currency, there is a chance that over more time the currency will go back up. It is not until the currency is sold that their losses are final.

Another possibility considered a loss is when the currency remains at a similar value over a long period of time. The investor did not lose money. But they missed the opportunity to make money through a different investment.

Carry Trade Speculation

Carry trade speculation is different from direct speculation. It involves the difference in value between two currencies. This is opposed to the value of one.

This method obviously has more variables because it involves another currency. Consider when both currencies increase or decrease in value at the same time, an opportunity for a loss or gain is not possible. Otherwise, there is almost a constant opportunity for frequent differences between two currencies.

Trial by Fire

Should you spend money to make money? Sometimes this is unavoidable as a startup cost. You have to purchase a currency before its change in value can give you an opportunity to profit.

Learn by trading. The money you are spending on courses to learn may benefit you more through having your own experiences. If you invest in Forex initially a very small amount that may be a good idea. You may make money or lose money on that very small investment. But you will gain valuable knowledge.

This real-world experience will teach you how the process works. This saves you time in the future. It also shows you how these currencies fluctuate. As well as why they fluctuate. And what you can do better moving forward.

Verifying Forex Trading Brokers

When finding a real broker to invest in Forex, make sure they are transparent. Any questions you have should be answered without redirection. There should be ample information on their professional website.

Look for third-party verification. Any checks or pay statements they provide as proof of their success could otherwise be fake.

A Google search of the name of the company should provide a lot of results. Try to find a physical address for the company. Independently verify this address online as if you were actually going to go there. See if there is a face to the name. When all of their pictures are stock photos, this can be a concern.

Look for third-party reviews from websites not hosted by the company. When searching this company. there should be little to no scam warnings in the results.

Brokers and Forex Trading Software

Other than eToro, Traders way is another popular broker. They provide the Metatrader 4 software for their customers. This program has been in service for years. An update is available under the expected name Metatrader 5. However, this software is not nearly as popular. So there’s no concern if you’re not using the latest software. Use the more popular version.

USDUnited States DollarUSA
EUREuroEuropean Union
GBPPound SterlingUnited Kingdom
CADCanadian DollarCanada
AUDAustralian DollarAustralia
NZDNew Zealand DollarNew Zealand

Get Rich by Trading Forex

How much Forex traders make a day depends on their starting capital. The larger the risk, the larger the reward. Most professionals are not all-in with their investments. That means they have a certain limit to how much they are willing to risk. This is usually a small percentage such as 5%.

It is possible to get rich by Trading Forex, that’s why people are drawn to it. But this is the exception and not the rule. Trading is best suited for people with financial experience, business degrees, and are willing to make it a full-time career.

Forex is not suited for people to do in their spare time. There is too much research to be done to be successful. Also, the amount of financial investment needed is more than someone can do with extra cash.

Please do not spend your last penny on Forex. It is best used as an investment rather than a way to make extra money.


Forex trading is highly regulated but legal in most countries. It has a bad reputation because scams are so common. Do as much research as you can before investing any money. Resist the temptation of quick and easy money.

I have the highest confidence in any program or broker linked to in this article. You can use them as a starting point but use the program that is best suited for you.

Finally, there are simulators available that can give you the look and feel of trading without risking any money. This can be a good test to see if the market is right for you. I recommend’s simulator as I have read the fine print on their website. It’s a 90-day demo account and you can unsubscribe from any emails.

There are many parallels between Forex and other kinds of scams. Read our article about Sugar Daddy scams here.