Between Charles Ponzi and Bernie Madoff, the history of pyramid schemes is rich, tragic and driven by one of the most powerful emotions — greed. While the forex market is far from a pyramid scheme, its development over the decades has attracted shady businesses. This article discusses financial pyramids in forex trading and lists basic steps that help avoid pitfalls.
What is Forex?
Foreign exchange (forex) is a global, decentralized currency market. Through a network of international banks, it operates 24 hours per day, 5 days per week, with the Australian market opening and the U.S. market closing the week. Forex works by pitting the value of one currency against another, creating currency pairs. The most popular is the euro vs. the U.S. dollar, labeled as EUR/USD.
The origins of the modern currency market can be traced to the 1970s when the U.S dollar officially started floating. Since then, the forex market has become one of the largest globally, with daily volumes exceeding $6 trillion.
What is a Pyramid Scheme?
A pyramid scheme is a business model that relies on perpetual and unsustainable growth. These schemes often promise high and fast returns to lure new members quickly. By deploying its funds to pay out returns for earlier members, the scheme continues to operate as long as there is an influx of new members. The scheme inevitably implodes when the growth slows down as it cannot pay out promised returns.
2 Main Types of Forex Pyramids
The forex market grew quickly,…
