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Comment by brianbreslin | Hacker News Reader

So this is slightly deviating from topic, but still on it. Can someone explain why forex has looked like shady stuff for so long and there are so many get rich trading forex ads all over the web? I have never dug into this, so I am just genuinely curious. How does that industry work?

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Pull people in, lose all their money via high leverage (stop them out when they lose), repeat with new sucker. You have to get new customers to pillage constantly, hence the advertising. Plus it is more or less unregulated (leverage is limited to 50x in US, unregulated elsewhere). The companies dont have to hedge the positions much, as many net out, and people will mainly be losing money.

There is almost no regulation (insider trading is fine for example). Leverage is huge so it draws in the get rich quick people. FX has dealers instead of brokers, and I'm told from friends who have dabbled in FX trading, feels like a conflict of interest.

http://www.investopedia.com/articles/forex/06/sevenfxfaqs.as...

Forex trading in itself is a fairly neutral, close to zero sum process. The people running forex adds get rich by charging commission on trades and selling get rich courses. Most small speculators lose their money. I guess it remains popular because it's not a total losers game - well informed speculators like Soros can make a great deal of money at it.

> so many get rich trading forex ads all over the web Anecdotally, as a publisher, the CPCs (cost-per-click) are quite high, likely to make up for low clickthrough rates.

In other words, it doesn't seem like many people are interested in it, but the forex shops must be making fairly good money when they get a new customer.

tl;dr it's high-margin and low volume in terms of actual customer counts.

Lack of regulation. You can go to jail for advertising equities, futures, bonds, etc. like these bucket shops do.

When you have 50x or 100x leverage, you will either get rich quick or go to zero quick.

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