Topic: How To Invest

Forex trading courses sound too good to be true for a reason

market graphic

Reductio ad absurdum (Latin: “reduction to the absurd”) is a form of argument that goes back thousands of years, to Aristotle and before. It works like this: to prove a proposition is false, you simply show that its logical implications lead to absurd conclusions. This can be a great timesaver for investors.

Take, for example, foreign-exchange trading courses, for which you can pay hundreds or thousands of dollars for a day or two of instruction. The marketing materials for these courses suggest that you can make a living in as little as a few minutes a day by trading foreign exchange (or “forex,” as course promoters refer to it in the ads). Better yet, you can do it in your living room.

The “secrets” that the courses claim to provide consist of formulas that show you how to, first, pick “a large proportion of winning trades” and, second, get out of your rare losing trades while your losses are still small. Forex investments are presented as a can’t-lose proposition.

In theory, it could work. Foreign-exchange trading does come with a lot of leverage. Your winning trades do show an extraordinary rate of return on capital. In reality, however, it doesn’t work. Instead, it consistently fails. No amateur, part-time trader succeeds at it for any length of time. Eventually, they all lose money.

I’m not going to explain how the sand gets in the gears of this particular perpetual-motion machine. It’s simpler to apply reductio ad absurdum.


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Why would anybody work?

The investing business is among the world’s most profitable, so it attracts some of the world’s smartest people. Many of these people spend years studying markets at the world’s highest-rated, most-expensive universities. Many go on to get rich, but it takes decades.

Do you really think these people would go to all that trouble and expense if all they really needed was a two-day forex course?

For that matter, banks and other financial institutions spend untold billions every year to hire market experts, create and sell investment products and so on. Why would they do so if it was so easy to make money “trading forex”?

This leads to an even more basic question: if forex trading really offered an opportunity to make that kind of return, why would anybody work?

It all comes down to a rule that undoubtedly goes back even further than reductio ad absurdum: When a deal sounds too good to be true, it almost certainly isn’t true.

COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members

Have you ever taken any get-rich-quick investing courses, in forex or anything else? Did you learn anything that you would say has materially helped you succeed as an investor? Let us know what you think.

Comments

  • Pat -I was a currency and precious metals trader for 14 years(pro)(Merill Lynch) and rarely did you ever see a consistently profitable trader – They all lost their shirts …repeat “All” DWS

  • Brooke P.

    Dear Pat,

    Well done! There’s nothing like common sense to take an absurdity to its logical conclusion.

    Your common sense, coupled, I’m sure, with many hours of hard work, is why I’ve been following your good advice since you edited The Investment Reporter in the 1980’s. Needless to say I’ve got a number of multi-baggers in my portfolio – some thanks directly to you, and others due to following the principles and approaches to investing that you’ve set out.

    Kindest personal regards,
    Another “Pat”

  • Thanks for the usual astute analysis. The other question one might ask is why people would ever go to the considerable trouble of crafting & giving get-rich-quick courses if they could mint billions simply by taking their own advice for a few short minutes a day. I think we know the answer.

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