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Inside the Instagram foreign exchange craze - BBC Three

Since the pandemic started, more than 280,000 under-25s lost their jobs.

So what do you do when you're at a loose end? There are only so many park strolls you can take before you turn to social media scrolls.

That's where BBC reporter and presenter Dion Hesson first came across forex trading.

"I saw some friends posting Instagram stories saying, 'if you want to make some money through trading on your phone, message me to find out more," he says.

"Initially I thought nothing of it, but then it got more popular, with more and more friends posting about it."

If, like Dion, you're new to this world, you might be wondering what forex trading is? Put simply, foreign exchange is the conversion of one currency into another. Forex trading is essentially betting on the value of a currency going up or down.

Caspar Marney is a former foreign exchange trader for an investment bank and the founder of Velador Associates, a company which gives legal advice to forex traders. He says the purpose of forex markets is "to facilitate international business".

Caspar Marney is a former foreign exchange trader for an investment bank

To put it into context, "if a US smartphone manufacturer wants to buy LCD screens from South Korea, it may need to convert US dollars to South Korean won.

"In this case, the manufacturer would, through a bank or broker, make a forex transaction to buy Korean won for US dollars and then use the Korean won to pay the supplier."

These types of transactions are one of a range of factors that cause a currency to change value – and it's that shift in value that forex traders try to cash in on.

You might associate the industry with big open-plan offices, LED screens dotted with loads of numbers on them and men in expensive suits, but that's changing and, like many industries, moving online.

It's the online and social media-led part of this industry that's the focus of BBC Three documentary's Instatraders.

'Become financially free'

Often with the companies Dion saw on Instagram, a big selling point was the idea of "being your own boss".

He regularly saw posts that "offered people the chance of becoming 'financially free', all by working from your phone or laptop".

Intrigued by what he'd seen, Dion decided the only way to put the promises of financial freedom to the test was to try it for himself, so he enrolled at IM Academy, one of many companies offering forex trading education. It cost £240 to sign up and had a £200 monthly membership fee thereafter. This fee gave him access to educational webinars, mentoring and eventually trading platforms.

As part of his journey into this new generation of forex traders, Dion spoke to some of IM Academy's forex traders and mentors. They wouldn't disclose their salary, but some of them said they were making "sexy money".

Dion says this is backed up by the Instagrams of some forex influencers, which "show the lifestyle you can achieve through forex trading. There's fast cars, holidays, boats, and because you then see these influencers teaching trading on webinars, you think, 'this is possible, I can be one of them'".

Often with the companies Dion saw on Instagram, a big selling point was the idea of "being your own boss"

But how easy is it to make "sexy money"? Caspar has concerns.

Some media influencers promote forex trading as a way to make a reliable income from a small amount of money, with little risk - which is unrealistic, he says.

He adds, "a trade has two sides. If one side wins, the other side loses. There's also platform providers to take into consideration and brokers who charge transaction fees.

"Adverts and promotions will focus on attracting new subscribers. Influencers may try and attract new subscribers through showing bank account screenshots, exotic and luxurious properties and cars purchased through winnings, as well as the lure of financial independence, all through trading.

"This is problematic as it does not highlight the underlying risks and potential losses of trading. It is not at all representative of the average person's trading experience.

"While a small few may win, many will be losers, and the average person will most probably lose, just like a lottery."

In Dion's case, he initially did make money. After putting up £100, he was pleased to find he made a 9% profit, however when you deduct his membership fee, he was in the red by over £330 and would have needed to trade over £2000 before getting in the green.

And he says, "if I actually wanted to make a grand a month I would have needed to be trading with over £13,000".

Was it beginner's luck for Dion? It seems likely. One study of individual Forex traders suggests that more than four in five lose money. In the case of IM, they don't monitor their students' trading so don't know whether they counter this trend.

The more time Dion spent looking at these companies, the more he noticed many Forex education companies have recruitment and referral strands as part of their business.

Many companies do a lot of their promotion through Instagram and influencers, often appealing to people in financially precarious situations - especially people who didn't have incomes during the pandemic.

In the case of IM, he explains, "getting other people to sign up was a way to waver your monthly membership fee, and also of earning commission. Within many companies there are internal ranking systems, so the more you recruit, the higher you go in that system and the more money you make".

Dion put this point to IM, who disputed the recruitment claim and said traders were earning commission on product sales.

Dion believes companies like IM Academy tap into a growing culture of "rejecting conventional experts and traditional forms of education".

From the wannabe forex traders he spoke with, Dion found there was often a real desire to be "self-sufficient", but warns "overlooking red flags can come at a cost".

It's something Caspar agrees with.

"It's concerning. There is no such thing as a free lunch. Trading is a particularly difficult business to make money out of."

Financial experts warn that you shouldn't risk more than you can afford to lose or risk money on investments you don't understand. But despite the risks - and likelihood of failure that comes with forex trading - Caspar advises that people who are interested should get a job with a bank or broker that offers forex services and is regulated by the Financial Conduct Authority.