Forex
Trading Scams
A
forex scam is a confidence game played in the context of the
foreign exchange market by "customer brokers" against fairly
unsophisticated, under-capitalized "retail speculators". The
U.S. Commodity Futures Trading Commission which loosely
regulates the foreign exchange market in the United States,
has noted an increase in the number of these scams recently.
Why Retail Speculators Shouldn't Be Able To Beat The Market
The foreign exchange market is a zero sum game in which
there are many experienced well-capitalized professional
traders (e.g. working for banks) who can devote their
attentions full time to trading. An inexperienced retail
trader will have a significant information disadvantage
compared to these traders.
The retail trader always pays the bid/ask spread which makes
his odds of winning less than those of a fair game.
Additional costs may include margin interest, or if a spot
position is kept open for more than one day the trade must
be "resettled" each day, each time costing the full bid/ask
spread - read more
Spotting
Forex Trading Scams
In recent years, investors have witnessed increased number
of investment opportunities and offerings. While the
complexity and success of these investment products vary,
technological innovation has made the Forex market one of
the fastest growth areas. Many of the leading Forex
brokers reported up to 500% rise in the number of new
retail customers. However, the growth of the Forex market
has been accompanied by a sharp rise in foreign currency
trading scams.
Many of these Forex scams are promoted on the radio,
television, newspapers and the Internet. Investors who
fall victim to these schemes, often lose all of their
money.
As an illustration, let’s examine the facts of a recent
case involving Forex fraud and its consequences. W learned
of a foreign currency trading opportunity through an
infomercial on the radio. K, the owner of a Forex asset
management firm, spoke during the infomercial, promising
viewers significant profits with minimum risk. After
seeing the infomercial, W contacted K, and later attended
a seminar presented by K and his firm. The seminar was so
convincing that W wrote a check to K for $100,000 -
read more
-
-
NATIONAL FUTURES ASSOCIATION
FOREX INVESTOR ALERT
FEBRUARY 2007
In August 2003 NFA issued an Investor Alert
discussing the risks of trading in the retail off-exchange
foreign currency (forex) market. Since that time,
participation in forex trading by retail investors has
increased dramatically. There are current 37 active Forex
Dealer Members registered with NFA. These 37 firms hold over
$800 million in customer funds.
Unfortunately, the amount of forex fraud has also increased
dramatically. Since 2001, the Commodity Futures Trading
Commission (CFTC) has filed 93 enforcement actions in
federal court against hundreds of firms, owners and
employees for defrauding over 25,000 customers who lost over
$395 million in forex schemes. In addition, NFA has taken
enforcement actions against a number of its Forex Dealer
Members.
It is critical, therefore, that individuals who are
considering participating in the forex market understand the
risks associated with this product and conduct due diligence
before making any investment decisions -
read more
-
-
FOREX TRADING RESOURCES
