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Caution: Avoid Forex Scams!

Jun 10, 2008
The popularity of the foreign exchange or Forex markets has resulted in an increase in Forex scams as of late. Indeed, it is not uncommon to read in the newspapers about individuals losing their entire hard earned savings when their online brokerage houses go bust. A financial instrument initially looked upon as a means to achieving financial freedom had resulted in nothing but misery for such individuals, often throwing their lives into poverty in the process. As such, it is very important for would-be Forex investors to be on the lookout for Forex scams. These scams should be avoided at all costs!

- No Governing Body For Forex

Unlike the stock and commodities trading market, the foreign exchange market is organized without a fixed location, in what is often called an over-the-counter market. Instead of having a fixed location such as the New York Stock Exchange or the Chicago Mercantile Exchange, foreign exchange transactions take place over advanced telecommunication networks such as the internet. Simply said, without a centralized authority, there is no single governing authority that can safeguard the interest of foreign exchange traders.

- How To Identify A Credible Broker

As such, credibility is very important when it comes to searching for an online brokerage house. Typically, your online broker should be a credible one, having the status of a registered FCM (Futures Commission Merchant) with the CFTC (Commodity Futures Trading Commission). Shady brokerage houses with poor systems of management and accountability often close down in times of trouble, taking their clients' hard earned money with them before disappearing without a trace. If you are clueless about approaching an online broker with a proven record, you could speak to the customer service manager of your bank, who would provide you with a list of online brokerage houses which have had a credible track record in this business.

- Managing Your Own Emotions

It is also important for you as an investor to be able to manage your level of greed. Forex trading is a risky business that has no guarantee of profits. Stay away from websites or Forex firms that promise you the ability to make guaranteed astronomical profits at very little risk. Such marketing messages which you may encounter include "Make $100,000 in one month with Forex". Stay away from such claims. Even most professional Forex traders do not have the ability to guarantee such large profits in such a short period of time. The Forex market is unpredictable, characterized by ups and downs. Thus, always be suspicious of such claims and stay away from them as much as you can. Never ever let greed lead you into the trap of a Forex scam.

As with all other financial products, it is necessary for every Forex investor to be on his or her toes and to be on the guard against Forex scams. After all, your decision to enter the market is to create wealth by making your money work for you. Why let a moment of folly turn the tables against you? Nothing is guaranteed when it comes to any form of trading. In any case, the key to success would lie on keen judgment, experience, and the ability to make sound decisions under all circumstances.
About the Author
John Callingham is an authority on Forex Trading providing valuable advice at http://www.forexsimpletrading.com where you can learn about forex currency trading. Click Here to gain FREE access to his Forex Trading secrets when you sign up for his Forex Trading newsletter.
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