Forex Scams

With the increase of forex scams it is important to do your home work before committing any real money to trading. The average individual foreign-exchange-trading victim loses about $15,000, according to CFTC records according to The Wall Street Journal. Many new brokers have showed up promising easy money. Currency trading is a negative-sum game (more than zero-sum) due the brokerage commissions. Retail forex broker who indicates that trading foreign exchange is a low risk, high profit investment is a big warning sign.
CFTC Warnings
The U.S. Commodity Futures Trading Commission, which loosely regulates the foreign exchange market in the United States, has noted an increase in the amount of unscrupulous activity in the non-bank foreign exchange industry.
- stay away from opportunities that seem too good to be true
- avoid any company that predicts or guarantees large profits
- stay away from companies that promise little or no financial risk
- don’t trade on margin unless you understand what it means
- question firms that claim to trade in the “interbank market”
- be wary of sending or transferring cash on the internet, by mail or otherwise
- currency scams often target members of ethnic minorities
 - be sure you get the company’s performance track record
- don’t deal with anyone who won’t give you his background
Zero Sum Game
Currency trading is a game of professionals where small speculator is under capitalized. Professional traders have an advantage when it comes to various fundamentals (news) that can affect the market. Gambler’s ruin is just around the corner waiting, even if FX was a fair game where no-one had advantage, the player with less capital would end up going bankrupt. Since the retail speculator is effectively playing against the market as a whole - which has nearly infinite capital - he will almost certainly go bankrupt sooner or later.