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March 19, 2011

Understanding Forex scam!

A lot of people, especially the new traders, complain and portray a particular Forex trading platform as scam. So what motivates someone to do that? I have done some research in last few months and here is my finding.

A Forex scam is any trading scheme or platform used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market through their trading platform. Bar none! In my research including some big banks, what I have found is that a good trading platform owners should encourage individuals to learn first and NOT push them or take advantage of human nature to make them richer.

Don’t take my words for it, Michael Dunn from U.S. Commodity Futures Trading Commission have stated that Forex trading “has become the fraud du jour” as of early 2008, but “the market has long been plagued by swindlers preying on the gullible,” according to the New York Times. According to The Wall Street Journal, “The average individual foreign-exchange-trading victim loses about $15,000.”And then, The North American Securities Administrators Association says that “off-exchange Forex trading by retail investors is at best extremely risky, and at worst, outright fraud.” Now take a moment and think why all these smart people and reliable source of information would indicate this type of negativity towards Forex trading for individuals? Well … that’s because it really is scary. You will lose money. They are trying to tell you and educate you. Forex trading is NOT for people who think they will get rich over night. Lots of the people who own Forex trading platforms are gamblers. That is why you will see not many Forex platforms are based in the United States or Canada where the laws are more strictly enforced.

Another scary fact is that Foreign Exchange (Forex) market is a ZERO-SUM market. What this means is that whatever one trader gains, another loses, EXCEPT, that brokerage commissions and other transaction costs are subtracted from the results of all traders. So what does that tell you? Well that tells me, that is exactly why so many Forex platforms are offering “the promise” of unbelievable and incredibly high returns. The only thing is you will lose your hard earned money. That’s why these platforms offer you up to 100% deposit bonus, because they know you will NEVER get your money back and it will only make them richer. This type of offerings is not better than Ponzi schemes. These platforms will advertise that Forex trading is low risk and high profit investment. If you can identify all these signs you will be better off putting your money into mutual funds or other legitimate investments.

If you must invest into Forex, please consult with your bank or legitimate professionals. DO NOT fall for scam that sells the idea of making you rich over night … it will simply never be the case. Do your due diligence otherwise you will regret it.

I will try to post more as I learn about Forex.

And yes, I have lost couple of thousand dollars and learned it the hard way, but now I invest my money through banks and have way better luck!

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