Lately, investors have witnessed increased variety of offerings and investment opportunities. 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 top Forex brokers reported up to 500% increase in the amount of new retail clients. However, the growth of the Forex market has been accompanied by a increase in foreign currency trading sc.

A Lot of the Forex sc are promoted on the radio, tv, newspapers and the Internet. Investors who fall prey to such schemes, frequently lose all of their money.


As an illuion, let's examine the facts of a recent case involving Forex fraud and its consequences. W heard of a foreign currency trading opportunity. K, the owner of a Forex asset management firm, spoke throughout the infomercial audiences profits with minimum risk. W attended a seminar, and contacted K after viewing the infomercial. The convention was so persuasive that a test was written by W for $100,000 to K.

Several months afterwards, W received announcements (that were fictitious ) from K's firm representing substantial returns on his first $100,000 investment. Then, W made a decision to spend more money and attended the following convention. W took a loan and spent another $800,000 in K's Forex trading performance. Short while the Securities and Exchange Commission filed a complaint from K and his firm for engaging in a scheme to defraud investors. K's firm's assets were suspended, such as the $900,000 spent by W. A receiver was appointed to distribute the remaining assets of K's firm to defrauded investors. The resources were distributed with no preference given to any of those victims on pro-rata basis. Since K's firm's assets were not enough to satisfy all of the defrauded investor's promises, W received only about $.

Considering that a whole book can be written on the many approaches and methods utilized by Forex scam artists, in the following article, I'll concentrate on the major warning signs that one has to identify to avoid falling prey to Forex swindlers.


1. Promises of Little or No Risk

Should you encounter a Forex firm that claims to have developed a foreign currency trading egy that carries very little or no risk, stay far. The reason why Forex trading can be quite profitable is because it also carries a risk of loss. The Forex market is quite volatile, and, with no money management that is great, an investor can lose most if not all her funds within days. Thus, firms and people who make claims that are far from market realities, as is riskless Forex trading, are actually following your money.


2. Guarantees of Big Profits

Beware of firms that guarantee large profits in Forex trading. These so called warranties are mere ploys to lure investors and make them feel that their money is safe and they will definitely make profits. Such claims are simply false, because even the very best professional traders can't guarantee they will earn a profit any given day. The Forex market, because most markets, is quite unpredictable. Hence, be suspicious of those who produce them and these claims.


3. Employment Ads For Forex Traders

Most Forex trading firms utilize employment ads to attract people with funds to trade using their systems. The employment ads, which show up in newspapers and on the world wide web, say a foreign currency trading firm is looking for people to teach how to trade the currency market utilizing business capital. People who respond to the advertising are convinced that they'll earn a fortune trading currencies should they participate in the firm's training program. During the training process, which happens on a demonion system, the novice traders are encouraged and told that their demonion trading records show that have made profits, they are ready to earn real money and would very profitable. Despite the firm's assessment of the novice trader as a fantastic newcomer, no firm funds is given to the trader, rather the novice that was excited is told to use her own funds to trade utilizing the firm's platform. In addition to fees imposed on traders using the firm's platform, the Forex firm makes money as an introducing broker. Each time the novice trader transactions through the firm's system, a part of the spread charged by the broker is shared and goes into the firm's coffers. After couple of months, the novice trader leaves and loses all of her funds. The Forex firm, making money throughout the newcomer trader's short stint, moves to new traders eager to become trading foreign currencies.


4. Is your Forex Firm NFA Member or a CFTC?

Prior to signing a check and provide your funds to a Forex business, make certain you investigate the entity. Check to see if the Forex firm, with which you Intend to conduct business, is enrolled with the United States Commodity Futures Trading Commission or the National Futures Association. Many scam artists claim that their firms are registered with the CFTC or the NFA to gain a potential investor's trust. Don't expect anyone, also the background of the people and research the firm involved before parting with your hard earned money.


The world wide web has paved the way for several new opportunities for retail investors. The Forex market is both enjoyable and fast paced. Investor's who are diligent and careful are likely to avoid the perils of the market, and will profit from the opportunities foreign currency trading has to offer you.


John Bekian is the creator of http://www.electronicforextrading.com/, a eduional source for novice and professional Forex traders.