Retail forex trading is a segment of the vast foreign exchange market. It has been speculated that it represents 2 percent of the whole forex market which amounts to $50-60 billion in daily trading turnover. Due to the increasing tendency in the past years of the gradual shift from traditional intrabank 'paper' trading to the more advanced and accurate electronic trading, there has been spur in software development in this field. This change provided different types of trading platforms and tools intended for the use by banks, portfolio managers, retail brokers and retail traders.
One of the most important tools required to perform a forex transaction is the trading platform providing retail traders and brokers with accurate currency quotes.
History and new developments
Since 1996, when retail forex trading was introduced, several brokers who lacked the sufficient tools developed their own trading platforms tailored specifically to their needs. These platforms were good enough at the time but required constant investments in R&D and its development cost too much. This was the first wave.
The second wave was in the early 2000s: several software companies entered the retail forex trading market by launching their own versions of trading platforms. Typically these versions were cumbersome for both front-end users (retail traders) and back-end users (retail brokers) due to the misunderstanding of the developers about the forex market and also because of the insufficient programming tools/languages at the time. Simultaneously most of the retail brokers kept using and developing their own systems as they waited for better platforms which were yet to be developed.
There are currently few to no brokers which were part of the first wave trading systems. By now most of the first wave brokers have either vanished, merged or progressed to the second wave trading platforms – the most common example of which is Metaquotes.
It is only in the last couple of years that the advanced trading platforms started to emerge. These platforms put much stronger emphasis on the user interface (GUI) making it more accessible to the retail traders while making trading on it very simple and intuitive. Moreover a very strong emphasis was put on the back-end which allowed the retail brokers better control over their operations, better reporting and accurate system and ways to manage marketing campaigns. Gradually this wave is replacing the previous second wave with a major shift now to the friendlier and more intuitive systems of the third wave which according to Aite Group are necessary in order to maintain growth.
Nowadays, banks have also jumped on the retail forex trading platform bandwagon and have started offering those services to individual traders and money mangers, expanding the forex trading appeal. DBFX and Citibank are some of the banks that are currently offering this service.
Friday, December 11, 2009
Forex Scam
A forex (or foreign exchange) scam is any trading scheme used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market. Currency trading "has become the fraud du jour" as of early 2008, according to Michael Dunn of the U.S. Commodity Futures Trading Commission. But "the market has long been plagued by swindlers preying on the gullible," according to the New York Times. "The average individual foreign-exchange-trading victim loses about $15,000, according to CFTC records" according to The Wall Street Journal.
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."
"In a typical case, investors may be promised tens of thousands of dollars in profits in just a few weeks or months, with an initial investment of only $5,000. Often, the investor’s money is never actually placed in the market through a legitimate dealer, but simply diverted – stolen – for the personal benefit of the con artists."
In August, 2008 the CFTC set up a special task force to deal with growing foreign exchange fraud.”
The forex market is a zero-sum game, meaning that whatever one trader gains, another loses, except that brokerage commissions and other transaction costs are subtracted from the results of all traders, technically making forex a "negative-sum" game.
These scams might include churning of customer accounts for the purpose of generating commissions, selling software that is supposed to guide the customer to large profits, improperly managed "managed accounts", false advertising, Ponzi schemes and outright fraud. It also refers to any retail forex broker who indicates that trading foreign exchange is a low risk, high profit investment.
The U.S. Commodity Futures Trading Commission (CFTC), 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.
An official of the National Futures Association was quoted as saying, "Retail forex trading has increased dramatically over the past few years. Unfortunately, the amount of forex fraud has also increased dramatically." Between 2001 and 2006 the U.S. Commodity Futures Trading Commission has prosecuted more than 80 cases involving the defrauding of more than 23,000 customers who lost $350 million. From 2001 to 2007, about 26,000 people lost $460 million in forex frauds. CNN quoted Godfried De Vidts, President of the Financial Markets Association, a European body, as saying, "Banks have a duty to protect their customers and they should make sure customers understand what they are doing. Now if people go online, on non-bank portals, how is this control being done?"
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."
"In a typical case, investors may be promised tens of thousands of dollars in profits in just a few weeks or months, with an initial investment of only $5,000. Often, the investor’s money is never actually placed in the market through a legitimate dealer, but simply diverted – stolen – for the personal benefit of the con artists."
In August, 2008 the CFTC set up a special task force to deal with growing foreign exchange fraud.”
The forex market is a zero-sum game, meaning that whatever one trader gains, another loses, except that brokerage commissions and other transaction costs are subtracted from the results of all traders, technically making forex a "negative-sum" game.
These scams might include churning of customer accounts for the purpose of generating commissions, selling software that is supposed to guide the customer to large profits, improperly managed "managed accounts", false advertising, Ponzi schemes and outright fraud. It also refers to any retail forex broker who indicates that trading foreign exchange is a low risk, high profit investment.
The U.S. Commodity Futures Trading Commission (CFTC), 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.
An official of the National Futures Association was quoted as saying, "Retail forex trading has increased dramatically over the past few years. Unfortunately, the amount of forex fraud has also increased dramatically." Between 2001 and 2006 the U.S. Commodity Futures Trading Commission has prosecuted more than 80 cases involving the defrauding of more than 23,000 customers who lost $350 million. From 2001 to 2007, about 26,000 people lost $460 million in forex frauds. CNN quoted Godfried De Vidts, President of the Financial Markets Association, a European body, as saying, "Banks have a duty to protect their customers and they should make sure customers understand what they are doing. Now if people go online, on non-bank portals, how is this control being done?"
View on Global Forex Trading is a Scam!
As far as the zero-sum game is concerned, almost every type of trading instrument, money, transaction etc., is a zero-sum game! If you think that should stop you go dig a hole for yourself, go live there for a few days until you starve and die, it'll save someone the effort to dig the hole at least. Though on a serious note, that's the beauty of the markets, there is always someone betting against you, it could be someone booking profits, losses, buying, selling, short-selling, its always the same!!
Now to get on with forex, its not really that tough to calculate, one of the main basic principle is the interest rate of the country, if its high, there will be higher demand, hence lesser supply, hence a rally or vice versa, apart from that other factors like the GDP numbers, Ruling Government, Public Opinion etc., play an important role. Frankly there are a too many unrelated variables that come into play, hence its not worth my time.
I would ask you to do only a couple of things.
1) Learn the meaning of risk - There is no easy way to do this, and the best way is by experience, and that only comes with losses, so if you have $100,000 to trade with break that up into 20 $5000 account and start slowly, with control and rules (self set) blowing your accounts, if an account never blows, good for you! Hopefully you'll have learned quite a bit by the time you're half way through your capital.
Now to get on with forex, its not really that tough to calculate, one of the main basic principle is the interest rate of the country, if its high, there will be higher demand, hence lesser supply, hence a rally or vice versa, apart from that other factors like the GDP numbers, Ruling Government, Public Opinion etc., play an important role. Frankly there are a too many unrelated variables that come into play, hence its not worth my time.
I would ask you to do only a couple of things.
1) Learn the meaning of risk - There is no easy way to do this, and the best way is by experience, and that only comes with losses, so if you have $100,000 to trade with break that up into 20 $5000 account and start slowly, with control and rules (self set) blowing your accounts, if an account never blows, good for you! Hopefully you'll have learned quite a bit by the time you're half way through your capital.
Online FOREX Trading
There are a lot of people who are interested in online FOREX trading because you can make oodles of money with the right strategies. You can learn all these strategies by using Google and search for online FOREX trading tips and online FOREX trading strategies.
You can also buy books from bookshop to learn more about FOREX trading. However FOREX markets are extremely volatile and you must analyse carefully before trading. But like understand that currency trading is not get rich quick scheme. It is like any other investments and can it is similar to stock market. Be warned, if you are interested in participating in currency trading you had better get good tips and strategies first or you will certainly lose your money.
The market operates on a very high margin-trading. That means you can gain control a greater exchange of money by putting down only a part of your money. It is called leveraging and you are commonly permitted approximately 10 times your cash position. That can be a big gain for making profits. However, you will lose a lot if your trades go against you, so you have to be on top of the post. This is not a sport.
If you are venturing into online FOREX trading, learn the trading and the market first. Online FOREX trading is not gambling and it is essential to know what the investment is all about and how it works before you start trading. Look for a platform that has been established for a long time and good background.In the beginning of this article, we went over the basics. Now, we will look at this topic a little more in-depth.Currency trading is the world's largest trade. Over three trillion dollars merit of transactions take place each and every day in the world's currency market. Currency trading is open 24 hours a day, 7 days a week. A laptop with unfailing and preferably fast Internet connection and approved learning and strategies are necessary to start online FOREX trading.
If you could take the main ideas from this article and put them into a list, you would a great overview of what we have learned.
You can also buy books from bookshop to learn more about FOREX trading. However FOREX markets are extremely volatile and you must analyse carefully before trading. But like understand that currency trading is not get rich quick scheme. It is like any other investments and can it is similar to stock market. Be warned, if you are interested in participating in currency trading you had better get good tips and strategies first or you will certainly lose your money.
The market operates on a very high margin-trading. That means you can gain control a greater exchange of money by putting down only a part of your money. It is called leveraging and you are commonly permitted approximately 10 times your cash position. That can be a big gain for making profits. However, you will lose a lot if your trades go against you, so you have to be on top of the post. This is not a sport.
If you are venturing into online FOREX trading, learn the trading and the market first. Online FOREX trading is not gambling and it is essential to know what the investment is all about and how it works before you start trading. Look for a platform that has been established for a long time and good background.In the beginning of this article, we went over the basics. Now, we will look at this topic a little more in-depth.Currency trading is the world's largest trade. Over three trillion dollars merit of transactions take place each and every day in the world's currency market. Currency trading is open 24 hours a day, 7 days a week. A laptop with unfailing and preferably fast Internet connection and approved learning and strategies are necessary to start online FOREX trading.
If you could take the main ideas from this article and put them into a list, you would a great overview of what we have learned.
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