The Forex market is one of the least understood markets in the financial. While trading on the Foreign Exchange can be profitable, it can also be fraught with danger. Because it is so little understood, it is also a market that has been exploited by fraudulent companies. Just a basic understanding of Forex signals of dangers to watch for can help protect you from being exploited.
Forex stands for “foreign exchange.” This market is, at least on the surface, very easy to understand. If you have ever traveled overseas, you will have exchanged your currency for the currency of the country you are visiting. Since the deregulation of currencies, the exchange rates of those currencies is always fluctuating. When a nation’s economy is considered strong, its currency rises in value. If weaknesses are perceived in the economy, its value diminishes.
A good example of how currencies rise and fall is the Australian dollar as compared to the U. S. Dollar. Before the American housing collapse and the resultant recession, the Australian dollar generally hovered around the 75 cent to one U. S. Dollar, dipping or rising depending on perceived strengths or weaknesses in the Australian economy.
Since the financial crisis in America, the Australian dollar has seen a steady rise in its value and rose to historic highs against the dollar in 2010. This is because it is perceived as a safer currency in these uncertain times.
Since the U. S. Dollar is the world’s benchmark currency, most currency exchanges are done on dollar comparisons with the United States dollar. Currency values are very volatile because they are intimately connected with political and economic developments. While they can be a fascinating and lucrative type of trade in engage in, they are subject to the same risks as other investments. The most dangerous risks in currency exchanges are for the uninformed, who may fall for scams.
While there has been a huge boom in Forex trading, there has not been a corresponding boom in understanding how it works. So many people have been enticed by fraudulent companies into investing their money with them that the United States Commodity Futures Trading Commission (CFTC) has published an extensive warning to consumers about these Forex scams.
They cite several things investors should be wary of. These include promises of guaranteed high returns on your investments, false assurances that any losses will be minimal and temporary, claims that the Forex Market is “foolproof” if you use their “system” and other completely unsubstantiated claims. They also point out that these scammers target senior citizens who are just gaining access to their retirement funds. Many older people who have fallen for these frauds have lost their entire retirement savings.
Just watch out for these Forex signals of fraud and don’t enter the market until you are fully versed on how it works. It can be a very exciting and sometimes profitable market to get into, but it is not for the uninitiated.
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