FOREX TRADING RISKS
High Risk Investment
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.
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| The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose.
You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
The foreign exchange markets are sometimes referred to as "forex." The forex market is the largest financial market in the world, with daily average trading turnover of approximately $1.5 trillion. Operating 24 hours a day, the forex market is highly liquid and most of the trading is conducted electronically or over the phone.
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Forex - Foreign Currency Transactions
Banks, insurance companies, large corporations and other large financial institutions all use the forex markets to manage the risks associated with fluctuations in currency rates. In recent years, retail investors have also looked to the forex markets as yet another possible investment opportunity.
The Commodity Futures Trading Commission cautions investors to be wary of websites that purport to offer high yield investment opportunities in forex transactions, because this is a common area of internet fraud. The CFTC has posted several fictitious websites that are representative of typical websites that have been the subject of CFTC enforcement actions. CFTC's examples of fraudulent websites include Global Financial Capital Management, Colfax Trading International, TradeForex4You, White, Truman and Fischer, Excalibier Precious Metals, and Commodity Profits.com.
Foreign currency futures contracts may be legitimately traded either on a recognized futures exchange or in the "interbank market," which generally involves trading between large institutions such as banks and corporations. The interbank market does not typically include individual or retail customers. Fraudulent currency trading firms often tell customers that their trading is done in the "interbank market." Be wary of any firm that claims that you can or should trade in the "interbank market" or that it can or will do so on your behalf. Your losses can be very large in a single day. Companies that tell you otherwise may well be engaged in illegal schemes.
Forex indicates increased or decreased value of an investment caused solely by currency movements. For instance finding US dollar weak or going down, an investor might purchase German money markets.
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