A Forex Brokers scams is any trading scheme used to defraud individual traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market.

In this type of case, investors may be promised many thousands of dollars in profits in just a few weeks or months. Often with an initial investment of $5,000 or less. The investor money is never actually placed in the market through a legitimate dealer, but simply diverted, stolen for the personal benefit of the con artists.

Be aware that there is a unique organization - The United States Commodity Futures Trading Commission (CFTC). This agency regulates the trading of Forex currency, commodity futures and options contracts in the US and fights against companies involved in illegal or fraudulent sell of currency, commodity futures and options.

How do I protect myself?

There are five essential aspects of foreign currency market a beginner trader should be aware of:

Forex Fundamental Analysis

Forex Technical Analysis

Money Management

Forex Trading Psychology

Forex Brokerage

Understanding these five aspects will help you to sucessfully invest in the Forex Market and not get scammed.

Here are five ways to help you find the best forex broker and avoid Forex scams:

1. Find out if the broker’s company is a registered futures commission agent. Get the brokers NFA ID number. Beware of dealing with affiliates who may be associated with legimate brokers but operate on thier own.

2. Make certain the registered FCM has substantial assets. The minimum required by the NFA is $250,000.

3. A 3 to 5 pip spread is normal in liquid markets, such as the major currency pairs, and fees are typicaly charged on only the buy side.

4. Requotes should be rare. If you get requoted more than a couple of times per year, something is fishy.

5. Get a good information provider, and compare the brokers offer in the open market with others. Is it in step with the market? Or is it off? If it is off, they might be trying to profit from that difference.

Most Forex fraud and commodity fraud is committed by firms located in South Florida, Southern California or outside the United States. Russia is currently a major source of investment fraud. Never make a check or bank wire payable to ANYONE other that a FCM registered with the NFA.

A high number of cases of Forex fraud is instigated by firms located in the United States and brokers of the firm and were at one time registered with the National Futures Association and have had their licenses revoked.

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A Forex Margin call happens when a client’s account equity falls below the required margin.

Leverage financed with credit, which is a description of what a margin account entails. This is very common in Forex. A margined account is a leverageable account in which Forex currencies can be purchased for a combination of cash or collateral. Various brokers accept different limits.

Investing on margin isn’t the same as gambling. There are some similarities between margin trading and the casino. Margin is a high-risk strategy that can yield a huge profit if handled correctly. The dark side of margin is that you can lose your shirt and many other assets you own. Investing on margin without understanding what you’re doing is very risky.

As with any other investment research is the key to not losing your shirt! If, for instance, a client has 10 lots of open positions a margin call will occur if account equity drops below $5,000. At this point, some or all of the client’s open positions will be closed immediately at current prices.

Traders are also able to monitor both usable margin and used margin from the “Account Information” window of his/her online trading platform. Positions will be automatically closed once usable margin drops below zero.

Traders may avoid margin calls by either using stop loss orders or maintaining adequate funds in the account.

Normally the broker will have a minimum account size also known as account margin or initial margin e.g. $5,000-$10,000. Once you have deposited your money you will then be able to trade.

The title of this article asks, can a margin call hurt me? The answer is yes and very badly. But as in any other business there are things you can do to minimize your risk.

If for any reason the broker thinks that your position is in danger, that is, you have a position of $50,000 with a margin of one percent ($500.00) and your losses are approaching your margin ($500.00). He will call you and either ask you to deposit more money, or close your position to limit your risk and his risk.

Automatic stop loss is utilized as the safety net where the position is forced to cut automatically when the losses are at a certain point. It happens when the balance of margin account, that is, the asset value with deducting the losses, becomes to fall short of the margin limits set by your Forex broker. This practice is a common practice in the Forex market.

There is a difference from weekday trading and over the weekend trading. Reduced leverage is available leverage for over-the-weekend. The purpose of this policy is to protect clients from the risks caused by possible price swings during market closure. This could have a very serious affect on your invested funds.

How Do I Avoid A Margin call?

There are some common sense ways to avoid a margin call

1. Good money management, manage how you trade
2. Use stop loss for every position if you don’t
have adequate margin
3. Do not over trade

Hopefully this article will make you aware of some of the possible pitfalls of a margin call.

Do your due diligence and you will be in a better position than many other investors.

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What is Forex? The FOREX (Foreign Exchange Market), is the international market, started in the 70’s where currencies are bought and sold.

What currency is traded in the Forex market?

The item traded by Forex traders and investors are currency pairs. A currency pair is the exchange rate of one currency over another. The most popular currency pairs are:

USD/CHF: Swiss franc
GBP/USD: Pound
USD/CAD: Canadian dollar
USD/JPY: Yen
AUD/USD: Aussie
EUR/USD: Euro

The first currency of each currency pair is referred as the base currency, while second currency is referred as the counter or quote currency.

All currency pairs are quoted with a bid and ask price. The bid (always lower than the ask) is the price your broker is willing to buy at, thus the trader should sell at this price.

When dealing in Forex you will frequently hear the term pip. A pip is the minimum move a currency pair can make. Pip means price interest point. A move in the EUR/USD from 1.2545 to 1.2554 equals 9 pips.

The purpose of trading is to buy low and sell high. The foreign currency market FOREX is no different. The product traded are rates of currencies of different countries.

FOREX is a really unusual market for a variety of reasons. First, it is one of the few markets that it is free of any outside controls and that it cannot be manipulated. It is also the largest liquid financial market, with trade reaching between 1 and 1.7 trillion US dollars a day.

When this amount of money moves this fast, you can easily understand why a few investors would find it almost impossible to radically increase or decrease the price of a major currency.

The liquidity of the market means that unlike some stocks, traders are able to open and close positions within a few seconds as there are many buyers and sellers.

Margin Trading:

Margin trading refers to the leverage dollars given to the traders in the market.

One of the best features in Forex trading is that traders are able to trade foreign currencies with high margin.

In Forex, normal trade margins are 100:1 and 150:1, or even 200:1 trade margins. You get 1:1 margin for stock exchanges, 2:1 margin for equity trading, 15:1 margin for futures market. You can easily see how much more attractive Forex Trading is for the average trader.

This very attractive feature can also be dangerous. Traders should be very aware of the margin call and should always avoid them at all cost.

The typical broker will require a minimum account size, also known as account margin or initial margin. Once you have deposited your money you will then be able to trade. The broker will also specify how much they require per position (lot) traded.

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