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.

You can spend a lot of money to download programs that have promised to make you tons of money. Do your research and look into what is available.

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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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