While much foreign currency trading is legitimate, a form of foreign currency trading has been used in recent years to defraud members of the public. Currency trading scams often attract customers through advertisements in local newspapers, radio or through the Internet. These advertisements may tout highly-paid employment opportunities or high-return, low-risk investment opportunities in foreign currency trading (FOREX).
Foreign currency 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, rather than 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 activities.
Buyer beware…
Stay away from companies that promise little or no financial risk while predicting or guaranteeing large profits. You can lose most or all of your money very quickly trading foreign currency futures contracts. The currency futures markets are volatile and contain substantial risks for inexperienced investors. They are not the place to put any funds that you cannot afford to lose. Retirement funds should not be used for currency trading.
Don’t trade on margin unless you understand what it means
Many currency traders ask customers to give them money known as "margin," often sums in the range of $1,000 to $5,000. These amounts, which are relatively small in the currency markets, actually control far larger dollar amounts of trading. You need to be aware that margin trading can make you responsible for dollar losses that are far greater than the margin amount you deposited. Don’t trade on margin unless you fully understand what you are doing and are prepared to accept losses that exceed the margin amounts you paid.
Currency scams often target members of ethnic minorities
Some currency trading scams target potential customers in ethnic communities, particularly persons in the Russian, Chinese and Indian immigrant communities, through advertisements in ethnic newspapers and television "infomercials." Many such advertisements offer so-called "job opportunities" for "account executives" to trade foreign currencies. Be aware that all "account executives" they hire might be expected to use their own money for currency trading, as well as recruit their family and friends to do likewise. No promising job opportunity will ever ask you to put up your own money as a condition of employment. What appears to be a promising job opportunity is actually another way for these companies to lure people into parting with their money.
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