FX Trading Scams: How does it work ?

[Butterfly]

What's the deal with all those FX websites offering a trading console for foreign currencies ? on xe.com and FXCM.com they claim you can open a trading account and start speculating like a Pro on FX.

I don't know much on FX trading and I know it's one of the most slippery market with Futures and Options. Even cahotic junk bond market is safer.

Still a number of Internet "users" claim overnight success with those trading software. I doubt very much this is possible, unless they were incredibly lucky. On ThaiVisa, a number of "high flying" FX traders claim they were overnight millionaires ready to retire to Thailand thanks to their trading skills. That kind of claims raise a number of red flags for me as I know Pros in those markets who have lost their shirts. I doubt some TV morons could do better with their limited resources.

My objective with such tools would be to lower my USD exposure and get a decent rate when dealing multiple currencies.

Anyone we know here has any experience in those kind of tools ? how effective are they ? Where is the scam ?

Obviously I could exchange a few ideas about equity and stock trading but I don't know shit about FX (except they are very sensitive to interest rates and are strongly linked to bond market performance) so if anyone could help, that would be a great addition to this forum.

[Dirk_Diggler]

With the major players there is no "scam", some do promote FX trading as a quick way to millions which is obvious BS but overall its just a sales pitch, if you sign up with them they dont Scam you. The problem with FX trading is that it offers a huge amount of leverage i.e. with some you can put in $1000 and trade with $100 000....some people just dont understand the risk and details with that and lose their shirt...not the brokers fault, after all they are not there as educators, they give you the tools to trade, not the skill or knowledge...there are other resources for learning.. the user should have educated themselves before using real money.


I would not consider it any more dangerous than other forms of trading as long as you understand risk:reward and the use of leverage (just because someone offers you a huge 100:1 margin ratio you dont have to use it all!).

There were some proper scam FX shops that opened when FX trading first was opened to the masses..thankfully they are disapearing...if you stick to the big players then you are quite safe...the only danger is your own knowledge (or lack of it!)...so learn learn learn...use fake money accounts to practise and dont go putting in more money than you can afford to lose! (Like with any investment!)

[Fast Eddie]

Everything that Dirk says is correct. The likes of FXCM are just brokers. They are just a means for you to trade whichever currency pairs you favour/they offer, you have to bring your own strategy to the table. I daytrade Cable, as one of my sidelines, but i don't use any brokers of this type. Being a Brit, i prefer to spreadbet due to it's tax free status. I like FX, i find it responds well to my technical analysis. However , my understanding of the fundamentals equates to pretty much zero.

[Dougal]

...use fake money accounts to practise

I think Dirk is referring to the fact that there are a number of online trading systems which allow you to run dummy accounts to 'play' at making/losing money. A couple of my colleagues use them, I'll ask which ones they think are good.

[Butterfly]

ok, yeah, so those explanation are more inline with what I expected. It's mostly a broker deal.

I am not a chartist and don't believe in those tools unless you daytrade and stay glued to the screen all day. Not my idea of investing. However it seems to be the "thing" for all those FX trading.

[in4zip]

RE FX trading
Butt get over to any casino
you'll lose your dosh
but it will be faster, take less time

[Butterfly]

^ well that's Thai thinking here, again the idea is to edge against those USD swing, not to play silly with money. Even though those FX trading things do seem like casino losing machines. Brokers don't care, the more you lose to cover your bets, the more they make in commissions.

[Likewise]

You can play it quite safe by going for 1 pair of currencies. Read up on the fundamentals and open a position for long term. Can't do much wrong with that unless you misunderstood what you were reading.

Like Dirk said, DON"T use the complete margin/leverage that is offered to you. Lots of people start and think they are pro's and get margined out.

You've just lost your investment.