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Fraud and SCAMs on Forex market

The mediators such as brokers and dealers often use of fraud and scams in Forex market. There is a special organization called 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.

There are some dishonest and disrespectable forex broker's or dealer's strategies. Any victim of such a broker should report the broker. The "kitchen" method makes management of the dealing center sure, from the very start, that the most part of their clients will once lose their capital because the cores are the lowest vocational training of the client (aggression is overwhelming). Besides, they do not know any foreign languages. These market players are very seldom aware of the main information streams.

If you become a victim of such a broker, you may put in your broker's review.

What is brokerage? It is the so-called overlapping of all client transactions during the performance. "Brokerage" turns out to be beneficial in cases if many clients take part in it and they are active at the transactions' performance. Sometimes brokers earn capitals moving on the market against clients. Market can be shifted in different ways. As all the clients' transactions pass through dealers or dealing centers, the dealer forms the quotation and passes it by to the market player.

The dealing center does not use brokerage as the main technology. Profit is gained from the client's losses. This is the main point of the broker strategy. Usually the client's transactions performed during one day do not bring to the dealing center greater profits or big losses. Overall, these transactions bring small profit, and real profit is gained when positions open in current of several bank days and the client faces bigger losses. At the so-called "pseudo-brokerage" any position sometimes makes a client suffer losses, and the dealing center correspondingly gains profit on this position if this position is not blocked at the foreign broker. Some dealers provide you with a guarantee that you will never lose more money than you invest including the initial deposit and following deposits to keep the position open.

Let's examine two main distinctions between buying off-exchange Forex currency options and buying options on futures contracts. First, NFA's options brochure describes only American-style options, and they can be exercised at any time until they expire. Nevertheless, many forex options are of European-style, and they can be exercised merely on or near the date of expiration. One should keep in mind which kind of option to purchase.

Unlike adjusted futures exchanges in the retail off-exchange there is no central marketplace. Forex currency market there is also no main marketplace with lots of buyers and sellers. You are relying on the dealer's honesty for a fair price as the forex currency dealer says what the execution price is going to be. Second, when you exercise an option on an exchange-traded futures contract, as a rule, you get the basic exchange-traded futures contract. When you exercise an off-exchange forex currency option, you are more likely to get either a cash payment or a position in the basic currency.

You should check with the dealer's regulator about the dealer's registration status and ask the dealer how it is regulated. Besides there is sense in finding out if the dealer's regulator has taken over rules for regulating its retail forex activities.

Companies and individuals that demand retail accounts for currency dealers and manage those accounts do not have to be adjusted or combined with a regulated company, unlike Forex dealers. That is why you should know if the person's activities are regulated and by whom.

To recognize fraud, be careful and watch for the warning signs given below!

  • Avoid any firm that gives guarantees of huge profits
  • Keep away from opportunities that seem too fantastic
  • Be suspicious of companies that demand to trade in the "Interbank Market"
  • Keep away from firms that guarantee the miracle of little or no financial risk at all
  • Never trade on margin if you don't know what it means
  • Currency frauds as a rule target members of ethnic minorities
  • Be careful about transferring cash on the Internet by mail or in any other way
  • Make sure that you have the firm's performance track record
  • Never work with anyone who refuses to give you their background
  • Warning signs of commodity "Come-Ons"

Be aware that firms from South Florida exercise the majority of forex and commodity fraud. In 2000, CNBC regarded Boca Raton as the world's telemarketing fraud capital, as well as, Southern California or countries outside the US. As a rule, forex fraud is exercised by US companies which were once registered with the National Futures Association (800) 621-3570 and have had their licenses recalled, by their directors and brokers. Also never, make a bank wire or check payable to someone but an FCM adjusted with the NFA.

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