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Foreign exchange companies
Forex in gaining popularity as stocks are becoming more volatile in recent times, thanks to the looming global economy slowdown. However, a representative from the National Futures Association (NFA) has this to say, "retail forex trading has increased dramatically over the past few years. Unfortunately, the amount of forex fraud has also increased dramatically..." With the onset trend of online forex companies, there are no way to regulate these scams.
The National Futures Association's website also point out that you can verify with the Commodity Futures Trading Commision (CTFC) and the firm's NFA membership status as well as disciplinary history by calling (800) 621-3570. While most online forex companies are legitimate, they may tend to mislead customers into thinking that they can make big money without risk in the bid for more business. Certainly they do not tell you that some 95% of investors never make money from foreign exchange.
Another foreign exchange companies 'facility' that you should stay away from is the margin they offer. Typically in the range of $3000, this is the 'upfront credit' you can use to trade on top of your actual account balance. Investors should be wary that this amount are to be paid back if a loss occur so it may be a risk they can't afford.
Selecting the right foreign exchange company can help you become the other 5% who find riches in forex. Among the factors that you need to consider are educational tools, risk management advice, customer support, trading software, hidden cost and PIPS.
Since you are pretty much on your own, an online chat support or a toll free number are of paramount importance. So far, this two methods will work the fastest and to the point compared to troubleshooting tickets or email. Many reputable forex firms offer quick and reliable support so this should not be too much of an issue.
Next, you'll want to select a company with a trading software that's easy to use and reliable. This can easily be assessed by using a few demo accounts. Some foreign exchange companies may have real time trading softwares that does not require downloading. There may also be concern of its server's uptime which can be very frustrating especially if a buying opportunity present itself. Do a little research to see if your forex company have a back up server.
Last but not least, if you are a new to forex, it helps to pick a brokerage that provide education and strategies on forex trading. With this educational tools, you can try and apply what you learn using your demo account, which usually comes free with your account. Although foreign exchange companies will assure you about making money with forex. you get the first hand experience using a demo account. From there, it is plain to see what is hype and what is real opportunity.
The bottom line is to rely on your own judgement and learning the ropes in foreign exchange without subscribing to the get rich quick mentality advertised by foreign exchange companies. Like any other types of investment, money don't fall from the sky and only the well informed will succeed.