Forex options, are another component that draws similarities with the stock market, they offer traders more security in being able to limit risk and increase profit when trading in the market. There are generally two types of options an investor can choose from, the first being a traditional option. This gives the buyer the right but not the obligation to purchase a currency at a set or agreed price and time. If a trader has taken advantage of Forex options and during the agreed time the currency being bought appreciates, the trader can sell this currency at a profit.
However, if the currency depreciates the trader loses only the premium paid for the option. The second type of Forex options available is known as SPOT- Single Payment Options Trading. The Forex trader dictates this type of option, it is a prediction from the trader on what they forecast will occur on the Forex market. If the trader is successful the profit potential can be unlimited and if the SPOT is not a success only the premium is lost. Forex options give investors another tool with which to limit losses and increase profits, they are particularly popular at periods of economic reporting.
Transactions in options on FOREX carry a high degree of risk. Purchasers and sellers of options should familiarize themselves with the type of option (i.e. put or call) which they contemplate trading and the associated risks. You should calculate the extent to which the value of the options must increase for your position to become profitable, taking into account the premium and all transaction costs.
The purchaser of options may offset or exercise the options or allow the options to expire. The exercise of an option results either in a cash settlement or in the purchaser acquiring or delivering the underlying interest. If the option is on a leveraged position, the purchaser will acquire a FOREX open position with associated liabilities for margin. If the purchased options expire worthless, you will suffer a total loss of your investment which will consist of the option premium (transaction costs on FOREX are usually zero - no commission). If you are contemplating purchasing deep-out-of-the-money options, you should be aware that the chance of such options becoming profitable ordinarily is remote.
Selling ("writing" or "granting") an option generally entails considerably greater risk than purchasing options. Although the premium received by the seller is fixed, the seller may sustain a loss well in excess of that amount. The seller will be liable for additional margin to maintain the position if the market moves unfavourably. The seller will also be exposed to the risk of the purchaser exercising the option and the seller will be obligated to either settle the option in cash or to acquire or deliver the underlying interest.
If the option is on a leveraged position, the seller will acquire an open FOREX position with associated liabilities for margin. If the option is "covered" by the seller holding a corresponding position in the underlying interest or a future or another option, the risk may be reduced. If the option is not covered, the risk of loss can be unlimited.
Certain brokers in some jurisdictions permit deferred payment of the option premium, exposing the purchaser to liability for margin payments not exceeding the amount of the premium. The purchaser is still subject to the risk of losing the premium and transaction costs. When the option is exercised or expires, the purchaser is responsible for any unpaid premium outstanding at that time.
Many people think of the stock market when they think of options; however, the foreign exchange (FOREX) market also offers the opportunity to trade these unique derivatives. Options give retail traders many opportunities to limit risk and increase profit. Here we discuss what options are, how they are used, and which strategies you can use to profit.Types of FOREX Options
There are two primary types of options available to retail FOREX traders. The most common is the traditional call/put option, which works much like the respective stock option. The other alternative is single payment option trading--or SPOT--which gives traders more flexibility.Traditional Options
Traditional options allow the buyer the right but not the obligation to purchase something from the option seller at a set price and time. For example, a trader might purchase an option to buy two lots of EUR/USD at 1.3000 in one month; such a contract is known as a "EUR call/USD put." (Keep in mind that, in the options market, when you buy a call, you buy a put simultaneously--just as in the cash market you buy one currency and simultaneously sell another.) If the price of EUR/USD is below 1.3000, the option expires worthless, and the buyer loses only the premium. On the other hand, if EUR/USD skyrockets to 1.4000, then the buyer can exercise the option and gain two lots for only 1.3000, which can then be sold for profit.
Since FOREX options are traded over-the-counter (OTC), traders can choose the price and date on which the option is to be valid and then receive a quote stating the premium they must pay to obtain the option.
There are two types of traditional options offered by brokers:
American-style – This type of option can be exercised at any point up until expiration.
European-style – This type of option can be exercised only at the time of expiration.
One advantage of traditional options is that they have lower premiums than SPOT options. Also, because (American) traditional options can be bought and sold before expiration, they allow for more flexibility. On the other hand, traditional options are more difficult to set and execute than SPOT options. (For a detailed introduction to options, see "Options Basics.")Single Payment Options Trading (SPOT)
Here is how SPOT options work: the trader inputs a scenario (for example, "EUR/USD will break 1.3000 in 12 days"), obtains a premium (option cost) quote, and then receives a payout if the scenario takes place. Essentially, SPOT automatically converts your option to cash when your option trade is successful, giving you a payout.
Many traders enjoy the additional choices (listed below) that SPOT options give traders. Also, SPOT options are easy to trade: it's a matter of entering the scenario and letting it play out. If you are correct, you receive cash into your account. If you are not correct, your loss is your premium. Another advantage is that SPOT options offer a choice of many different scenarios, allowing the trader to choose exactly what he or she thinks is going to happen.
There are many advantages to trading spot foreign exchange as opposed to trading stocks and futures. 1. Bid/Ask Spread rates
Spread rates have tightened dramatically in the last years. Most online forex brokers offer a spread of 5 pips on EURUSD which is the most widely traded and liquid currency pair. In the futures market spreads can vary anywhere between 5 and 9 pips and can become even larger under illiquid market conditions (which tends to happen substantially more often in futures currencies).2. Margins requirements
Usually a foreign exchange trading with a 1% margin is available. In layman's terms that means a trader can control a position of a value of USD 1'000'000 with a mere USD 10'000 in his account. By comparison, futures margins are not only constantly changing but are also often quite sizeable. Stocks are generally traded on a non-margined basis and when they are, it can be as restrictive as 50% or so.you can start with 25 USD in Easy Forex3. 24 hour market
Foreign exchange market trading occurs over a 24 hour period picking up in Asia around 24:00 CET Sunday evening and coming to an end in the United States on Friday around 23:00 CET. Although ECNs (electronic communications networks) exist for stock markets and futures markets (like Globex) that supply after hours trading, liquidity is often low and prices offered can often be uncompetitive.4. No Limit up / limit down
Futures markets contain certain constraints that limit the number and type of transactions a trader can make under certain price conditions. When the price of a certain currency rises or falls beyond a certain pre-determined daily level traders are restricted from initiating new positions and are limited only to liquidating existing positions if they so desire. This mechanism is meant to control daily price volatility but in effect since the futures currency market follows the spot market anyway, the following day the futures market may undergo what is called a 'gap' or in other words the futures price will re-adjust to the spot price the next day. In the OTC market no such trading constraints exist permitting the trader to truly implement his trading strategy to the fullest extent. Since a trader can protect his position from large unexpected price movements with stop-loss orders the high volatility in the spot market can be fully controlled.5. Sell before you buy
Equity brokers offer very restrictive short-selling margin requirements to customers. This means that a customer does not possess the liquidity to be able to sell stock before he buys it. Margin wise, a trader has exactly the same capacity when initiating a selling or buying position in the spot market. In spot trading when you're selling one currency, you're necessarily buying another.
A disadvantage of SPOT options, however, is their higher premiums. On average, SPOT option premiums cost more than standard options.Why Trade Options?
There are several reasons why options in general appeal to many traders:
Your downside risk is limited to the option premium (the amount you paid to purchase the option).
You have unlimited profit potential.
You pay less money up front than for a spot (cash) FOREX position.
You get to set the price and expiration date. (These are not predefined like those of options on futures.)
Options can be used to hedge against open spot (cash) positions in order to limit risk.
Without risking a lot of capital, you can use options to trade on predictions of market movements before fundamental events take place (such as economic reports or meetings).
SPOT options allow you many choices:Standard options.One-touch SPOT – You receive a payout if the price touches a certain level.No-touch SPOT – You receive a payout if the price doesn't touch a certain level.Digital SPOT – You receive a payout if the price is above or below a certain level.Double one-touch SPOT – You receive a payout if the price touches one of two set levels.Double no-touch SPOT – You receive a payout if the price doesn't touch any of the two set levels.So, why isn't everyone using options? Well, there also are a few downsides to using them:
The premium varies according to the strike price and date of the option, so the risk/reward ratio varies. SPOT options cannot be traded: once you buy one, you can't change your mind and then sell it. It can be hard to predict the exact time period and price at which movements in the market may occur. You may be going against the odds.Options Prices
Options have several factors that collectively determine their value: Intrinsic value - This is how much the option would be worth if it were to be exercised right now. The position of the current price in relation to the strike price can be described in one of three ways:"In the money" - This means the strike price is higher than the current market price." Out of the money" – This means the strike price is lower than the current market price." At the money" – This means the strike price is at the current market price.The time value - This represents the uncertainty of the price over time. Generally, the longer the time, the higher premium you pay because the time value is greater.Interest rate differential - A change in interest rates affects the relationship between the strike of the option and the current market rate. This effect is often factored into the premium as a function of the time value.Volatility - Higher volatility increases the likelihood of the market price hitting the strike price within a limited time period. Volatility is factored into the time value. Typically, more volatile currencies have higher options premiums.How It Works – A ScenarioSay it's January 2, 2004, and you think that the EUR/USD (euro vs. dollar) pair, which is currently at 1.3000, is headed downward due to positive U.S. numbers; however, there are some major reports coming out soon that could cause significant volatility. You suspect this volatility will occur within the next two months, but you don't want to risk a cash position, so you decide to use options.
You then go to your broker and put in a request to buy a EUR put/USD call, commonly referred to as a "EUR put option," set at a strike price of 1.2900 and an expiry of March 2, 2004. The broker informs you that this option will cost 10 pips, so you gladly decide to buy.
This order would look something like this:Buy: EUR put/USD callStrike price: 1.2900Expiration: 2 March 2004Premium: 10 USD pipsCash (spot) reference: 1.3000
Say the new reports come out and the EUR/USD pair falls to 1.2850--you decide to exercise your option, and the result gives you 40 USD pips profit (1.2900 – 1.2850 – 0.0010).Option Strategies
Options can be used in a variety of ways, but they are usually used for one of two purposes:(1) to capture profit or(2) to hedge against existing positions.Profit Motivated Strategies
Options are a good way to profit while keeping the risk down--after all, you can lose no more than the premium! Many FOREX traders like to use options around the times of important reports or events, when the spreads and risk increase in the cash FOREX markets. Other profit-driven FOREX traders simply use options instead of cash because options are cheaper. An options position can make a lot more money than a cash position in the same amount.Hedging Strategies
Options are a great way to hedge against your existing positions to decrease risk. Some traders even use options instead of or together with stop-loss points. The primary advantage of using options together with stops is that you have an unlimited profit potential if the price continues to move against your position.Hedge ratio
An option price does not fluctuate in a one-to-one relationship with the fluctuations in the price of the underlying asset. This is because as the option strike price becomes closer to or further away from the current asset price, the probability of the strike price being in the money changes. In the graph above, you can see the relation of the option price to the underlying asset price. The word used to describe the relationship of the option’s price change to the underlying asset’s price change is the hedge ratio or delta. As you can see, as the option becomes more and more heavily in the money, the option value’s price will fluctuate very closely with the underlying asset price, meaning that the delta is approaching 1. But as the strike price becomes further and further out of the money, the delta approaches zero, as the probability that the option will have any intrinsic value on expiration also approaches zero.Hedging with options
Options are often used in combinational strategies with other options, or as a hedging tool for a spot position. A hedging strategy can be initiated to reduce a potential loss on the investment. If the investor buys a spot position at a price of 100, he has a profit/loss scenario as shown in the left-hand figure below. If the investor buys a put option, he can change the profit/loss scenario and reduce a potential loss. This is illustrated in the right-hand graph below. The advantage of hedging with options instead of using a ”stop” is that you can stay in the market despite movements against your underlying position and still have an unlimited profit scenario. The disadvantage is that you must have a larger gain in the spot before the position makes a profit because you must pay for the option. Hedging example
You speculate that the exchange rate of EURJPY will decline steeply in the next week and have the capital to sell 1,000,000 EURJPY on margin at the spot price of 105.00. Now you want to protect your position in case of a rise in the EURJPY rate.
Protection can be done in two ways1) you can place a stop order, or2) buy an option.
1) Placing a stopLet’s say that you consider placing a stop, based on your analysis, at 106.00. Placing a stop order, you will, of course, limit the potential for loss to JPY 1,000,000 (around 9,434 EUR) if the stop (106) is traded, thereby closing your position.
2) Buy an optionThe other way of protecting yourself from limitless downside in this scenario is with the purchase of a call option. Let’s say that you purchase a one-week call option with the same strike price as the stop-loss order (106.00) at a cost of JPY 300,000 (EUR 2,857). As the holder of this option, you will maintain the potential for unlimited profit because your spot position can stay open until the exercise date without having to worry about losing more than the option premium (JPY 300,000) and the (JPY 1,000,000) loss when the price is at 106.00. The option will protect any final price above that level. That’s because the call option gains value as the spot loses value. In other words, this option scenario can give you a staying power that is not possible with the use of stops. In any market, entering the market several times and hitting multiple stop losses is much more costly than establishing a more strategic options position. This is especially true in cases with high volatility.
The two strategies are shown in the graphic below. The thick blue line shows the profit/loss scenario for the hedged position. Keep in mind that in sideways markets, an option buying strategy can become costly because you are paying for time value that quickly erodes as the expiration date approaches.Profit and Loss - Hedge
Another potential advantage of a hedging strategy is this: in the course of the option’s life, you may reassess your view of the market and wish to actually close the short spot position (even at a loss) in the expectation that the market is going the other way. In this scenario, you close the short position but keep the option, hoping that it will come in the money before expiration. For example, let’s say that after a few days, the spot price for EURJPY rises to 105.50 from the entry level of 105.00, and you have changed your mind about the direction of the market. Since you believe the rate will continue to rise, you close your spot position for a loss, but hang on to your option until the expiration. At any level above the break-even point of 106.3 you will begin to make a profit. And again, the option itself might be resold before expiration.
Saturday, November 3, 2007
Forex is a risky Business
Although every investment involves some risk, the risk of loss in trading off-exchange Forex contracts can be substantial. Therefore, if you are considering participating in this market, you should understand some of the risks associated with this product so you can make an informed decision before investing.
As stated in the introduction to this topic, off-exchange foreign currency trading carries a high level of risk and may not be suitable for all customers. The only funds that should ever be used to speculate in foreign currency trading, or any type of highly speculative investment, are funds that represent risk capital – i.e., funds you can afford to lose without affecting your financial situation. There are other reasons why Forex trading may or may not be an appropriate investment for you, and they are highlighted below.
In Forex you are trading substantial sums of money, and there is always a possibility that a trade will go against you. There are several trading tools that can minimize your risk, yes, but eliminate it, no. With caution, and above all education, the Forex trader can learn how to trade profitably and minimize loss.
The Scams and fraud
Forex scams were fairly common a few years ago. The industry has cleaned up considerably since then. Still, you should exercise caution before signing up with a Forex broker by checking their background.
Reputable Forex brokers will be associated with large financial institutions like banks or insurance companies, and they will be registered with the proper government agencies. In the United States, brokers should be registered with the Commodities Futures Trading Commission or a member of the National Futures Association. You can also check with your local Consumer Protection Bureau and the Better Business Bureau.
The market could move against you
No one can predict with certainty which way exchange rates will go, and the Forex market is volatile. Fluctuations in the foreign exchange rate between the time you place the trade and the time you close it out will affect the price of your Forex contract and the potential profit and losses relating to it.
You could lose your entire investment
You will be required to deposit an amount of money (often referred to as a "security deposit" or "margin") with your Forex dealer in order to buy or sell an off-exchange Forex contract. As discussed earlier, a relatively small amount of money can enable you to hold a Forex position worth many times the account value. This is referred to as leverage or gearing. The smaller the deposit in relation to the underlying value of the contract, the greater the leverage. If the price moves in an unfavorable direction, high leverage can produce large losses in relation to your initial deposit. In fact, even a small move against your position may result in a large loss, including the loss of your entire deposit. Depending on your agreement with your dealer, you may also be required to pay additional losses.
You are relying on the dealer's creditworthiness and reputation
Retail off-exchange Forex trades are not guaranteed by a clearing organization. Furthermore, funds that you have deposited to trade Forex contracts are not insured and do not receive a priority in bankruptcy. Even customer funds deposited by a dealer in an FDIC-insured bank account are not protected if the dealer goes bankrupt.
There is no central marketplace
Unlike regulated futures exchanges, in the retail off-exchange Forex market there is no central marketplace with many buyers and sellers. The Forex dealer determines the execution price, so you are relying on the dealer's integrity for a fair price.
The trading system could break down
If you are using an Internet-based or other electronic system to place trades, some part of the system could fail. In the event of a system failure, it is possible that, for a certain time period, you may not be able to enter new orders, execute existing orders, or modify or cancel orders that were previously entered. A system failure may also result in loss of orders or order priority.
You could be a victim of fraud
As with any investment, you should protect yourself from fraud. Beware of investment schemes that promise significant returns with little risk. You should take a close and cautious look at the investment offer itself and continue to monitor any investment you do make.
Types of Risks
Even through you are dealing with a reputable broker, there are risks to Forex trading. Transactions are unexpected and depend on volatile markets and political events.
Exchange Rate Risk: refers to the fluctuations in currency prices over a trading period. Prices can fall rapidly unless stop loss orders are used.
Interest Rate Risk: can result from discrepancies between the interest rates in the 2 countries represented by the currency pair in a Forex quote.
Credit Risk: is the possibility that 1 party in a Forex transaction may not honor their debt when the deal is closed. This may happen when a bank or financial institution declares insolvency.
Country Risk: is associated with governments that may become involved in foreign exchange markets by limiting the flow of currency. There is more country risk associated with "exotic" currencies than with major countries that allow the free trading of their currency.
How to limit risks?
There are some ways to limit risk and financial exposure. Every trader should have a trading strategy; i.e., knowing when to enter and exit the market, and what kind of movements to expect. Developing strategies requires education, which is the key to limiting risk. The basic rule which trader follows aal time: Never use money that you cannot afford to lose.
Every Forex trader needs to know at least the basics about technical analysis and how to read financial charts. He should study chart movements and indicators and understand how charts are interpreted.
Stop-Loss Orders
Even the most knowledgeable traders, can't predict with absolute certainty how the market will behave. For this reason, every Forex transaction should take tools to minimize loss.
Stop-loss orders are the most common way to minimizing risk. A stop-loss order contains instructions to exit your position if the price reaches a certain point. If you take a long position (expecting the price to rise) you would place a stop loss order below the current market price. If you take a short position (expecting the price to fall) you would place a stop loss order above the current market price.
Stop loss orders can be used in conjunction with limit orders to automate Forex trading.
As stated in the introduction to this topic, off-exchange foreign currency trading carries a high level of risk and may not be suitable for all customers. The only funds that should ever be used to speculate in foreign currency trading, or any type of highly speculative investment, are funds that represent risk capital – i.e., funds you can afford to lose without affecting your financial situation. There are other reasons why Forex trading may or may not be an appropriate investment for you, and they are highlighted below.
In Forex you are trading substantial sums of money, and there is always a possibility that a trade will go against you. There are several trading tools that can minimize your risk, yes, but eliminate it, no. With caution, and above all education, the Forex trader can learn how to trade profitably and minimize loss.
The Scams and fraud
Forex scams were fairly common a few years ago. The industry has cleaned up considerably since then. Still, you should exercise caution before signing up with a Forex broker by checking their background.
Reputable Forex brokers will be associated with large financial institutions like banks or insurance companies, and they will be registered with the proper government agencies. In the United States, brokers should be registered with the Commodities Futures Trading Commission or a member of the National Futures Association. You can also check with your local Consumer Protection Bureau and the Better Business Bureau.
The market could move against you
No one can predict with certainty which way exchange rates will go, and the Forex market is volatile. Fluctuations in the foreign exchange rate between the time you place the trade and the time you close it out will affect the price of your Forex contract and the potential profit and losses relating to it.
You could lose your entire investment
You will be required to deposit an amount of money (often referred to as a "security deposit" or "margin") with your Forex dealer in order to buy or sell an off-exchange Forex contract. As discussed earlier, a relatively small amount of money can enable you to hold a Forex position worth many times the account value. This is referred to as leverage or gearing. The smaller the deposit in relation to the underlying value of the contract, the greater the leverage. If the price moves in an unfavorable direction, high leverage can produce large losses in relation to your initial deposit. In fact, even a small move against your position may result in a large loss, including the loss of your entire deposit. Depending on your agreement with your dealer, you may also be required to pay additional losses.
You are relying on the dealer's creditworthiness and reputation
Retail off-exchange Forex trades are not guaranteed by a clearing organization. Furthermore, funds that you have deposited to trade Forex contracts are not insured and do not receive a priority in bankruptcy. Even customer funds deposited by a dealer in an FDIC-insured bank account are not protected if the dealer goes bankrupt.
There is no central marketplace
Unlike regulated futures exchanges, in the retail off-exchange Forex market there is no central marketplace with many buyers and sellers. The Forex dealer determines the execution price, so you are relying on the dealer's integrity for a fair price.
The trading system could break down
If you are using an Internet-based or other electronic system to place trades, some part of the system could fail. In the event of a system failure, it is possible that, for a certain time period, you may not be able to enter new orders, execute existing orders, or modify or cancel orders that were previously entered. A system failure may also result in loss of orders or order priority.
You could be a victim of fraud
As with any investment, you should protect yourself from fraud. Beware of investment schemes that promise significant returns with little risk. You should take a close and cautious look at the investment offer itself and continue to monitor any investment you do make.
Types of Risks
Even through you are dealing with a reputable broker, there are risks to Forex trading. Transactions are unexpected and depend on volatile markets and political events.
Exchange Rate Risk: refers to the fluctuations in currency prices over a trading period. Prices can fall rapidly unless stop loss orders are used.
Interest Rate Risk: can result from discrepancies between the interest rates in the 2 countries represented by the currency pair in a Forex quote.
Credit Risk: is the possibility that 1 party in a Forex transaction may not honor their debt when the deal is closed. This may happen when a bank or financial institution declares insolvency.
Country Risk: is associated with governments that may become involved in foreign exchange markets by limiting the flow of currency. There is more country risk associated with "exotic" currencies than with major countries that allow the free trading of their currency.
How to limit risks?
There are some ways to limit risk and financial exposure. Every trader should have a trading strategy; i.e., knowing when to enter and exit the market, and what kind of movements to expect. Developing strategies requires education, which is the key to limiting risk. The basic rule which trader follows aal time: Never use money that you cannot afford to lose.
Every Forex trader needs to know at least the basics about technical analysis and how to read financial charts. He should study chart movements and indicators and understand how charts are interpreted.
Stop-Loss Orders
Even the most knowledgeable traders, can't predict with absolute certainty how the market will behave. For this reason, every Forex transaction should take tools to minimize loss.
Stop-loss orders are the most common way to minimizing risk. A stop-loss order contains instructions to exit your position if the price reaches a certain point. If you take a long position (expecting the price to rise) you would place a stop loss order below the current market price. If you take a short position (expecting the price to fall) you would place a stop loss order above the current market price.
Stop loss orders can be used in conjunction with limit orders to automate Forex trading.
You and Forex broker
To trade on the forex market, the largest financial market on the planet, one must use a forex broker. Not unlike a stock broker, a forex broker can also makes suggestions about which moves to make when exchanging foreign currency. Some forex brokers even supply technical analysis to some of their clients and offer tips on research to improve their success as forex traders.
Typically in the forex market a forex broker is a banking institution who may buy up large amounts of a certain currency. For years, banks were the only ones who had access to the forex markets. But today with the Internet, any forex trader, who subscribes with a forex broker, can access the market 24 hours a day.
Today, as with stock brokers, the brick and mortar institutions, such as banks, are less of an option for the individual forex trader who works from home, monitoring the news and gaining insight into certain technical information to help with his or her trading decisions.
Choosing a forex broker may depend on your needs. If you are new to the field, there are houses, or online forex brokers who may cater to your needs, providing in-depth research, ample time to demo their product and so on. Other forex brokers are geared toward the experienced online forex trader. They too offer advice, but may be less likely to offer instructional help with the information, assuming that you may already know how it may or may not benefit you when you read it. It is advisable to read about and even run a demo on several different online forex brokers before going with one.
Intimate knowledge of money management techniques characterizes the best forex brokers. Components of this knowledge are understanding of trading signals, ability to analyze rapid changes in market conditions, and comprehension of such market factors as interest rates. Capable currency traders apply their time-tested methods in a logical, consistent manner.
Brokers take intelligent positions in the market, and garner profits for their clients.
Forex, or FX, brokers use statistical tools to analyze trends. On the basis of about 26 technical indicators, FX brokers determine when to take a position in the market. Through familiarity with sometimes arcane statistics and charting, traders apply empirical principles to the dynamic forex trading forum.
By using these indicators, FX brokers try to understand what a market is about to do. Depending on their ability to determine what is statistically correct, these currency traders may successfully reap great profits for investors. The best FX brokers are capable risk managers.
One of the current theories is the asset market model, which views currencies as asset prices traded in the financial market. The Dow Theory is based mostly on stock market averages. Whether theories are valid or not, FX brokers must make empirical determinations of trends and, therefore, market opportunities.
Objective, disciplined, knowledgeable, ethical - these qualities and characteristics define the best FX brokers. Investors can find such traders by viewing websites of governmental entities and brokerage firms, for example. Investigations of traders and firms offering services to the general public would reveal those that operate with integrity.
You can locate a Forex broker right now online. But before you go about researching Forex companies, you should learn a little about the market. Approaching your Forex broker as an erudite investor can't help but earn you approval.
After all, brokers interact with the Forex market on a daily basis. Speaking to them in their particular trade language will designate you as an empathic individual. And that means they will be more likely to look out for your concerns singularly.
Treat the entire interaction as a fundamentally human affair. Despite the impersonal nature of investing, those involved appreciate common courtesy. Your relationship with your broker can yield lasting implications for your financial well-being.
You will no doubt stumble across a plethora of stories of financial success on the Web. We caution you, however -- don't get sucked in by the promise of fantastic moneymaking opportunities. Evaluate all of your options methodically and objectively before proceeding with any purchase.
Forex companies respect investors who speak honestly and openly about their plans. Such straightforward interaction enables them to strategize effectively. Given the stochastic nature of the markets, it's no wonder stability is such a valued commodity!
Your dedication to learning the process may not pay off overnight. But a systematic, long-term approach never fails to yield a significant return. So goose your time cost ratio today - get in the game!
A European Forex broker will have a unique perspective on the foreign exchange trading paradigm that exists today. What motivates the modern European Forex broker in determining strategy? A confluence of international events have radically affected the continent's philosophical leanings.
Choose your Forex trading firm based on recommendations. One way to do this is to solicit the counsel of other Forex traders. Designated online forms provide access to these mavens 24 hours a day.
Another way to go about the process is to triangulate resources. Contact a number firms about your specific portfolio. Ask each one of these companies to specify its most feared competitor.
Finally, triangulate your search by counting up the most commonly feared competitors. Choose from among these rarefied possibilities for greater potential success. And never forget -- you have the ultimate agency over your investment portfolio, friend
Typically in the forex market a forex broker is a banking institution who may buy up large amounts of a certain currency. For years, banks were the only ones who had access to the forex markets. But today with the Internet, any forex trader, who subscribes with a forex broker, can access the market 24 hours a day.
Today, as with stock brokers, the brick and mortar institutions, such as banks, are less of an option for the individual forex trader who works from home, monitoring the news and gaining insight into certain technical information to help with his or her trading decisions.
Choosing a forex broker may depend on your needs. If you are new to the field, there are houses, or online forex brokers who may cater to your needs, providing in-depth research, ample time to demo their product and so on. Other forex brokers are geared toward the experienced online forex trader. They too offer advice, but may be less likely to offer instructional help with the information, assuming that you may already know how it may or may not benefit you when you read it. It is advisable to read about and even run a demo on several different online forex brokers before going with one.
Intimate knowledge of money management techniques characterizes the best forex brokers. Components of this knowledge are understanding of trading signals, ability to analyze rapid changes in market conditions, and comprehension of such market factors as interest rates. Capable currency traders apply their time-tested methods in a logical, consistent manner.
Brokers take intelligent positions in the market, and garner profits for their clients.
Forex, or FX, brokers use statistical tools to analyze trends. On the basis of about 26 technical indicators, FX brokers determine when to take a position in the market. Through familiarity with sometimes arcane statistics and charting, traders apply empirical principles to the dynamic forex trading forum.
By using these indicators, FX brokers try to understand what a market is about to do. Depending on their ability to determine what is statistically correct, these currency traders may successfully reap great profits for investors. The best FX brokers are capable risk managers.
One of the current theories is the asset market model, which views currencies as asset prices traded in the financial market. The Dow Theory is based mostly on stock market averages. Whether theories are valid or not, FX brokers must make empirical determinations of trends and, therefore, market opportunities.
Objective, disciplined, knowledgeable, ethical - these qualities and characteristics define the best FX brokers. Investors can find such traders by viewing websites of governmental entities and brokerage firms, for example. Investigations of traders and firms offering services to the general public would reveal those that operate with integrity.
You can locate a Forex broker right now online. But before you go about researching Forex companies, you should learn a little about the market. Approaching your Forex broker as an erudite investor can't help but earn you approval.
After all, brokers interact with the Forex market on a daily basis. Speaking to them in their particular trade language will designate you as an empathic individual. And that means they will be more likely to look out for your concerns singularly.
Treat the entire interaction as a fundamentally human affair. Despite the impersonal nature of investing, those involved appreciate common courtesy. Your relationship with your broker can yield lasting implications for your financial well-being.
You will no doubt stumble across a plethora of stories of financial success on the Web. We caution you, however -- don't get sucked in by the promise of fantastic moneymaking opportunities. Evaluate all of your options methodically and objectively before proceeding with any purchase.
Forex companies respect investors who speak honestly and openly about their plans. Such straightforward interaction enables them to strategize effectively. Given the stochastic nature of the markets, it's no wonder stability is such a valued commodity!
Your dedication to learning the process may not pay off overnight. But a systematic, long-term approach never fails to yield a significant return. So goose your time cost ratio today - get in the game!
A European Forex broker will have a unique perspective on the foreign exchange trading paradigm that exists today. What motivates the modern European Forex broker in determining strategy? A confluence of international events have radically affected the continent's philosophical leanings.
Choose your Forex trading firm based on recommendations. One way to do this is to solicit the counsel of other Forex traders. Designated online forms provide access to these mavens 24 hours a day.
Another way to go about the process is to triangulate resources. Contact a number firms about your specific portfolio. Ask each one of these companies to specify its most feared competitor.
Finally, triangulate your search by counting up the most commonly feared competitors. Choose from among these rarefied possibilities for greater potential success. And never forget -- you have the ultimate agency over your investment portfolio, friend
Forex risks
Assuming you are dealing with a reputable broker, there are still risks to FOREX trading. Transactions are subject to unexpected rate changes, volatile markets and political events.
Any investments have the whole set of risks.
What factors define the risks? Many factors. Among them: 1) The Basic purposes of the company 2) The Organization (mechanism) of the purpose achievement3) Management of the company, that defines its successful and long functioning 4) Presence of sufficient own company's resources for opposition various acts of God
All rest (duration of existence, the big building in the center of the town, big attractive office, the affable personnel) are not so essential. Forex market stand independently from other markets first of all because it is out of the exchange. Why so happens - probably because it formed rather recently, about 20 years ago, and banks became its participants. By virtue of development of a communication facility and automation banks began to trading "directly", not requiring in the special organizations - stock exchanges. Been born, this market became global at once, and in one country it was not possible to limit, "settle" it legislatively. Therefore there is such dislike and neglect for this market from many "classical" financiers. Nevertheless for a lot of the European and North American banks speculative operations on Forex market are the basic source of the income while the quantity of the personnel working in other markets, is constantly reduced.
So, Forex market practically has no legislative regulation in one country, and in the majority of the countries is equated to the organization of games. It follows from this that Forex market's broker does not require any licenses and certificates. It is the usual legal person.
Here is the second important fact - Forex market is not adjusted, despite of set of the confused problems and risks in addition to the risk connected with movements of the price of the market. These problems rotate around of trust, honesty of carrying out of operations, managed of Forex risks, a transparency and marketing of Forex brokers. But in the beginning we should understand, that, unlike highly adjustable exchange markets, broker firms cannot be carried to any separate stock exchange on character of problems and risks.
FOREX trading can be risky, but there are ways to limit risk and financial exposure.
Every FOREX trader needs to know at least the basics about technical analysis and how to read financial charts. He should study chart movements and indicators and understand how charts are interpreted.
Even the most knowledgeable traders, however, can't predict with absolute certainty how the market will behave. For this reason, every FOREX transaction should take advantage of available tools designed to minimize loss. Stop-loss orders are the most common ways of minimizing risk when placing an entry order. A stop-loss order contains instructions to exit your position if the currency price reaches a certain point. If you take a long position (expecting the price to rise) you would place a stop loss order below current market price. If you take a short position (expecting the price to fall) you would place a stop loss order above current market price.
As an example, if you take a short position on USD/CDN it means you expect the US dollar to fall against the Canadian dollar. The quote is USD/CDN 1.2138/43 - you can sell US$1 for 1.2138 CDN dollars or sell 1.2143 CDN dollars for US$1.
You place an order in the following way:Sell USD: 1 standard lot USD/CDN @ 1.2138 = $121,380 CDNPip Value: 1 pip = $10Stop-Loss: 1.2148Margin: $1,000 (1%)
You are selling US$100,000 and buying CDN$121,380. Your stop loss order will be executed if the dollar goes above 1.2148, in which case you will lose $100.
However, USD/CDN falls to 1.2118/23. You can now sell $1 US for 1.2118 CDN or sell 1.2123 CDN for $1 US.
Because of the immense volume of FOREX, however, it is impossible for one force to control the market for any length of time. Market forces will prevail in the long run, making FOREX one of the most open and fair investment opportunities available.
Prices of foreign exchange are indicated by FOREX quotes in pairs of currencies. The first currency is the 'base' and the second is the 'quote' currency. In this example:
USD/EUR = 0.8419
...the currency pair is US dollars and European euros. The base currency (USD) is always at '1' and the quote currency shows how much it costs to buy one unit of the base currency. In this example, 1 US dollar costs 0.8419 euros.
Conversely...
EUR/USD = 1.1882
...tells us that it costs 1.1882 US dollars to buy 1 euro.
When the price of the quote currency goes up it indicates that the base currency is becoming stronger – one unit of the base currency will buy more of the quote currency. If the quote currency falls, however, the base currency is becoming weaker.
FOREX quotes are seen in 'bid' and 'ask' prices. Bid is the price that buyers will pay for the base currency (while selling the quote currency), and ask is the price that sellers will sell the base currency (while buying the quote currency).
Symbol Bid Ask
USD/CAD 1.2392 1.2397
This chart tells us that we can buy one American dollar for 1.2397 Canadian dollars, or sell one American dollar for 1.2392 Canadian dollars. The most commonly traded currencies pairs are the "Majors": GBP/USD, EUR/USD, AUD/USD, USD/JPY, USD/CHF, and USD/CAD.
We often see exchange rates listed in cross currency charts that list many different currencies and their values against each other. An example of such a chart is seen here:US $ Ca $ Euro UK ? US $ 1.00000 1.24060 0.83935 0.56870 Ca $ 0.80606 1.00000 0.67657 0.45841 Euro 1.19140 1.47805 1.00000 0.67755 UK ? 1.75840 2.18147 1.47591 1.00000
In this chart, the currencies listed down the left side of the chart are the base currencies and the currencies at the top are the quote currencies. We can convert the chart above into currency pairs by following the row beside the base currency. Using US dollars as the base currency we get the following currency pairs:USD/CAD = 1.24060USD/EUR = 0.83935USD/GBP = 0.56870
...which tells us that one US dollar is equal to the corresponding value of the quote currency. To find the opposite pair e.g. CAD/USD follow the Canadian dollar row to the US dollar column - CAD/USD = 0.80606 (one Canadian dollar is worth 0.80606 US dollars).
There is no standard for cross-currency charts: some have the base currency on the top and some have it on the side. How to tell which is which? You need to know at least one pair of currencies and which one of the pair is more valuable.
To minimize your forex risks you may use stop and limit orders
Any investments have the whole set of risks.
What factors define the risks? Many factors. Among them: 1) The Basic purposes of the company 2) The Organization (mechanism) of the purpose achievement3) Management of the company, that defines its successful and long functioning 4) Presence of sufficient own company's resources for opposition various acts of God
All rest (duration of existence, the big building in the center of the town, big attractive office, the affable personnel) are not so essential. Forex market stand independently from other markets first of all because it is out of the exchange. Why so happens - probably because it formed rather recently, about 20 years ago, and banks became its participants. By virtue of development of a communication facility and automation banks began to trading "directly", not requiring in the special organizations - stock exchanges. Been born, this market became global at once, and in one country it was not possible to limit, "settle" it legislatively. Therefore there is such dislike and neglect for this market from many "classical" financiers. Nevertheless for a lot of the European and North American banks speculative operations on Forex market are the basic source of the income while the quantity of the personnel working in other markets, is constantly reduced.
So, Forex market practically has no legislative regulation in one country, and in the majority of the countries is equated to the organization of games. It follows from this that Forex market's broker does not require any licenses and certificates. It is the usual legal person.
Here is the second important fact - Forex market is not adjusted, despite of set of the confused problems and risks in addition to the risk connected with movements of the price of the market. These problems rotate around of trust, honesty of carrying out of operations, managed of Forex risks, a transparency and marketing of Forex brokers. But in the beginning we should understand, that, unlike highly adjustable exchange markets, broker firms cannot be carried to any separate stock exchange on character of problems and risks.
FOREX trading can be risky, but there are ways to limit risk and financial exposure.
Every FOREX trader needs to know at least the basics about technical analysis and how to read financial charts. He should study chart movements and indicators and understand how charts are interpreted.
Even the most knowledgeable traders, however, can't predict with absolute certainty how the market will behave. For this reason, every FOREX transaction should take advantage of available tools designed to minimize loss. Stop-loss orders are the most common ways of minimizing risk when placing an entry order. A stop-loss order contains instructions to exit your position if the currency price reaches a certain point. If you take a long position (expecting the price to rise) you would place a stop loss order below current market price. If you take a short position (expecting the price to fall) you would place a stop loss order above current market price.
As an example, if you take a short position on USD/CDN it means you expect the US dollar to fall against the Canadian dollar. The quote is USD/CDN 1.2138/43 - you can sell US$1 for 1.2138 CDN dollars or sell 1.2143 CDN dollars for US$1.
You place an order in the following way:Sell USD: 1 standard lot USD/CDN @ 1.2138 = $121,380 CDNPip Value: 1 pip = $10Stop-Loss: 1.2148Margin: $1,000 (1%)
You are selling US$100,000 and buying CDN$121,380. Your stop loss order will be executed if the dollar goes above 1.2148, in which case you will lose $100.
However, USD/CDN falls to 1.2118/23. You can now sell $1 US for 1.2118 CDN or sell 1.2123 CDN for $1 US.
Because of the immense volume of FOREX, however, it is impossible for one force to control the market for any length of time. Market forces will prevail in the long run, making FOREX one of the most open and fair investment opportunities available.
Prices of foreign exchange are indicated by FOREX quotes in pairs of currencies. The first currency is the 'base' and the second is the 'quote' currency. In this example:
USD/EUR = 0.8419
...the currency pair is US dollars and European euros. The base currency (USD) is always at '1' and the quote currency shows how much it costs to buy one unit of the base currency. In this example, 1 US dollar costs 0.8419 euros.
Conversely...
EUR/USD = 1.1882
...tells us that it costs 1.1882 US dollars to buy 1 euro.
When the price of the quote currency goes up it indicates that the base currency is becoming stronger – one unit of the base currency will buy more of the quote currency. If the quote currency falls, however, the base currency is becoming weaker.
FOREX quotes are seen in 'bid' and 'ask' prices. Bid is the price that buyers will pay for the base currency (while selling the quote currency), and ask is the price that sellers will sell the base currency (while buying the quote currency).
Symbol Bid Ask
USD/CAD 1.2392 1.2397
This chart tells us that we can buy one American dollar for 1.2397 Canadian dollars, or sell one American dollar for 1.2392 Canadian dollars. The most commonly traded currencies pairs are the "Majors": GBP/USD, EUR/USD, AUD/USD, USD/JPY, USD/CHF, and USD/CAD.
We often see exchange rates listed in cross currency charts that list many different currencies and their values against each other. An example of such a chart is seen here:US $ Ca $ Euro UK ? US $ 1.00000 1.24060 0.83935 0.56870 Ca $ 0.80606 1.00000 0.67657 0.45841 Euro 1.19140 1.47805 1.00000 0.67755 UK ? 1.75840 2.18147 1.47591 1.00000
In this chart, the currencies listed down the left side of the chart are the base currencies and the currencies at the top are the quote currencies. We can convert the chart above into currency pairs by following the row beside the base currency. Using US dollars as the base currency we get the following currency pairs:USD/CAD = 1.24060USD/EUR = 0.83935USD/GBP = 0.56870
...which tells us that one US dollar is equal to the corresponding value of the quote currency. To find the opposite pair e.g. CAD/USD follow the Canadian dollar row to the US dollar column - CAD/USD = 0.80606 (one Canadian dollar is worth 0.80606 US dollars).
There is no standard for cross-currency charts: some have the base currency on the top and some have it on the side. How to tell which is which? You need to know at least one pair of currencies and which one of the pair is more valuable.
To minimize your forex risks you may use stop and limit orders
Forex fraud and scams
There are a lot of fraud and scams from the direction of intermediaries such as brokers and dealers in Forex business. The United States Commodity Futures Trading Commission (CFTC) is the federal agency that regulates the trading of Forex currency, commodity futures and options contracts in the United States and takes action against firms suspected of illegally or fraudulently selling Forex currency, commodity futures and options. Off-exchange trading of Forex, foreign currency futures and options contracts with retail customers by a counterparty that is not a regulated financial entity as set forth in the CFMA is unlawful and may be a fraud or scam.
There are some forex broker's or dealer's strategies sometimes not honest and respectable.
If you become a victim of such a broker you may put your broker's review.
Using the "kitchen" method, management of the dealing center is based on the assumption, that the majority of players (clients) will lose the money sooner or later. It is promoted by a lot of the reasons. The cores are the lowest vocational training of the client, excessive aggression and practically absolute ignorance of foreign language. Such clients are very often completely out of the basic information streams.
Brokerage is the overlapping of absolutely all client transactions (positions) during their performance. "Brokerage" can be profitable only at a great deal of clients and their activity at transactions' performance. Broker can earn money "moving" of the market against the client. It is possible to shift the market in the various ways. Since any client transaction passes through dealer of dealing center, the dealer forms the quotation, giving to the client.
Basis of this broker strategy is the following thesis: dealing center doesn't use brokerage as the basic technology, a basis of profit are the client's losses. The client transactions completed in current of one day, as a rule, do not bring to dealing center neither greater profits, nor heavy losses. In a total sum these transactions make small profit. The basic money appears when positions open in current of several bank days and lead the client to greater, significant losses.
At "pseudo-brokerage" any position has moments during which client is incured losses, accordingly, dealing center has some profit on this position (provided that this position is not blocked at the foreign broker).
Some dealers guarantee that you will not lose more than you invest, which includes both the initial deposit and any subsequent deposits to keep the position open. There are two significant differences between buying off-exchange Forex currency options and buying options on futures contracts. First, when you exercise an option on an exchange-traded futures contract, you receive the underlying exchange-traded futures contract. When you exercise an off-exchange Forex currency option, you will probably receive either a cash payment or a position in the underlying currency. Second, NFA’s options brochure only discusses American-style options, which can be exercised at any time before they expire. Many Forex options are European-style options, which can be exercised only on or near the expiration date. You should understand which type of option you are purchasing.
Retail off-exchange Forex currency trades are not guaranteed by a clearing organization and are the most sustainable to fraud and scams. Furthermore, funds that you have deposited to trade Forex currency contracts are not insured and do not receive a priority in bankruptcy. Even customer funds deposited by a dealer in an FDIC-insured bank account are not protected if the dealer goes bankrupt. There is no central marketplace unlike regulated futures exchanges in the retail off-exchange. Forex currency market there is no central marketplace with many buyers and sellers. The Forex currency dealer determines the execution price, so you are relying on the dealer’s integrity for a fair price.
You should ask the dealer how it is regulated and check with the dealer’s regulator about the dealer’s registration status. You should also ask the dealer if its regulator has adopted rules to regulate its retail Forex activities.
Unlike Forex dealers, firms and individuals that solicit retail accounts for Forex currency dealers and manage those accounts do not have to be regulated or affiliated with a regulated firm. Therefore, you should find out if the person’s Forex activities are regulated and by whom.
Warning Signs of Fraud
Watch for the warning signs listed below, and take the following precautions before placing your funds with any currency trading company.
1. Stay Away From Opportunities That Sound Too Good to Be True
2. Avoid Any Company that Predicts or Guarantees Large Profits
3. Stay Away From Companies That Promise Little or No Financial Risk
4. Don't Trade on Margin Unless You Understand What It Means
5. Question Firms That Claim To Trade in the "Interbank Market"
6. Be Wary of Sending or Transferring Cash on the Internet, By Mail or Otherwise
7. Currency Scams Often Target Members of Ethnic Minorities
8. Be Sure You Get the Company's Performance Track Record
9. Don't Deal With Anyone Who Won't Give You Their Background
10. Warning Signs Of Commodity "Come-Ons"
Most Forex fraud and commodity fraud is committed by either firms located in South Florida (Boca Raton was voted by CNBC the telemarketing fraud capital of the world in 2000), Southern California or outside the United States. Never make a check or bank wire payable to ANYONE other that a FCM registered with the NFA. In the majority of cases Forex fraud is perpetrated by firms located in the United States and the principals and brokers of the firm and were at one time registered with the National Futures Association (800) 621-3570 and have had their licenses revoked.
There are some forex broker's or dealer's strategies sometimes not honest and respectable.
If you become a victim of such a broker you may put your broker's review.
Using the "kitchen" method, management of the dealing center is based on the assumption, that the majority of players (clients) will lose the money sooner or later. It is promoted by a lot of the reasons. The cores are the lowest vocational training of the client, excessive aggression and practically absolute ignorance of foreign language. Such clients are very often completely out of the basic information streams.
Brokerage is the overlapping of absolutely all client transactions (positions) during their performance. "Brokerage" can be profitable only at a great deal of clients and their activity at transactions' performance. Broker can earn money "moving" of the market against the client. It is possible to shift the market in the various ways. Since any client transaction passes through dealer of dealing center, the dealer forms the quotation, giving to the client.
Basis of this broker strategy is the following thesis: dealing center doesn't use brokerage as the basic technology, a basis of profit are the client's losses. The client transactions completed in current of one day, as a rule, do not bring to dealing center neither greater profits, nor heavy losses. In a total sum these transactions make small profit. The basic money appears when positions open in current of several bank days and lead the client to greater, significant losses.
At "pseudo-brokerage" any position has moments during which client is incured losses, accordingly, dealing center has some profit on this position (provided that this position is not blocked at the foreign broker).
Some dealers guarantee that you will not lose more than you invest, which includes both the initial deposit and any subsequent deposits to keep the position open. There are two significant differences between buying off-exchange Forex currency options and buying options on futures contracts. First, when you exercise an option on an exchange-traded futures contract, you receive the underlying exchange-traded futures contract. When you exercise an off-exchange Forex currency option, you will probably receive either a cash payment or a position in the underlying currency. Second, NFA’s options brochure only discusses American-style options, which can be exercised at any time before they expire. Many Forex options are European-style options, which can be exercised only on or near the expiration date. You should understand which type of option you are purchasing.
Retail off-exchange Forex currency trades are not guaranteed by a clearing organization and are the most sustainable to fraud and scams. Furthermore, funds that you have deposited to trade Forex currency contracts are not insured and do not receive a priority in bankruptcy. Even customer funds deposited by a dealer in an FDIC-insured bank account are not protected if the dealer goes bankrupt. There is no central marketplace unlike regulated futures exchanges in the retail off-exchange. Forex currency market there is no central marketplace with many buyers and sellers. The Forex currency dealer determines the execution price, so you are relying on the dealer’s integrity for a fair price.
You should ask the dealer how it is regulated and check with the dealer’s regulator about the dealer’s registration status. You should also ask the dealer if its regulator has adopted rules to regulate its retail Forex activities.
Unlike Forex dealers, firms and individuals that solicit retail accounts for Forex currency dealers and manage those accounts do not have to be regulated or affiliated with a regulated firm. Therefore, you should find out if the person’s Forex activities are regulated and by whom.
Warning Signs of Fraud
Watch for the warning signs listed below, and take the following precautions before placing your funds with any currency trading company.
1. Stay Away From Opportunities That Sound Too Good to Be True
2. Avoid Any Company that Predicts or Guarantees Large Profits
3. Stay Away From Companies That Promise Little or No Financial Risk
4. Don't Trade on Margin Unless You Understand What It Means
5. Question Firms That Claim To Trade in the "Interbank Market"
6. Be Wary of Sending or Transferring Cash on the Internet, By Mail or Otherwise
7. Currency Scams Often Target Members of Ethnic Minorities
8. Be Sure You Get the Company's Performance Track Record
9. Don't Deal With Anyone Who Won't Give You Their Background
10. Warning Signs Of Commodity "Come-Ons"
Most Forex fraud and commodity fraud is committed by either firms located in South Florida (Boca Raton was voted by CNBC the telemarketing fraud capital of the world in 2000), Southern California or outside the United States. Never make a check or bank wire payable to ANYONE other that a FCM registered with the NFA. In the majority of cases Forex fraud is perpetrated by firms located in the United States and the principals and brokers of the firm and were at one time registered with the National Futures Association (800) 621-3570 and have had their licenses revoked.
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