My <b>Easy Forex</b> Megablog: Apr 7, 2008

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How To Avoid Some Common Forex Scams

By Gregg Hall

There is an old saying that states, "A Fool and his Money are Easily Parted". With the proper strategy and resources from which to educate yourself, there is no reason to be foolish. With all of the opportunities to make money from home there are plenty of people who can't wait to get right in and get started. The problem is, there are also plenty of scam artists out there who are all too willing to rip you off if you give them half a chance. In the Forex industry, experienced traders don't fall for the scams, but people who are new to the industry are ripe targets. Therefore, you need to know what to look out for. There is an old saying that states, "A Fool and his Money are Easily Parted". With the proper strategy and resources from which to educate yourself, there is no reason to be foolish. With all of the opportunities to make money from home there are plenty of people who can't wait to get right in and get started. The problem is, there are also plenty of scam artists out there who are all too willing to rip you off if you give them half a chance. In the Forex industry, experienced traders don't fall for the scams, but people who are new to the industry are ripe targets. Therefore, you need to know what to look out for.

The government agency that regulates Forex trading, as well as other futures and commodities markets, cautions newcomers to watch out for the scammers that try to paint unrealistic pictures of huge profit potential in Forex and other trading markets. Recently they have also put out numerous fraud alerts for consumers specifically about scams involving the foreign currency exchange market. Here are a few of the tips from the CFTC to give you some insight on how to avoid scams.

First off, you always need to be wary of people who promise huge returns at low or no risk. If you see ads that say things like, "Make $2500 in minutes" that is a pretty good sign that they are not a reputable company. A reputable company will always temper the allure of large profits with warnings that you can also lose just as big or bigger. The Forex market is not a cash cow; there are risks just as there is with any investment opportunity. People who are unaware of the risks involved usually quit trading when they begin losing money.

You were equipped at birth with the ability to question and reason. Use it and be suspicious of everything until you verify that a company is reputable. Use the CFTC and investigate the company or broker you are thinking of doing business with by checking their fraud alert pages. Another good thing to do is see if the company is registered with the CFTC or if they belong to the National Futures Association. By using these resources you can easily find out if there have ever been disciplinary actions taken against the company you are investigating. You can also verify addresses and phone numbers. With the ease of access on the Internet, it has become increasingly easy to run fraud scams with false credentials and fake names.

Just think about how easy it is to have an online presence now. A Domain name is less than ten bucks and you can get web hosting for less than $10 a month. That is a pretty cheap investment for the opportunity to reach millions of people and part them and their money. Be sure to take the time to investigate and verify the people you are considering with the agencies I mentioned above before you give them any private information or credit card numbers. Forex trading can be a wonderful experience and business. Just make sure you work with a reputable company and do your homework.

Gregg Hall is an author living in Navarre Beach, Florida. Find more about this as well as online Forex trading at www.FXTradingStrategies.com

Let's Talk About Forex

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Forex trading has taken the world by storm. Millions of people attempt to make their fortune on the Forex market. Unfortunately most of them will loose their money because they did not have proper forex education . Without proper education Forex trading is an expensive gamble. There are various training courses available on the internet but most of them are very expensive.

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I have been using USD index and Eur/Gbp (or Gbp/Chf) as my guide dogs since late 70?s with reasonable accuracy for medium-term trend. Never lost money on medium-term bet relying on those guide dogs in fact. But that cross does not work when Pound is deliberately devalued.

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The gross domestic product,or GDP,is another economic indicator used when looking at the foreign exchange market. The GDP is considered the widest and broadest measure of the economy in a country. The gross domestic product represents the total market value of all goods and services that are normally produced within any given country. This is usually measured in the time frame of a year, and not in weeks or months. Using a larger time period gives good statistics on the products and services that are produced in the country. This indicator is not used alone when forecasting the Forex. The GDP is considered a lagging indicator, meaning that is a measurable factor that changes after the economy has already began to follow a certain trend.

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The Division of Trading and Markets (now Division of Clearing and Intermediary Oversight, or DCIO) issued an advisory in 2002 concerning foreign currency trading by retail customers (PDF). The advisory affirms that off-exchange trading of 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. The advisory further states that, if there is a lawful counterparty to the transaction, such as a person registered as a futures commission merchant, the persons acting as intermediaries to such a transaction, that is, in the manner of an introducing broker, commodity trading advisor or commodity pool operator, would not need to register under the CEA if that is their only involvement in futures or option transactions.

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Forex Fundamental Analysis

The two primary approaches of analyzing Forex markets are technical analysis and fundamental analysis. Fundamental analysis comprises the examination of economic indicators, asset markets and political considerations when evaluating a nation�s currency in terms of another. The focus of fundamental analysis lies on the economic, social and political forces that drive supply and demand. There is no single set of beliefs that guide forex fundamental analysis, yet most fundamental analysts look at various macroeconomic indicators such as economic growth rates, interest rates, inflation, and unemployment.

Here we look at some of the major Forex fundamental factors that play a role in the movement of a currency:

Economic Indicators

Economic indicators are reports released by the government or a private organization that detail a country�s economic performance. These economic indicators can be released on a weekly basis, but the more common report is monthly. Indicators are based around a number of economical situations, of which the two primary factors are that of International trade and Interest. Subsidiary factors also include Consumer Price Index (CPI), Purchasing Managers Index (PMI), Durable goods orders, retail sales and Producer Price Index (PPI).

Currency�s Interest Rates

One of the major indicator factors, Interest rates, are a key economic function of any nation. Generally, when a country raises its interest rates, the country�s currency will strengthen in relation to other currencies as assets are shifted to gain a higher return. Interest rates hikes, however, are usually not good news for stock markets. This is due to the fact that many investors will withdraw money from a country�s stock market when there is a hike of interest rates.

International Trade

The trade balance portrays the net difference (over a period of time) between the imports and exports of a nation. A trade deficit can be an economic disaster for a government and a currency. A deficit may appear when a country is importing more than it is exporting, meaning that more money is leaving and less is coming in. In some ways, however, a trade deficit in and of itself is not necessarily a bad thing. A deficit is only negative if the deficit is greater than market expectations and therefore will trigger a negative price movement.

From http://www.forex-articles.net

Additional Info On Forex Today

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REACTING TO NEWS
News or data are always read by the market along the prevailing market bias. Data can provide a good reading for the state of the market. If the data is bad but the price is still rising or not affected, it must be a bull market which means buy on dip strategy is a better one. Conversely, if the data is good but the price is not rising or even falling, it must be a bear market which means sell on bounce strategy is a better one. The inflexion point must be when bad news or good news. no longer affect the prices as they have done before. Medium/long-term bias changes are usually accompanied by such reactions to the news. It is not the numbers that counts but how the market reacts to the numbers that counts. That gives some comfort to those who are not privy to the numbers already

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There are a few methods that are used when forecasting the Forex. Each system is used to understand how the Forex works and how the fluctuations in the market can affect traders and currency rates. The two methods that are most often used are called technical analysis and fundamental analysis. Both methods differ in their own ways, but each one can help the Forex trader understand how the rates are affecting the currency trade. Most of the time, experienced traders and brokers know each method and use a mixture of the two to trade on the Forex.
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With a daily turnover of over trillions of dollars, the Foreign Exchange market conducts more than three times the aggregate amount volume of the United States Equity and Treasury markets combined. The Forex market is an over-the-counter market where buyers and sellers conduct foreign exchange business using different means of communication.

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Let�s take a concrete example of getting a profit from the changing the rate of the Euro, from 0,9162 to 0,9292. If you have anticipated this change by using technical or fundamental analysis, you can buy the Euro cheaper for dollars, and then sell it back at a higher price. For example, if you choose leverage 1:100, then 99,000 dollars of the credit line, granted by the Internet broker, is added to 1000 dollars, and you buy the Euro at the price of 0.9162. As a result of this transaction we get: $ 100,000 / 0.9162 = Euro 109.146, 47.

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Asian Morning Update 7th April 2008

Sun, 06 Apr 2008 19:26:28 -0400
Poor U.S. unemployment data puts the Dollar on the back foot

European releases overnight:

February Forecast Actual
German Factory Orders (MoM) +0.8% - 0.5%
German Factory Orders (YoY) +6.7% +9.0%

Friday’s German factory orders data was rather strange seeing a far worse than expected MoM figure while the YoY figure was boosted by past revisions. Domestic orders were flat confirming the lack of consumer demand.

Several ECB officials offered the usual round up of often repeated statements, none of it of much consequence, that the U.S. economy is already in the midst of a recession and will overflow into the “real” economy and that could still cause a negative impact globally. One official, Alumnia, did suggest that the situation in Europe is not as bad as the IMF has suggested.

The U.K.’s Financial Times ran an article on the credit squeeze which it says has intensified and thus the chances of a rate cut on Thursday’s from the BOE have risen. This came in response to the BOE report which outlined a probable worsening in the squeeze on mortgages and corporate credit.

This has certainly placed more pressure on the Pound and while the medium term still looks bearish the prospect of a return to 2.0191 is certainly on the cards following Friday’s poor unemployment data from the States.

States releases overnight:

March Forecast Actual
U.S. Change in Non-Farm Payrolls - 50K - 80K
U.S. Change in Manufacturing Payrolls - 40K - 48K
U.S. Unemployment Rate 5.0% 5.1%

The non-farm payrolls were certainly pretty soft, the worst one month decline in five years in fact. It provoked a statement of disappointment from the White House. “Recession” has suddenly become a permitted word in officials’ statements now, used by both the White House and Paulson but always quickly followed by statements of growth in H2 as the fiscal stimulation package provides a positive impact. Paulson argued that while recession is possible the label is unimportant, preferring to focus on dealing with its practical effects.

It didn’t stop the CEO of PIMCO to take a swipe at the situation by saying that U.S. treasuries are the most overvalued assets globally given the level of inflationary expectations. I guess that highlights the difference between politics and investment strategy…

All in all it puts the Dollar onto its back foot again and does certainly look set to lose out again this week. The release calendar is not the most hectic but Thursday does see the BOE and ECB announce their rate decisions.

The ECB are almost certainly to announce an unchanged policy, caught still between the conflict provided by the high level of inflation and the need to ensure that the credit markets remain stable. The latter continues to reflect that while official comment is confident, their actions suggest otherwise.

The BOE rate decision has a little more uncertainty. U.K. figures have remained better that the doomsayers but there is still universal recognition that the U.K. economy is next most vulnerable to the credit crunch.

The conflict of the implications here make the rate decision less apparent. There is once again a rising cry for a rate cut on Thursday but BOE official comments do not really point to this at the moment. Things could change over the next few days but as of now the greater chance still appears to be an unchanged policy.

So as the week begins the Dollar should remain on the soft side with a decline towards recent lows on the cards. We do still have to be cautious even if the Euro penetrates the 1.5901 high as we are also approaching the G7 meeting at the weekend.

Concerted intervention does not appear to be favored by the central banks but there has been a growing lobby for such action to bring back some stability to exchange rates. Notably we have seen comments from French, German and Japanese officials that appear to be pushing this line.

Thus Dollar losses should be watch with some care but most likely this will be the overall preference shown by the market.

More later once the daily analysis has been done…

There following releases are due from Asia due today:

Australia
March AiG Performance of Construction Index
February Trade Balance AUD -2.5bn
February Building Approvals (MoM) +0.0%
March ANZ Job Advertisements

Japan
February Leading Economic Index (P) 50.0%
February Coincident Index (P) 44.4%