Typical attractive features of the market

Typical attractive features of the market:

liquidity:

the market operates the enormous money supply and gives absolute freedom in opening or closing a position in the current market quotation. High liquidity is a powerful magnet for any investor, because it gives him or her the freedom to open or to close a position of any size whatever.

promptness:

with a 24-hour work schedule, participants in the FOREX market need not wait to respond to any given event, as is the case in many markets.

availability:

a possibility to trade round-the-clock; a market participant need not wait to respond to any given event;

flexible regulation of the trade arrangement system:

a position may be opened for a pre-determined period of time in the FOREX market, at the investor’s discretion, which enables to plan the timing of one’s future activity in advance;

value:

the Forex market has traditionally incurred no service charges, except for the natural bid/ask market spread between the supply and the demand price;

one-valued quotations:

with high market liquidity, most sales may be carried out at the uniform market price, thus enabling to avoid the instability problem existing with futures and other forex investments where limited quantities of currency only can be sold concurrently and at a specified price;

market trend:

currency moves in a quite specific direction that can be tracked for rather a long period of time. Each particular currency demonstrates its own typical temporary changes, which presents investment managers with the opportunities to manipulate in the FOREX market;

margin:

the credit “leverage” (margin) in the FOREX market is only determined by an agreement between a customer and the bank or the brokerage house that pushes it to the market and is normally equal to 1:100. That means that, upon making a $1,000 pledge, a customer can enter into transactions for an amount equivalent to $100,000. It is such extensive credit “leverages”, in conjunction with highly variable currency quotations, which makes this market highly profitable but also highly risky.

Margin Trading System
A typical transaction amounts to $10 million in inter-bank trade. However, it is quite clear that such transaction values are not affordable for a private investor – well, at least to the overwhelming majority of them.

Involvement of small and medium investors in the Forex market was facilitated by intermediacy of dealing or brokerage companies. Medium and small investors have access to the global forex market in many nations, using the sums of money starting from $2,000 in their transactions. A dealing company provides its customers with a credit line – a so-called dealing leverage, or a credit leverage, that is several times as big as the deposit. Brokers providing margin trading services require that a pledge deposit should be contributed, and provide a customer with an opportunity of entering into forex sales and purchase transactions for amounts that are 50, 100 and sometimes even 200 times as large as the deposit made. The risk of losses is borne by the customer; the deposit serves as security hedging a broker. The system of operations through a dealing (brokerage) house, with a credit leverage, was called margin trading.

To put it simply, the essence of margin trading can be reduced to the following: by placing pledged capital, an investor becomes able to manage target loans provided against this pledge and to guarantee indemnification against any potential losses on open forex positions with the deposit.

As mentioned above, unlike with forex transactions with actual delivery or actual currency exchange, FOREX participants, especially those with little funds, make use of trading with an insurance deposit - margin trade, or leverage trade. In case of marginal trade, each transaction must consist of the two stages – purchase/sales of foreign exchange at one price, and then its compulsory sales/purchase at another (or at the same) price. The first action is called the opening of a position; the second is the closing of a position. Opening of a position is not accompanied with actual delivery of foreign exchange, and a participant that opened the position contributes an insurance deposit that serves as guarantee of indemnification against any possible losses. Upon closing of a position, the insurance deposit is returned, and profit or losses are calculated.

Any margin trading transaction must comprise two parts: opening of a position and closing of a position. For instance, when forecasting the euro goes up (looks up) vs the dollar, we want to buy a cheaper euro with dollars now and to sell it back when it rises in price. In this case, the transaction will look as follows: opening of a position – euro purchase; closing of a position – its sale. All the time until the position has been closed we have an “open euro position.” Just the same, when we believe that the euro will cheapen (look down) vs the dollar, our transaction will consist of the following steps: opening a position – sales of a more expensive euro; closing a position – purchase of a cheapened euro. Therefore, we are able to generate profit whether the exchange rate goes up or down.

You can enter FOREX through an intermediary only. A dealing center may act as such intermediary. This agency provides you with a (computer or telephone) communications channel with a broker who makes available forex quotations to you and through whom you can enter into transactions. You can also operate directly from your home PC through the Internet. The last option has been becoming increasingly more common recently. The prices you can see on your computer’s screen are prices of actual transactions at FOREX.

A customer concludes a contract with the company whereby the latter undertakes, at the customer’s order and in its own name, to enter into transactions. In this case, the company runs the risk of losses from entering into such transactions, so the customer deposits a certain sum of money with the bank as pledge. The amount of this deposit is determined based on the amount of transactions entered into by the bank and on the credit lever provided to the customer. If a dealing company makes losses from a concluded transaction, the investor becomes liable to it in the amount of this loss, and these liabilities are covered from the pledge deposit; if the company generates profit from a concluded transaction, it becomes liable to the investor in the amount of this profit. Generated profit is remitted to the customer’s pledge deposit. The customer’s order to the company to close an open position is a must; yet the company jobs with its own money. Otherwise the bank may close a long position with a short one, and the customer may sustain losses. The situations when cross rates change by more than two percentage points hardly ever happen in the global market, and losing his or her pledge is next to impossible if a customer jobs reasonably. If the bank’s dealer understands that potential losses, if the rate changes for the worse, might exceed the pledge deposit amount, the dealer can close a position independently, without waiting for the customer’s instructions, with losses not exceeding the pledge amount.

Margin trading appeals by its affordability. Investing funds into securities of the most developed foreign countries to generate any fixed income would hardly be interesting for our compatriots. U.S. Treasury bonds are surely the most reliable and stable, but, being very expensive, they have low yield (approx. 6% p.a.) and are the object of long-term investments. Shares generate higher yield; however, dividend amount is directly dependent on successful operations of any particular enterprise and its shareholders’ preferences. Share purchase for bull transactions seems more attractive but requires greater investments. Margin trading is free from the said limitations – you can sell and buy depending on your expectations, and 1%-3% of a transaction value will do to enter into the transaction.

Making profit in forex

Making profit on Forex market. Examples.

Example 1. GBP/USD

Zoom

Let your deposit equal 3000 USD. Leverage 1:100 on Forex Market allows to operate the sum equal 300 000 units of base currency.

You expect increasing of US currency cost against general world currencies on Forex Market. And decide to sell GBP against USD on September, 22, 2005. At the same time you realize the risk of trading the maximum sum, and sell only 30 000 GBP against USD at 1.8000.

12 days later, on October, 3, 2005 you decide to close your short position and buy GBP at 1.7540.

Thus, your operation profit on Forex Market equal:
(1.8000-1.7540)*30 000 = $1380

Accordingly, the trading yield equal:
($1380/$3000)*100 = 46% of the initial deposit.

Example 2. USD/JPY

Zoom

Let your deposit equal 2000 USD. Leverage 1:100 on Forex Market allows to operate the sum equal 200 000 units of base currency.

You expect decreasing of US currency cost against general world currencies on Forex Market. And decide to sell 50 000 USD against JPY at 111.10 on August, 31, 2005.

A week later you decide to close your short position USD/JPY and buy USD against JPY at 109.15.

Thus, the financial result of this trade on Forex Market equal:
(111.10-109.15)*50 000 = 97 500 JPY (or 97 500/109.15 = $893.26)

Accordingly, the trading yield equal:
($893.26/$2000)*100 = 44.7%

Evidently, that trader's main task is to forecast the trade of developments on currency market correctly. So if we had acted conversely in the above-listed operations, loss would be the result of trades.

scope of transactions in the global currency market

FOREX (FOReign EXchange market)
Forex is an inter-bank market that took shape in 1971 when global trade shifted from fixed exchange rates to floating ones. This is a set of transactions among forex market agents involving exchange of specified sums of money in a currency unit of any given nation for currency of another nation at an agreed rate as of any specified date. During exchange, the exchange rate of one currency to another currency is determined simply: by supply and demand – exchange to which both parties agree.

The scope of transactions in the global currency market is constantly growing, which is due to development of international trade and abolition of currency restrictions in many nations. Global daily conversion transactions came to $1,982 billion in mid-1998 (the London market accounted for some 32% of daily turnover; the New York market exchanged approx. 18%, and the German market, 10%). Not only the scope of transactions but also the rates that mark the market development are impressive: in 1977, the daily turnover stood at five billion U.S. dollars; it grew to 600 billion U.S. dollars over ten years – to one trillion in 1992. Speculative transactions intended to derive profit from jobbing on the exchange rate differences make up nearly 80% of total transactions. Jobbing attracts numerous participants – both financial institutions and individual investors.

With the highest rates of information technology development in the last two decades, the market itself changed beyond recognition. Once surrounded with a halo of caste mystique, the foreign exchange dealer’s profession became almost grasroots. Forex transactions that used to be the privilege of the biggest monopolist banks not so long ago are now publicly accessible thanks to e-commerce systems. And the foremost banks themselves also often prefer trade in electronic systems over individual bilateral transactions. E-brokers now account for 11% of the forex market turnover. The daily scope of transactions of the biggest banks (Deutsche Bank, Barclays Bank, Union Bank of Switzerland, Citibank, Chase Manhattan Bank, Standard Chartered Bank) reaches billions of dollars.

The FOREX market as a place where to apply one’s personal financial, intellectual and psychic power is not designed for attempts at catching a bluebird there. Sometimes someone manages to do so but for a short time only. The key advantage of a forex market is that one can succeed there just by the strength of one’s intelligence.

Another essential feature of the FOREX market, no matter how strange it might seem, is its stability. Everybody knows that sudden falls are very typical of the financial market. However, unlike the stock market, the FOREX market never falls. If shares devalue it means a collapse. But if the dollar slumps, that only means that another currency gets stronger. For instance, the yen strengthened by a quarter against the dollar late in 1998. On some days dollar fell by dozens percentage points. However, the market did not collapse anywhere; trading continued in the usual manner. It is here that the market and the related business stability lie - currency is an absolutely liquid commodity and will be always traded in.

The FOREX market is a 24-hour market that does not depend on certain business hours of foreign exchanges; trade takes place among banks located in different corners of the globe. Exchange rates a`re so flexible that significant changes happen quite frequently, which enables to make several transactions every day. If we have an elaborate and reliable trade technology we can make a business, which no other business can match by efficiency. It is not without reason that the pivotal banks buy expensive electronic equipment and maintain the staffs of hundreds of traders operating in different sectors of the FOREX market.

The starting costs of joining this business are very low now. Actually, it costs several thousands of dollars to take a course of initial training, to buy a computer, to purchase an information service and to create a deposit; no real business can be established with this money. With excessive offers of services, finding a reliable broker is also quite a real thing. The rest depends on the trader himself or herself. Everything depends on you personally, as in no other area of business now.

The main thing the market will require for successful operations is not the quantity of money you will enter it with – the main thing is the ability to constantly focus on studying the market, understanding its mechanisms and participants’ interests; this is constant improvement of one’s trade approaches and their disciplined implementation. Nobody has achieved success in that market by forcing one’s way with one’s capital atilt. The market is stronger than anything else; it is even stronger than central banks with their huge foreign exchange reserves. George Soros, a national hero of the FOREX market, did not win the Bank of England at all, as many of us believe – he made the right guess that, with existing contradictions inherent in the European financial system, there were plenty of problems and interests that would not allow to hold the pound. That’s exactly what happened. The Bank of England, having spent nearly $20 billion to maintain the pound rate, jacked it up, by giving it in to the market. The market settled this problem, and Soros got his billion.

The global monetary system has gone a long way during thousands of years of the human history, but it is surely experiencing the most exciting and earlier unthinkable changes. The two main changes determine a new image of the global monetary system:

* the money is fully separated from any tangible media;
* powerful information and telecommunications technologies made it possible to consolidate monetary systems of different nations into the single global financial system that has no boundaries.

Important Questions To Ask When Choosing A Broker

1. Is my account deposit insured and how safe is my money?
Find out if the broker provides any investor protection in case the brokerage firm fails and if the firm has solid financial standards, meeting the capital adequacy requirements.

2. Is the broker regulated by an agency monitoring their activities?
Find out if the broker is a registered member of any regulatory agencies and organizations overseeing the broker’s activities.

3. Has the brokerage firm ever had any serious problems with clients or regulators?
National Futures Association, for example, has a direct way to check registered broker/dealer’s background through the Background Affiliation Status Information Center (BASIC)

4. Type of broker- Market Maker or ECN (Electronic Communications Network)?
Market Makers set the prices that traders receive by selecting the best bid and offer. ECN broker firms provide the bid and offer prices from the liquidity providers on the Electronic Communications Network.

5. How user friendly and reliable is the trading platform?
Find out if the platform is web or desktop based. Are there any restrictions on executions during extreme volatility times, slippage, constant freezes, crashes, etc.

6. Is there phone dealing available in case of technical problems?

7. Does the broker provide around the clock customer support?

8. What are the bid and offer spreads and are there any commissions, margin interest, and other costs of trading?

9. What are the broker’s leverage, types of accounts, and margin policies?

10. Does the broker provide any additional, free of charge, services like real-time charts, news, alerts, courses, etc.?

Forex Confidential Risk Disclosure

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisory if you have any doubts.

Q: What is FOREX?
Forex is an interbank market that was created in 1971 when international trade ... The FOREX market is complex and volatile - it takes expert knowledge to trade in forex.
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Q: What are the advantages of FOREX?
- Forex is open 24 hours a day
- Forex is the most liquid market in the world
- Commission-free trading for more than 60 currency pairs.
- No restrictions on shorting which allows you to enjoy profit opportunities during any market condition
- No Pattern Day Trading rule
- You can day trade with very low account balances
- You can open a small account to start with. Up to 200-to-1 leverage reduces the need for large amounts of capital.
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Q: Why do you need a professional to help you trade?
The FOREX market is known as the most profitable market in the world. It is common to have monthly returns of 100% or more on your deposit. But having the potential to profit that much also means high risk for your investment if you are not careful. That’s where we come in. We are FOREX professionals and we have developed a system that will allow you to profit handsomely. It includes defined risk and suggested money management which are both required for consistent profits and capital preservation.*
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Q: What Does It Mean Have A 'BUY' Or 'SELL' Position?
A BUY (Long) position is one in which a forex trader buys a currency pair at one price and intends to sell it later at a higher price; the investor is benefiting from a rising market. A SELL (Short) position is an investment position that benefits from a decline in market price. The risk of having either long or short position is the same. For more information on this subject, please go to our knowledge center
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Q: What is pip, Stop-loss & Profit-limit?
Please go to our knowledge center for basic information on FOREX
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Q: What is your maximum stop-loss?

We use a maximum of 40 pips for stop-loss. We keep our risk to a minimum so that the losses are much smaller than the profits which ultimately results in better monthly performance. We also find that our members can relax a lot more after putting their orders in with such a small stop loss.
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Q: How much money do I need to start currency trading?
If you are a beginner you should start with very small amounts and when you are able to build up your account you can start trading with larger amounts. It is better to preserve your capital for later on, when you become more formidable market participant.
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Q: What broker do I need to have an account with?

You can have account with any broker you choose. It makes no difference at all if you have an account with any other broker than we have.
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Q: How Do I Manage Risk?
The most common risk management tools in FOREX online trading are the limit order and the stop loss order. A limit order places a restriction on the maximum price to be paid or the minimum price to be received. A stop loss order ensures a particular position is automatically liquidated at a predetermined price in order to limit potential losses should the market move against an investor's position. The high liquidity of the FOREX market ensures that limit orders and stop loss orders can be easily executed, usually with little or no slippage. However, you do not need to worry about these risk parameters as we will send these to you daily. We estimate and calculate this daily in a way that your loss is minimized while keeping your monthly profit to the maximum. However, you need to do your own money management which is the amount of money you would risk on each trade. We suggest not risking more than 1% of your capital on each trade. Our survival depends on our members making a profit. Therefore, we do our best to help and guide our members along the way.
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Q: How long do you hold the positions?
All positions open at 05:00 GMT (00:00 ET) and are valid for 24 hours. That means on the day after the signal at 05:00 GMT, the signals’ validity expires and all positions must be closed whether they are in profit or loss, unless they have already reached the target or stop loss point. The reason we chose this time frame is because we believe that the whole day market behavior can be predetermined with a higher degree of accuracy when the European & British Market Opens.
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Q: How many signals do you issue each day?
We issue a maximum of one signal for 6 currency pairs, including 5 majors and 1 cross-pair, so that the risk can be minimized by diversifying the trades. This will ultimately result in better performance and profits with much lower drawdown.
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Q: How do you handle Fridays signals?
All signals are valid for the next 24 hours. However, Friday’s signals are valid until Monday morning at 05:00 GMT. Unlike other companies, we do NOT close Friday’s signal at the end of the Friday because we believe, and it has been proven to us, that Sunday’s movement in the market is the result of Friday’s movement most of the time!
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Q: Do I need a charting service?
No you don’t need any charting tools. We provide everything that you need through the emails. You can track the trades through free charting services that most FOREX brokers offer.
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Q: Can I cancel my subscribtion? Will I be charged every month?
Unlike most of our competitors, we do not automatically renew your subscription. It expires at the end of 90 days. If for any reason, you are not satisfied with the service, simply do nothing and it will expire and you won’t be charged again. However, if you love the system and want to continue your membership, you must buy another three month worth of service.
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Q: Do you offer support to your subscribers?
Yes, we offer email support 24/7 and respond to our customer’s questions promptly. Our success depends on you making money so don’t be bashful about asking for help if you don’t understand something.
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Q: I still have more questions. How do I contact you?
Please feel free to contact us by emailing at

FOREX SCAM

People who Scam in forex are thought to be the wild west guys in trading scheme used to defraud individual traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market. Currency trading "has become the fraud du jour," according to Michael Dunn of the U.S. Commodity Futures Trading Commission.But "the market has long been plagued by swindlers preying on the gullible," according to the New York Times. "The average individual foreign-exchange-trading victim loses about $15,000, according to CFTC records" according to The Wall Street Journal. The North American Securities Administrators Association says that "off-exchange forex trading by retail investors is at best extremely risky, and at worst, outright fraud."
Due to lax regulation in many countries, and the lack of knowledge many people possess about it, there are scams aplenty.

The forex market is a zero-sum game, meaning that whatever one trader gains, another loses, except that brokerage commissions and other transaction costs are subtracted from the results of all traders, technically making forex a "negative-sum" game.

These scams might include churning of customer accounts for the purpose of generating commissions, selling software that is supposed to guide the customer to large profits,improperly managed "managed accounts", false advertising,Ponzi schemes and outright fraud.It also refers to any retail forex broker who indicates that trading foreign exchange is a low risk, high profit investment.

The U.S. Commodity Futures Trading Commission (CFTC), which loosely regulates the foreign exchange market in the United States, has noted an increase in the amount of unscrupulous activity in the non-bank foreign exchange industry.

An official of the National Futures Association was quoted as saying, "Retail forex trading has increased dramatically over the past few years. Unfortunately, the amount of forex fraud has also increased dramatically..." Between 2001 and 2006 the U.S. Commodity Futures Trading Commission has prosecuted more than 80 cases involving the defrauding of more than 23,000 customers who lost $350 million. From 2001 to 2007, about 26,000 people lost $460 million in forex frauds.CNN quoted Godfried De Vidts, President of the Financial Markets Association, a European body, as saying, "Banks have a duty to protect their customers and they should make sure customers understand what they are doing. Now if people go online, on non-bank portals, how is this control being done?"

What is Zero Sum game?

In game theory, zero-sum describes a situation in which a participant's gain or loss is exactly balanced by the losses or gains of the other participant(s). It is so named because when the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero. Go is an example of a zero-sum game: it is impossible for both players to win. Zero-sum can be thought of more generally as constant sum where the benefits and losses to all players sum to the same value. Cutting a cake is zero- or constant-sum because taking a larger piece reduces the amount of cake available for others. In contrast, non-zero-sum describes a situation in which the interacting parties' aggregate gains and losses is either less than or more than zero. The sum of a negative and a negative always equal a negative.

How to avoid forex fraud

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. Russia is currently a major source of investment fraud. 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 is a lot of fraud from boiler rooms that are telling there clients to make the check payable to a offshore FCM or in many cases a Bahamas FCM. THERE ARE NO BAHAMIAN FCM's that I am aware of PERIOD, with the exception of major World Banks. The Bahamas are the country of choice for fraud and to steal your money because the Bahamas are a half hour from South Florida (Miami, Fort Lauderdale and West Palm Beach) and one and one half hours by private boat. 100% of the money you invest in Forex in the Bahamas will be stolen and will NEVER be placed into ANY trade. If you have been victimized in this manner of fraud or contacted to invest in Forex in the Bahamas call the FBI in Miami at 305-944-9101.

Please keep in mind that most of the law enforcement agencies and regulatory agencies are fully aware of who is perpetrating investment and Forex fraud and where they are located. Due to the great burden and lack of funding placed on Law Enforcement and the Regulatory Agencies action is only taken when there is pressure from the public. Only by contacting EVERYONE that you can will get results. The paperwork you signed when opening your account means nothing in a Court of Law when there is fraud involved on the part of the broker.

In recent years there has been a sharp rise in commodity, foreign currency - Forex trading fraud and scams. Consumers should be alert to investment fraud, scams and companies that sell Forex currencies and commodity brokers based on sales pitches claiming that customers can make a lot of money with little risk. Sales solicitations appearing in newspapers, telemarketing, radio or television promotions, or attractive Internet websites, touting high-return, low-risk investment opportunities in foreign currency trading more often than not are fraud or a scam. If it sounds to good to be true it probably is.

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. The CFTC has jurisdiction to investigate and prosecute Forex currency fraud and scams and commodity fraud and scams occurring in its registered Forex and commodity firms and their affiliates. 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.

Although Forex and commodity dealers who are regulated by NFA must disclose their charges to retail customers, there are no rules about how a dealer charges a customer for the services the dealer provides or that limit how much the dealer can charge. Before opening a Forex, currency trading or commodity account, you should check with several dealers and compare their charges as well as their services. Some firms charge a per trade commission, while other firms charge a mark-up by widening the spread between the bid and ask prices they give their customers. Some Forex and currency firms may charge both a commission and a mark-up. In my opinion any firm selling Forex, commodities or foreign currency charging more than $50 is either a scam or fraud.

Some Forex and currency 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 currency 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. This is one of the major areas where fraud and scams occur in Forex an currency trading.

The Commodity Exchange Act (CEA) allows the sale of OTC Forex currency futures and options to retail customers if, and only if, the counterparty (the person on the other side of the transaction) is a regulated entity. These regulated entities include the following: financial institutions, such as banks and savings associations registered broker-dealers and certain of their affiliates, registered futures commission merchants (FCM's) and certain of their affiliates, certain insurance companies and their regulated affiliates, financial holding companies, and investment bank holding companies.

Under the CEA, the CFTC has the authority to shut down any unregulated entity that acts as a counterparty to Forex currency futures or options transactions with retail customers. The CFTC also has the authority to take action against registered FCMs and their affiliates for violating the anti-fraud and anti-manipulation provisions of the CEA in connection with OTC Forex currency transactions involving retail customers. The CFTC cannot adopt rules to regulate Forex without additional Congressional authorization.

NFA has rules to protect customers from fraud and scams in the retail off-exchange Forex currency market. Firms that introduce customers to Forex currency dealers do not have to be regulated entities. NFA’s rules provide, among other things, that a Forex currency dealer FCM must take responsibility for the activities of unregulated entities that solicit retail customers including and fraud or scams perpetrated by the introducing broker and the brokers of the firm that introduced the account. Additionally, NFA’s rules require Forex currency dealer FCMs to supervise their employees and agents and any affiliates that act as counterparties to retail Forex transactions to ensure the public is protected from fraud and scams by its introducing brokers. NFA’s Forex rules do not apply to all FCMs and their affiliates, however. Therefore, you should ask the dealer if NFA regulates its Forex currency activities.

You should ask the dealer how it is regulated and check with the dealer’s regulator about the dealer’s registration status and background to ensure they have not had any complaints of fraud or scams. You should also ask the dealer if its regulator has adopted rules to regulate its retail Forex currency activities.

Unlike Forex currency 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. If the person is not regulated, you may be exposed to additional risks of fraud.

Just as you wouldn’t consider buying a house or a car without carefully reading and understanding the terms of the contract, neither should you establish a Forex currency account without first reading and understanding the Account Agreement and all other documents supplied by your dealer.

Both the CFTC and NFA offer programs that may be available for resolving monetary disputes involving your Forex currency account. Information about NFA’s arbitration program is available by calling NFA at 800-621-3570. The CFTC offers a reparation program for resolving disputes. If you want information about filing a CFTC reparations complaint, contact the CFTC's Office of Proceedings at 202-418-5250

Don't become a victim of Forex fraud commodity fraud or other types of investment fraud or scams.

Massive Fraud

Societe Generale Uncovers Massive Fraud(PARIS)

In what appears to be the largest trading fraud ever carried out by a single person, a young trader at French bank Societe Generale is accused of making unauthorized bets on stock markets that cost the bank nearly $7.2 billion but may not have netted him a cent.
It would place the young trader, identified as 31-year-old Jerome Kerviel, atop the pantheon of rogue traders for a scheme from which bank executives said he apparently did not make a
personal profit.

Societe Generale Chief Executive Daniel Bouton said Kerviel's motivations were "totally irrational" but gave no further clues to his motive.

The bank, France's second-largest, said Thursday it had learned of the fraud last weekend. And the timing could not have been worse: The bank was forced to sell Kerviel's contracts just as stock markets were plunging worldwide. It took the bank three days to unload them.

Societe Generale said the losses amounted to 4.9 billion euros, or about $7.18 billion - one of history's biggest banking frauds. It led to immediate calls for tighter regulation.

The fraud also raised comparisons to Nick Leeson, the trader who bankrupted British bank Barings in 1995 after he lost 860 million pounds - then worth $1.38 billion - on Asian futures markets, wiping out the bank's cash reserves.

Leeson himself told the British Broadcasting Corp. on Thursday that he was not shocked
such a fraud had happened again, but "the thing that really shocked me was the size of it."

Bouton insisted Societe Generale is still financially sound. But the bank said it would need to raise about $8 billion in new capital, partly by selling shares in a rights offer underwritten by JPMorgan Chase & Co. and Morgan Stanley.

The company said it expects to post a net profit of 600 million to 800 million euros
($874 million to $1.16 billion) for all of 2007 - even after the fraud and another
2.05 billion euros ($2.99 billion) lost in the subprime mortgage crisis.

Moody's Investors Service late Thursday downgraded Societe Generale's bank financial
strength rating to "B-" from "B" and assigned a "negative" outlook to the rating, which means the rating could be cut later. Moody's also downgraded the bank's long-term debt and
ratings to "Aa2" from "Aa1" but kept those ratings' outlooks "stable."

The downgrade was primarily driven by the fraud losses but also follows Societe Generale's announcement of the credit-related write-downs, Moody's said.

Kerviel, employed by the bank since 2000, had worked his way up from a supporting role in an office that monitors trades to a job on the more glamorous futures desk, where he invested the bank's own money by hedging on European equity market indices - making bets on the
future performance of the markets.

Described as a "brilliant" student by one of his former university teachers, he shocked executives with the complexity and scale of his trades. Bouton called the fraud "extraordinarily sophisticated."

Kerviel was involved in what the bank calls "plain vanilla," or the more basic forms of hedging, with limited authority. He took home a salary and bonus of less than 100,000 euros, or about $145,700 - relatively modest in the financial world.

The bank said he went far beyond his role - taking "massive fraudulent directional positions" in various futures contracts, betting at the start of this year that stock markets would rise.

He apparently escaped detection by using knowledge of the bank's control systems gleaned in his earlier monitoring job. Most of his positions went unnoticed by colleagues and superiors as Kerviel covered his tracks with what the bank described as a "scheme of elaborate fictitious transactions."

He got caught when markets dropped, exposing him in contracts where he had bet on a rise.
Jean-Pierre Mustier, chief executive of the bank's corporate and investment banking, said he is convinced Kerviel acted alone. Three union officials representing Societe Generale employees
said managers at the bank told them Kerviel was having "family problems."

Analysts were stunned that such a huge fraud could have occurred more than a decade after the one at Barings. It shows banks "are still under the threat that an employee with a good understanding of the risk management processes can (get around) them to hide his losses," said Axel Pierron, a senior analyst with Celent.

Societe Generale said Kerviel had admitted to the fraud and had been dismissed along with some of his bosses. Bouton offered to resign, but the board rejected his offer.

The bank also filed a legal complaint Thursday accusing Kerviel of fraudulent falsification of banking records, use of such records and computer fraud.

Elisabeth Meyer, Kerviel's lawyer, said on French television network BFM that her client "is not fleeing" and is "available for judicial authorities," but did not specify where he was.
The lawyer said Kerviel had been suspended on Sunday, and was awaiting formal written notification of the suspension.

The Bank of France, the country's central bank, said it was immediately informed of the fraud and was investigating. Its governor, Christian Noyer, said the trader had an abnormal knowledge of Societe Generale's trading systems, and measures would have to be taken to
prevent this happening again.

Traders are usually kept to tight spending limits, told "you may trade this much and no more," said Robert Kolb, a professor of finance at Loyola University Chicago. Those controls apparently failed in this case.

Kolb said he expected "a lot of soul searching" in the industry, and predicted that one upshot might be new measures to prevent people who have previously monitored traders later becoming traders themselves.

"It shows that we are in a very troubled period for banks, and I think that it's in such troubled periods that difficult things happen," said Gilles Glicenstein, president of asset management at France's largest bank, BNP Paribas.

Societe Generale's shares, which have lost nearly half their value over the past six months, were suspended in Paris on Thursday morning, then dropped 4.1 percent to close at 75.81 euros ($111.16) after they resumed trading.

Founded in 1864 after a decree signed by Napoleon III, Societe Generale employs 120,000 people in 77 countries.