CFTC warnings

The CFTC lists 9 warning signs for foreign exchange trading fraud:

1. Stay away from opportunities that seem too good to be true
Always remember that there is no such thing as a "free lunch." Be especially cautious if you have acquired a large sum of cash recently and are looking for a safe investment vehicle. In particular, retirees with access to their retirement funds may be attractive targets for fraudulent operators. Getting your money back once it is gone can be difficult or impossible.

2. Avoid any company that predicts or guarantees large profits
Be extremely wary of companies that guarantee profits, or that tout extremely high performance. In many cases, those claims are false.
The following are examples of statements that either are or most likely are fraudulent:
"Whether the market moves up or down, in the currency market you will make a profit."
"Make $1000 per week, every week"
"We are out-performing domestic investments."
"The main advantage of the forex markets is that there is no bear market."
"We guarantee you will make at least a 30-40% rate of return within two months."

3. Stay Away From Companies That Promise Little or No Financial Risk
Be suspicious of companies that downplay risks or state that written risk disclosure statements are routine formalities imposed by the government.
The currency futures and options markets are volatile and contain substantial risks for unsophisticated customers. The currency futures and options markets are not the place to put any funds that you cannot afford to lose. For example, retirement funds should not be used for currency trading. You can lose most or all of those funds very quickly trading foreign currency futures or options contracts. Therefore, beware of companies that make the following types of statements:
"With a $10,000 deposit, the maximum you can lose is $200 to $250 per day."
"We promise to recover any losses you have."
"Your investment is secure."

4. Don't Trade on Margin Unless You Understand What It Means
Margin trading can make you responsible for losses that greatly exceed the dollar amount you deposited.
Many currency traders ask customers to give them money, which they sometimes refer to as "margin," often sums in the range of $1,000 to $5,000. However, those amounts, which are relatively small in the currency markets, actually control far larger dollar amounts of trading, a fact that often is poorly explained to customers.
Don't trade on margin unless you fully understand what you are doing and are prepared to accept losses that exceed the margin amounts you paid.

5. Question Firms That Claim To Trade in the "Interbank Market"
Be wary of firms that claim that you can or should trade in the "interbank market," or that they will do so on your behalf.
Unregulated, fraudulent currency trading firms often tell retail customers that their funds are traded in the "interbank market," where good prices can be obtained. Firms that trade currencies in the interbank market, however, are most likely to be banks, investment banks and large corporations, since the term "interbank market" refers simply to a loose network of currency transactions negotiated between financial institutions and other large companies.

6. Be Wary of Sending or Transferring Cash on the Internet, By Mail or Otherwise
Be especially alert to the dangers of trading on-line; it is very easy to transfer funds on-line, but often can be impossible to get a refund.
It costs an Internet advertiser just pennies per day to reach a potential audience of millions of persons, and phony currency trading firms have seized upon the Internet as an inexpensive and effective way of reaching a large pool of potential customers.
Companies offering currency trading on-line will usually be located in different legal jurisdictions to you. Even if they display an address or any other information identifying their nationality on their Web site it may be false. Be aware that if you transfer funds to foreign firms it may be very difficult or impossible to recover your funds.

7. Currency Scams Often Target Members of Ethnic Minorities
Some currency trading scams target potential customers in ethnic communities, particularly persons in the Russian, Chinese and Indian immigrant communities, through advertisements in ethnic newspapers and television "infomercials."
Sometimes those advertisements offer so-called "job opportunities" for "account executives" to trade foreign currencies. Be aware that "account executives" that are hired might be expected to use their own money for currency trading, as well as to recruit their family and friends to do likewise. What appears to be a promising job opportunity often is another way many of these companies lure customers into parting with their cash.

8. Be Sure You Get the Company's Performance Track Record
Get as much information as possible about the firm's or individual's performance record on behalf of other clients. You should be aware, however, that It may be difficult or impossible to do so, or to verify the information you receive. While firms and individuals are not required to provide this information, you should be wary of any person who is not willing to do so or who provides you with incomplete information. However, keep in mind, even if you do receive a glossy brochure or sophisticated-looking charts, that the information they contain might be false.

9. Don't Deal With Anyone Who Won't Give You His Background
Plan to do a lot of checking of any information you receive to be sure that the company is and does exactly what it says.
Get the background of the persons running or promoting the company, if possible. Do not rely solely on oral statements or promises from the firm's employees. Ask for all information in written form.
If you cannot satisfy yourself that the persons with whom you are dealing are completely legitimate and above-board, the wisest course of action is to avoid trading foreign currencies through those companies.

Forex Scam

A forex scam is any trading scheme used to defraud individual traders by convincing them that they can expect to gain an unreasonably high profit by trading in the foreign exchange market.
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,[3] improperly managed "managed accounts",[4] false advertising,[5] Ponzi schemes and outright fraud.[6] It also refers to any retail forex broker who indicates that trading foreign exchange is a low risk, high profit investment.

Rules To Stop Losing Money

20 Rules To Stop Losing Money

1.  Don't trust others opinions -It's your money at stake, not theirs. Do your own analysis, regardless of the information source.                                                                                                             
2. Don't believe in a company - Trading is not investment. Remember the numbers and forget the press releases. Leave the American Dream to Peter Lynch.                                                                                                                                             
3. Don't break your rules - You made them for tough situations, just like the one you're probably in right now.                                                                                                                                
4. Don't try to get even - Trading is never a game of catch-up. Every position must stand on its merits. Take your loss with composure, and take the next trade with absolute discipline.                                                                                                                                                                                                       
5. Don't trade over your head - If your last name isn't Buffett or Cramer, don't trade like them. Concentrate on playing the game well, and don't worry about making money.                                                                                                                                                        
6. Don't seek the Holy Grail - There is no secret trading formula, other than solid risk management. So stop looking for it.                                                                                                      
7. Don't forget your discipline - Learning the basics is easy. Most traders fail due to a lack of discipline, not a lack of knowledge.                                                                                                           
8. Don't chase the crowd - Listen to the beat of your own drummer. By the time the crowd acts, you're probably too late…or too early.                                                                                          
9. Don't trade the obvious - The prettiest patterns set up the most painful losses. If it looks too good to be true, it probably is.                                                                                                           
10. Don't ignore the warning signs - Big losses rarely come without warning. Don't wait for a lifeboat to abandon a sinking ship.                                                                                                           
11. Don't count your chickens - Profits aren't booked until the trade is closed. The market gives and the market takes away with great fury.                                                                              
12. Don't forget the plan - Remember the reasons you took the trade in the first place, and don't get blinded by volatility.                                                                                                                  
13. Don't have a paycheck mentality - You don't deserve anything for all of your hard work. The market only pays off when you're right, and your timing is really, really good.                                                                                                                                
14. Don't join a group - Trading is not a team sport. Avoid stock boards, chatrooms and financial TV. You want the truth, not blind support from others with your point of view.                                                                                                   
15. Don't ignore your intuition - Respect the little voice that tells you what to do, and what to avoid. That's the voice of the winner trying to get into your thick head.                                                                                                                                                
16. Don't hate losing - Expect to win and lose with great regularity. Expect the losing to teach you more about winning, than the winning itself.                                                                                
17. Don't fall into the complexity trap - A well-trained eye is more effective than a stack of indicators. Common sense is more valuable than a backtested system.                                                                                                                                                
18. Don't confuse execution with opportunity - Overpriced software won't help you trade like a pro. Pretty colors and flashing lights make you a faster trader, not a better one.                                                                                                                                                                                  
19. Don't project your personal life - Trading gives you the perfect opportunity to discover just how screwed up your life really is. Get your own house in order before playing the markets.                                                                                                                                                     
20. Don't think its entertainment - Trading should be boring most of the time, just like the real job you have right now