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To some extent, the futures market can also offer a means to hedge currency risk, depending on the size of the trade and the actual currency involved. The futures market is conducted in a centralized exchange and is less liquid than the forward markets, which are decentralized and exist within the interbank system throughout the world.
Since there is constant fluctuation between the currency values of countries due to varying supply and demand factors such as interest rates , trade flows, tourism, economic strength and geopolitical risk , an opportunity exists to bet against these changing values by buying or selling one currency against another in the hopes that the currency you buy will gain in strength or that the currency you sell will weaken against its counterpart.
Until the advent of the internet, currency trading was limited to interbank activity on behalf of their clients. Gradually, the banks themselves set up proprietary desks to trade for their own accounts, which was followed by large multinational corporations , hedge funds and high net worth individuals. With help from the internet, a retail market aimed at individual traders has emerged, providing easy access to the foreign exchange markets, either through the banks themselves or brokers making a secondary market.
For more on the basics of forex, check out " 8 Basic Forex Market Concepts. Trading currencies can cause some confusion related to risk due to its complexities.
Much has been said about the interbank market being unregulated and therefore very risky due to a lack of oversight. This perception is not entirely true, though. A better approach to the discussion of risk would be to understand the differences between a decentralized market versus a centralized market and then determine where regulation would be appropriate. The interbank market is made up of several banks trading with each other around the world.
The banks themselves have to determine and accept sovereign risk and credit risk , and for this they have many internal auditing processes to keep them as safe as possible. The regulations are industry- imposed for the sake and protection of each participating bank. Since the market is made by each of the participating banks providing offers and bids for a particular currency, the market pricing mechanism is derived from supply and demand.
Due to the huge flows within the system, it is almost impossible for any one rogue trader to influence the price of a currency. This is a positive move for retail traders who will gain a benefit by seeing more competitive pricing and centralized liquidity.
Banks of course do not have this issue and can, therefore, remain decentralized. Traders with direct access to the forex banks are also less exposed than those retail traders who deal with relatively small and unregulated forex brokers , which can and sometimes do re-quote prices and even trade against their own customers.
It seems that the discussion of regulation has arisen because of the need to protect the unsophisticated retail trader who has been led to believe that forex trading is a surefire profit -making scheme. For the serious and educated retail trader, there is now the opportunity to open accounts at many of the major banks or the larger, more liquid brokers.
As with any financial investment, it pays to remember the caveat emptor rule — "buyer beware! The possibility exists that you could sustain a loss of some or all of your deposited funds and therefore you should not speculate with capital that you cannot afford to lose.
You should be aware of all the risks associated with trading and seek advice from an independent advisor if you have any doubts. Trading involves high risk and you can lose a lot of money. Past returns are not indicative of future results. Past performance does not guarantee or imply any future success.
Powerful technical analysis tools. Trendicators are a group of proprietary indicators developed through 20 plus years of market research that identify the current trend and momentum. One of the best predictors of any market getting ready to make a big move is momentum. NinjaTrader is a massive web advertiser, and arguably the largest retail futures brokerage that serves the retail class of investor.
Typically, they are very naive and extremely susceptible to greasy marketing pitches and financial hucksters. This is supposedly where the newbie and naive can discover an amazing trading system or supposed professional trading educator. What did we witness? It has the tone and tenor of a visit to a used car dealer or a timeshare sales presentation. The key is the heavy implication and insinuation that if you purchase the magical trading indicators, then your financial dreams are about to come true.
Day after day, Steve Wheeler will send out emails proclaiming that he had once again made huge trading profits. We were pretty shocked at such outrageously flamboyant marketing of supposed profits. None of the emails had the required CFTC hypothetical performance disclaimers, so consumers are naturally going to assume that these truly amazing profits are in fact…real profits. Below are few snippets that we extracted from the emails…check out these amazing claims of profitability.
As you can see, Steve and Janie Wheeler make some truly amazing claims. Does he even trade? Does he have a verifiable track record?
Our next step was to reach out directly to Steve and Janie Wheeler in search of the truth. The first step was a series of emails embedded with tracking links, we simply asked if Steve Wheeler had a verifiable track record that backs up his claims of profitable trading.
We could watch in real time as Steve opened and read the emails. But not once did he or anyone respond.
Next, we began calling and after several attempts…we finally got Janie Wheeler on the telephone. Our questions were casual and non-accusatory. And she was quite friendly. It became quickly apparent that we were not dealing with the sharpest tool in the shed. I could imagine her trying to make chicken salad while answering my tough questions. Anyway, we drilled down to the very root of the question…and we asked Janie Wheeler very plainly, does your husband Steve Wheeler have a verifiable track record that legitimizes his claims of profitable trading?
Yes, we can and should be upset about petty confidence games that push the dream of financial freedom with dubious products. But in truth, we should be more upset with the brokerages that continue to enable these sorts shenanigans. The blame falls squarely onto the plate of NinjaTrader brokerage. They know what is going on. Yes, they have made some minor adjustments to keep the fraud down to a manageable level.
But the reality is that the fraudsters have just gotten a bit more creative.
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