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Foreign exchange fraud is any trading scheme used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market.
Currency trading became a common currency trading lowest brokerage of fraud in earlyaccording to Michael Dunn of the U. Commodity Futures Currency trading lowest brokerage Commission. The foreign exchange market is at best a zero-sum game meaning that whatever one trader gains, another loses. Currency trading lowest brokerage, brokerage commissions and other transaction costs are subtracted from the results of all traders, making foreign exchange a negative-sum game. Frauds might include churning of customer accounts for the purpose of generating commissions, selling software that is supposed to guide the customer to large profits, currency trading lowest brokerage improperly managed "managed accounts",  false advertising,  Ponzi schemes and outright fraud.
Commodity Futures Trading Commission CFTCwhich 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. The foreign exchange market is a zero sum game  in which there are many experienced, well-capitalized professional traders e.
An inexperienced retail trader will have a significant information disadvantage compared to these traders. Retail traders are, almost by definition, undercapitalized. Thus, they are subject to the problem of gambler's ruin: In some variations of forex trading, the customers do not obtain normal fungible futures, but instead make a contract with some named company. Even if the company claims to act as their "forex dealer", it is financially interested in making the retail customer lose money.
The contract is directly between the customer and the pseudo-dealer, so it is an off-exchange one; it cannot be normally registered and traded on futures exchanges. Although it is possible for a few experts to successfully arbitrage the market for an unusually large return, this does not mean that a larger number could earn the same returns even given the same tools, techniques and data sources.
This is because the arbitrages are essentially drawn from a pool of finite size; although information about how to capture arbitrages is a nonrival good currency trading lowest brokerage, the arbitrages themselves currency trading lowest brokerage a rival good. To draw an analogy, the total amount of buried treasure on an island is the same, regardless of how many treasure hunters have bought copies of the treasure map.
By offering high leverage some market makers encourage traders to trade extremely large positions. This increases the trading volume cleared currency trading lowest brokerage the market maker and increases their profit, but increases the risk that currency trading lowest brokerage trader will receive a margin call.
While professional currency dealers such as banks and hedge funds tend to use no more than To aid with transparency, some regulatory authorities publish in to public domain the following: From Wikipedia, the free encyclopedia. Archived from the original on The Economics of Foreign Exchange. Retrieved 17 December Then Multiply by ".
The New York Times. Scams and confidence tricks. Confidence trick Error account Shill Shyster Sucker list. Con artists Confidence tricks Criminal enterprises, gangs and syndicates Email scams Impostors In the media Film and television Literature Ponzi schemes.
Foreign exchange market Futures exchange Retail foreign exchange trading. Currency Currency future Currency forward Non-deliverable forward Foreign exchange swap Currency trading lowest brokerage swap Foreign exchange option. Bureau de change Hard currency Currency pair Foreign exchange fraud Currency intervention.