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Is Forex Trading Legit?

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Today we can see in the media a lot of bad comments about forex trading, CFD, risky investing. There are a number of allegations by clients about broker business. So, is forex legit?

Forex trading is a legitimate and profitable business regulated by global supervisory bodies. Several governmental and independent bodies supervise forex trading around the world and they set standards that all brokers under their jurisdiction must comply with. Forex trading is legit regulated business as same as stocks trading or commodities.

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When ordinary people exchange one currency for another in the expectation that the price will change they are part of the trading mechanism. If you don’t have any experience trading, it is understandable that you might be wary of some of the options available to you out there.

Stocks, bonds, treasuries – all of it can seem like an entirely different world and one that is often far removed from what most of us do for a living.

But don’t think that you’re not sophisticated enough to trade.

In fact, you might already have the tools necessary to start trading in a commodity that all of us can understand: Money.

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A-Grade brokers regulation

This is a strong reputation broker. This means high capital requirements, rigorous trading rules, laborious and high reporting standards and tougher (expensive) penalties for non-compliance. USA (Commodity Futures Trading Commission CFTC, NFA) – Japan (FSA Japan) – United Kingdom ( Financial Conduct Authority FCA) – Australia (Australian Securities and Investments Commission ASIC) – Singapore (Monetary Authority of Singapore MAS) – Hong Kong ( Securities and Futures Commission SFC) – Switzerland (Financial Services and Markets Authority FSMA) – Germany (Federal Financial Supervisory Authority BaFin)

B-Grade brokers regulation

Capital requirements, physical presence rules, simplified reporting standards, fit and proper tests, and lower tax rates. – The Bahamas (Securities Commission of the Bahamas SCB) – Cyprus (Cyprus Securities and Exchange Commission CySEC) – Czech Republic (Czech National Bank CNB) – Latvia (FCMC) – Malta ( Malta Financial Services Authority (MFSA)) – New Zealand (Financial Markets Authority New Zealand FMA) – South Africa ( Financial Services Board FSB) – United Arab Emirates Dubai (Dubai Financial Services Authority DFSA)

C-Grade brokers regulation

Little or no regulation compared to the other grades. – Belize (International Financial Services Commission IFSC) – British Virgin Islands (British Virgin Islands Financial Services Commission BVI FSC) – Cayman Islands (Monetary, Regulatory and Advisory Body of the Cayman Islands CIMA CIMA) – Mauritius (Financial Services Commission – Mauritius FSC) – Saint Kitts and Nevis (Financial Services Regulatory Commission – St. Kitts) – Seychelles (Seychelles Financial Services Authority SFSA) – Vanuatu (Vanuatu Financial Services Commission VFSC)

You can see the whole list for each country in a List of financial regulatory authorities by country.


How you might ask?

On the Forex market where traders buy and sell foreign currency for tidy little profits every day.

These licensing agencies make sure that the Forex market works smoothly and that traders are able to complete transactions with confidence.

Far from being a scam, Forex is actually completely necessary for conduction international trade and business.

Though there isn’t a centralized, global exchange system, the various regulatory bodies that exist around the globe make sure that the market works in as efficient a manner as possible.

Fraud and scams aren’t impossible (as, indeed, they are possible in any market) but they are harder to pull off in a Forex market due to the need for either massive collusion or massive volume to manipulate the market.

Forex is what is called a “zero-sum” market. That means that, like in an options contract, there is always a winner and a loser.

Both parties can’t make money in a Forex exchange because that would require both currencies to be equivalent in value to one another which, upon exchange, would not result in again.

In this kind of market, knowledge and market expertise lend an advantage to the trader with more resources and experience.

That doesn’t mean that making a profit is impossible, it just means that the time it takes for a trader to develop their strategy might be a little be longer than with other forms of exchange such as in buying and selling stocks.

Be wary of any group offering you guaranteed returns as it is most likely a scam.

And before you start trading Forex you should practice first with a free online simulation. These are totally free and allow you to learn in a simulated environment that mimics the market. Here you can learn the basics as well as strategies that work for you. In addition, you can determine how much risk you want to take and what currencies you think you want to trade.

One thing is certain: In any market, the big boys tend to win no matter what. The one way you can level the playing field in your favor is to learn as much as you can about Forex and hone your skills in a simulated environment before taking the plunge into actual trading.

Where is the problem – forex is a scam or legit

Main problem because forex trading has a bad reputation is this:

1) 95% of traders lose their money because of bad risk management, greedy, overtrading, lack of knowledge. When some traders realize that a quick-rich scheme is not possible in the forex industry they start to talk that trading is a scam.

2) Marketers in the trading industry (forex signals promoters, online course promoters, trading products promoters…) are creating aggressive and very often scammy and unethical marketing promotions. This bad faith promotion will destroy forex trading reputation.

A lot of traders think that portfolio (trading account) they can manage, risk 5%, 10%, 50% or more per trade and double their account every month. This is the wrong way of trading and a lot of people because of huge risks, lose their money. This is why a lot of traders ask themselves “Is Forex Trading Legit? ”

Investors around the world can now access active trading and investing and they can participate in a growing number of markets because of internet and electronic trading. They can decide to trade stocks, forex or futures contracts, their decisions are made based on risk tolerance, convenience or account size.

It will be difficult for traders to earn when they are not available during regular market hours to enter, exit and properly manage trades. Traders or investors should select options based on the time they can spend doing trading. There can be a steady growth of funds, earning dividends or a loss when stocks are devalued for persons who trade stocks.
However, today’s investors and active traders can access many different trading instruments, they can even learn to trade with virtual cash and trade risk-free. Other trading instruments such as blue-chip stocks, fast-paced futures, and others can be chosen, it depends on the preference of the trader.

Forex market (CFD business) and stocks market are in the same basket, regular business opportunity.

When we choose an Online Broker – we can see that forex business is legit

Every single broker needs to be part of some regulation body, get a license.
Choosing the best stock broker or forex broker can help persons to trade and lose less as brokers are trained and they know what to expect when they are trading. There are online brokers you can employ, you can choose an online brokerage that suits your needs. You need to decide if you want to be an active or a passive investor, the amount of money you are willing to spend on brokerage fees, and the level of risk you want to take. These are just some of the factors you will need to think about when you are choosing an online broker. Choosing a forex broker can be a technical process, it is always best to check on the reviews left by others before making a decision.

Professional traders will compare investing in the forex market to buying blue chips, indexes, and industrial.

“Buy and hold investors, are seen as persons who should trade in stocks, while short-term traders or scalp traders will prefer investing in the forex market”. Yes and no. A lot of traders hold a long position in the forex industry as well.

In this article you will see why investing in the forex market is the best option for traders, as price volatility is more pronounced there. There are many factors to be considered when persons decide to start trading and it is best for persons to get as much information as they can before they start trading.

Forex is a legit business for Smart investors

Knowing your risks and implementing strategies to avoid pitfalls, will help to grow a portfolio in a reasonable time. These investors are constantly thinking about their appetite for risk, trading objectives, and their level of experience. They know how important it is for them to be honest with themselves.
However, even when smart strategies are implemented traders lose money from time to time. Markets can be volatile, and mistakes can be made, but smart investors are always alert, and they know what signs to look for when they are trading.
Forex trading is the preferred choice that smart investors use whenever they choose to invest. Investors can choose from a wider cross-section of trading options.
Experienced traders can increase their earnings quickly by capitalizing on the sudden hikes in the market.
Forex trading is continuous as markets are always open and trading worldwide. Persons can find professional, experienced brokers who will trade on their behalf and keep om earning consistently. There is no need for traders to worry about waiting for their investment to grow, once they are trading with the right brokers or other professionals who know the forex market well.

Persons can find out who the successful traders are and try to Implement their strategies and become just as successful once they are willing to learn. When this happens, trading currency is the best investment option a person can find. As money is made every day and there is no need to wait for a company to pay dividends, as they do when they are trading in the stock market.

Traders learn trading strategies such as pullback trading, break out strategy, and many other strategies and use them to earn. The traders who know what to do are always earning. The persons who want to learn and earn from forex trading can easily find courses that they can take online and quickly learn about the things they can do to earn in forex markets.
A professional trader is astute, disciplined, not very emotional (practices risk control), does not give up easily. There are many persons who stop investing their time and money in forex trading because they tried it once and they lost some money. These persons will never become successful at forex trading and make money every day as they are not courageous and patient. They are not willing to find successful persons, who are making money every day by trading forex and learn from them. The persons who are unwilling to try because they heard that forex trading does not work and simply refused to do what they needed to do so they can be successful traders.

Since we know that the successful forex traders are the ones who lost money and still pressed on until they became professionals by learning the best strategies and improving their skills every day. We can say making money in forex trading is possible whenever persons are willing to be persistent. Forex trading is simply not something that the people who quit easily should do. These people simply need to understand that persistent traders make very huge profits every day.

Forex
The foreign exchange currency trading, Fx, or forex market is the most accessible and liquid market in the world and it is also the largest one. Understanding the technical, fundamental analysis and the macroeconomic analysis necessary for trading is important. Traders need to be sufficiently capitalized, so they can use the appropriate trade sizing and limit the financial risk by using smart leverage levels.
Trading in this market is different, as it involves selling and buying world currencies, as you make a profit from the difference in the exchange rate.
Getting into forex trading is easy, you can learn from other traders at the forum, do an online forex course, or simply open an account with a broker. It all depends on your level of competence and the level of risk you can afford to take.
Most forex brokers won’t charge a fee
The forex market tends to be less volatile in the long term than the equity market. However, trading can be risky, and traders should seek to be very informed as they can lose quite rapidly if they don’t know what they are doing. It is good to focus on the fact that, forex trading can earn high profits as well. Many brokers are compensated whenever bidding takes place.

One important fact makes that people are against the forex industry. Huge leverage. A lot of brokers will give traders the opportunity to trade 1:500 leverage and then 95% of them will risk too much per trade and lose all money. When more people lose money than earn money – than we have the question “is forex legit business ?”

Trading in Stocks
Trading in the stock market is risky and there can be huge losses when stocks lose value. The stock market is vulnerable, it is influenced by governments and what they do.
Fear is also, influences the stock market and you never know when people will become fearful. A lack of confidence can cause the market to become unstable and this causes a downturn and losses for investors.
David Rosenberg who is an economist once highlighted the fact that only 50 percent of New York Stock Exchange stocks are above their 200-day moving average. It was the first time this was happening since Donald Trump became the President and the hope of pro-growth policies like tax cuts and spending on infrastructure was expected. This caused a massive market rally because there was hope. You can clearly see that there is a great deal of uncertainty surrounding the operations of the stock market.
The lack of market breadth can be worrying, this happens when there is a lack of confidence and investors put their money where they think they will feel safe. This causes them to invest their money in a small list of stocks and this is bad for some companies that are listed on the stock market as their company shares might not do well.
There can be volatility break out in the market and this can lead to huge losses for investors.
Dividend payments can be small, and they are not always paid regularly, investing in the stock market is seen as something persons do when they are not planning to earn much from, their investment.
Stockbrokers always charge for their services, unlike the forex brokers who find other ways to earn.

Big investors and trading companies can make more scam and manipulation on the stock market than on the forex market because the forex market has volume, pure price trends without insider trading.  Currency pairs can not be hurt by a journalist!

Trading is like anything: The more you know about it, the better your outcomes tend to be.

That said, it is also prone to scams and deceitful practices just like any other market.

In this article, we are going to talk about seven common scams that you will see in Forex trading, what they are, why they are bad, and how you can spot them and avoid them.

Knowledge is power and, when it comes to Forex, it also saves you a lot of time and money.

Here are the most common types of Forex scams that you might encounter in your trading career:

Signal Selling

You may have seen traders on YouTube (and elsewhere) promising you insider knowledge about what stocks to buy and sell to make a bunch of money.

Typically this relies upon little to no research and total ignorance on the part of the buyer (that would be you).

Signal selling does make one person money: The guy you’re paying for the “stock tips.”

Don’t get us wrong: Not all “stock tips” are signal selling. But, typically, anyone offering you a “secret list” of “guaranteed stocks that will make you money” in exchange for a weekly or monthly subscription fee is ripping you off and could be guilty of signal selling.

Wrong promotion in bad faith (holy grail expert advisors, holy grail signals, expensive online courses, etc. ) quick money scheme promotions,  can hurt forex trading reputation.

High Yield Investment Programs

Often though not always, HYIPs are those that promise above-market returns and (typically) guaranteed security.

Think Bernie Madoff when you’re thinking about Forex scams in this area.

Because no trader can guarantee above-market returns without any loss of capital whatsoever, these traders typically pay out older members of the scheme using money brought in from new members or subscribers. Though an HYIP isn’t necessarily a Ponzi scheme or pyramid scheme, it can be structured in that manner.

To avoid this one just remember: If it is too good to be true, it often is.

Manipulating Bids/Asks

This involves your Forex broken manipulating trades so that they make money and you probably don’t.

Boiler Room Trading

This involves faking trades and running off with your money. It’s that simple. In Forex it is as easy as taking your money and then not executing on the trades though, when it comes to stocks, a boiler room typically involves an operation raising money for an as-yet-unlisted company and then keeping the money raised from investors for themselves.

You can avoid scams by educating yourself on the ins and outs of the Forex market. Knowledge is power and being forewarned is forearmed when it comes to Forex scams.

Conclusion

Trading in the foreign exchange markets is the best thing for investors to do, as there are many great books that are available and there are brokers who are willing to assist those traders who need help. Persons don’t need to lose money and sit in silence or sit and complain. Trading in the forex market is a learning process and those who are willing to spend their time learning the strategies will always be the ones who earn and become like the other successful forex traders.
Forex is a legit business because it is regulated and business where is hard to manipulate on currency markets because of huge volume from big banks and investors. Is forex a scheme? On the end, Forex is not a Ponzi scheme – it is legit business.

What is Forex?

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Forex is recognized as being the marketplace that allows you to engage in the trading of many diverse types of currencies of the nations of the world. The forex market is considered to be the market that is the largest one on the globe at this present time that provides the highest level of liquidity as a result of the many trades being conducted in the number of trillions of dollars on a daily basis. For this market, it is noted that there is no existence of a location that is centralized. Instead, the forex market is set up to function as an electronic network that connects banks, institutions, brokers as well as personal traders who conduct trades primarily via the usage of banks or brokers. So, what is forex?

Forex definition:

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Forex or foreign exchange is the largest and most liquid asset global marketplace for exchanging national currencies against one another. In the foreign exchange process, traders change one currency into another currency for commerce, trading, or tourism. The forex trading market is open 24 hours a day, five days a week, except for holidays. In the trading industry, traders attempt to profit by buying and selling currencies by speculating (predicting) on the direction currencies are likely to take in the near or distant future.

Currency needs are experienced by many people and organizations, such as personal investors as well as financial agencies. These people and organizations may conduct speculations in regard to the movement of a designated pair of currencies. They place their orders for the sake of purchasing and selling currencies via the forex market in an effort to have interactions pertaining to other orders in regard to currencies that have been placed by other people and organizations.

What is the forex market?

So, let we see forex market meaning, forex market definition:

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The forex market is a global network of computers and brokers from around the world and it can be divided into the interbank markets and the over-the-counter (OTC) market. The interbank market is a market where large banks trade currencies on behalf of clients. The OTC market is a market where individual traders trade through online platforms and brokers.

Foreign exchange is made every single day. Ordinary people and business owners convert currency when they pay for goods and services abroad. For example, if you buy some products from the UK in GBP you need to convert your dollars if you want to but that product. You did a foreign exchange.

But if you are a trader, you use a platform for buying and selling currency pairs and you are part of the (OTC) market.

Forex trading time

The forex market operates twenty-four hours per day for five days each week. But it is to be noted that these operational hours do not apply to holidays. Yet, the reality is that there may be the conducting of trades for some currency types during a holiday time in such cases that the country or global market is regarded as being open for the sake of business purposes.

Those who are retail traders have the option to engage in opening an account on the forex market. Then they are equipped with the ability to be able to conduct the purchasing and selling of various currencies, trade two currencies against each other. The difference in the price that the pair of currencies that are purchased or sold for will determine if there is the provision of a profit or a loss.

There is another manner in which participation in the forex market can become a reality, which is via the usage of forwards as well as futures. It is noted that there is the customization of forwards in regard to currencies being exchanged following times of expiration. On the other hand, it is not possible to apply any form of customization to futures and they are more widely applied by those who engage in conducting speculations, while it is understood that the positions frequently experience closure prior to the expiration time in order to prevent the formation of a settlement.

It is comprehended that the market in the financial sector which is ranked as being the largest on the globe is recognized as being the forex market. In general, those who are retail traders do not desire to conduct the delivery of the complete sum of currency for which they are conducting trades. They rather desire to make a profit concerning the differences pertaining to the various currencies over a span of time. Since this is the case, brokers conduct the rolling over of placements on a daily basis.

Pairs and quotes for forex

You can learn more How To Read A Forex Quote in our previous article. When there is the conducting of trades in various currencies, pairs are used for the listing of the currencies. Some examples of this include, USD/JPY, EUR/USD as well as USD/CAD. It is noted that such listings provide a representation of the US dollar in comparison to the Japanese Yen, the Euro in comparison to the US dollar, and finally the US dollar in comparison to the Canadian dollar.

Forex lots

When there is the conducting of trades on the forex market, this happens in lots. They are referred to as being micro lots, mini lots as well as standard lots. A micro lot is categorized as being a value of 1000 of a particular currency. Then a mini lot is categorized as being a value of 10.000 concerning a designated currency. Finally, it is noted that a standard lot is regarded as being a value of 100,000 of a particular currency. This is not the same as when you enter a bank to conduct the transaction of exchanging four hundred and fifty dollars for a trip. In such cases where there is the conducting of trades on the forex market which are done electronically, set blocks of currency are applied for the placement of the trades. However, you can conduct the trading of any number of blocks according to your desires and preferences. Take into consideration, for example, that it is possible to conduct trades for seven micro-lots which would be a total of seven thousand, or three mini lots for a total of thirty thousand. Or you can also conduct trades of seventy-five standard lots for a total of seven hundred and fifty thousand.

Size of Forex

It cannot be denied that the forex market is distinctive from other markets. This is due primarily to its massive size. Normally, the volume of trading that is conducted here is ultra-large. Take into consideration, for example, that the Bank for International Settlements indicated that the daily average of trades was noted as being over five trillion dollars back in April of 2016. London, Singapore, Tokyo, New York, Sydney, Hong Kong as well as Frankfurt are deemed as comprising the locations of the largest markets for foreign exchange.

Trading on the forex

The fact is that the forex market operates twenty-four hours per day for five days per week within the context of key centers of finance around the world. This denotes the reality that you can conduct the purchasing and the selling of currencies at your preferred time during the week.

Within the point of view that is historical, it is realized that in past times, trading in regard to foreign exchange was only made possible for hedge funds, major corporations as well as governments. However, in modern society at this present time, it is rather easy to conduct the trading of various currencies with simply the click of a mouse. Therefore, access to the ability to trade on the forex is no longer a complex problem. This means that anyone who desires to engage in the conducting of trades on the forex market has the opportunity to do so. Individuals are offered the opportunity by a wide range of banks, investment agencies as well as retail forex brokers to engage in the opening of accounts for the sake of conducting trades of various forms of currency.

In such cases that you conduct trades on the forex market, this means that you are conducting the purchasing or selling of a designated type of currency for a specific nation in relation to another form of currency. However, it is noted that there is no exchange of physical money that transpires between two entities. This is what takes place at a kiosk that deals in foreign exchange. But since the forex is an electronic market, traders normally make a placement in regard to a designated form of currency hoping that there will be the experiencing of movement in the upward direction that would strengthen the currency that they are purchasing for the sake of obtaining a profit. Or if they are selling, they would hope for a weakness in the other form of currency in order to achieve a profit.

During the conducting of trades, there is the conducting of the trading of a particular type of currency in correlation to another form of currency. This is always the case. When you conduct the selling of a type of currency, you are in actuality conducting the purchasing of another form of currency. In terms of the trading world in the electronic realm, there is the achievement of a profit that is based on the differences in the prices of the currencies for which you conducted transactions.

How to Avoid Forex Scams?

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Introduction to forex scams

Since more than $5 trillion are traded daily, the Foreign exchange (Forex) market is the biggest financial market globally. In addition to central banks, corporations, speculators can also trade all 24 hours, 5 days weekly. It is very easy to trade online with hundreds of currencies and currency pairs, like the Euro, US dollar, British pound, Russian ruble, and Japanese yen. Though trading appears lucrative, it is also risky, and so the Forex trader should be well trained, and manage risk well. Additionally, there are a large number of scammers trying to cheat Forex traders and some tips to avoid losing money in a Forex scam are provided below. This spot forex market (with its enormous amount of money floating around) has not only created potential profit-making opportunities for the traders but also it has even opened up the possibilities of making forex scams by unscrupulous operators.

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Forex scams represent every kind of manipulation on the foreign exchange market (forex rigging) or any action that misleads traders (advertisements may tout high-return, low-risk investment opportunities in foreign currency trading). Forex scams can be divided into two groups. The first one is the forex trading scam or forex rigging or forex investment scams when parties conspire to fix or inflate currency prices to achieve higher profits at the expense of the consumer. The second one is the promotion of get-rich-quick schemes in the forex industry which mislead traders, convincing them that they can expect to gain a high profit by trading in the foreign exchange market.

About forex rigging, we talked in our previous article.

Let us talk about something that is much more common, forex trading scams that mislead traders.

forex scams types

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How to spot a forex scam?

Let us identify a Forex scam.

One of the easiest ways to detect a Forex scam is that it will promise extremely high profits with no risk or extremely low risk. However, in reality, there is no guarantee of making a profit. If it was possible, the traders would share this information with others. Many of the beginner Forex traders find these offers attractive and lose money. There is a lot of difference between what the scammers promise and the reality of Forex trading. Some rules which traders can use to avoid scammers are:

  • remaining safe and avoiding offers which are unrealistic
  •  avoid using software which claims to have found a secret moneymaking formula
  •  do not install software, which may be malware or spyware, causing computer damage

The scammers will not register with regulatory authorities while genuine Forex brokers can provide details of their registration. If a Forex trader is suspecting a particular Forex broker, they can contact the relevant regulatory authority, who will usually provide a list of regulated companies, and the cases filed against these companies. This can help the trader avoid problematic Forex brokers.

Individuals who are involved in Forex and other scams are always looking for new methods to exploit gullible new traders. There are three main categories of forex scams in which people lose money. Understanding how they work is one step in avoiding them.

Still, the unscrupulous operators often end up making a luring scam for you so that you can easily get persuaded into it. But, no worries anymore! Please keep reading and you will reveal a detailed overview of the common forex scams and also know how to spot it in the first place.

Forex scams types

1. Spread bid-ask manipulation or point-related forex scam

Forex scam known as spread bid-ask manipulation is manipulation where unregulated brokers offer several times bigger floating spread and they directly increase the chances of their client losing investment.

This is one of the oldest forex scams which is based on the computer manipulation of bid-ask spreads. The spread varies between the currency pairs. Note, this scam can typically occur when the point spreads differ a lot among the brokers.

To be more precise, you may find some brokers who may not offer the standard two-point or three-point spread in USD/EUR. Rather, they may offer you spreads of seven pips or even more. Due to these additional pips, you may end up losing the potential gains from a winning trade.

Over the last ten years, the scam has quieted down a bit. Nevertheless, the possibility of a point-spread scam still exists especially if you are dealing with offshore retail brokers that are not regulated by the NFA and CFTC. Also, make sure to validate the nation of origin of these brokers before you deal with them.

Historically, it has been found that mostly United States-based companies have been the source for the point-related forex scam.

2. A false fund manager or the false single seller scam

This one can be categorized as a modern-day forex scam. It’s based on the single sellers. Do you know about the single sellers? Well, False fund managers or false single sellers are the pooled asset managers, retail firms, individual traders, and managed account companies that offer you a system with a claim to offer you favorable times to sell or buy a currency pair-based on professional guidance and recommendations. These platforms boast of having long-standing experience and unique trading abilities.

Especially, if you are a novice trader, they will trap you very easily and eventually disappear with your traded money. For example, they will claim to offer you some privileged trade recommendations and ask you to place your bets. After a while, they will disappear with all of your money. Unfortunately, the single seller scam is becoming a wider and more serious problem nowadays.

It’s true that there are many honest single seller systems available. However, a vast majority of them is a scam and they are following deceptive business practices. So, please beware.

3. Forex robot scamming or expert advisor manipulation

Expert advisors represent coding script that can analyze trades and automatically initiates and executes trades according to preprogrammed instructions. Very often, Expert advisors sellers use get-rich-quick schemes ads, unrealistic promote their product, and mislead potential customers.

So, by definition trading program that uses computer code/algorithms for opening and closing Forex trades is called a Forex robot. Some forex robots are legal, they are built using expert advisers (EA) feature of the Meta-trader trading platform. Online research can provide a list of forex robot-related scams. Some of the features of these scams are

– The marketing messages do not have any results as proof and are not realistic.

– very high returns in percentage, in a few years. It is advisable to check the statistics, in some cases, only incomplete statistics may be provided.

– Scalping strategies that are not diversified. Many forex robots are trading for small profits using a scalping system. This can help the trader make a profit regularly if market conditions are favorable. Yet if there is a change in the forex market, the same robot could make losses, wiping out the profits

– Unregulated brokers: Some Forex robots are showing good profits with unknown unregulated brokers yet if a Forex trader opens an account with these brokers, the commissions, spreads will be more, reducing the profit to a great extent.

Usually, well-optimized expert advisors show excellent past performance results because they are overfitted in some small-time range. In live trading, those robots show bad results.

Robot scamming has been a persistent forex scam. It typically occurs in certain types of forex-developed trading systems. These systems talk about a robotic code that can generate automatic trades. Irrespective of whether you are sleeping or you are busy with some other work, these systems will trigger its automatic code and help you earn your profits without a hassle.

These claims may sound quite lucrative but these are some absolutely fake claims. Most of these systems are not verified or formally reviewed. To be more precise, they have not been tested by an independent source.

Hence, before a system claims that it will trigger its automatic robot code to generate profits for you, please make sure to test whether its trading system’s parameters and optimization codes are fully reviewed and verified or not. If these optimization codes and parameters are invalid, the system will then generate random buy and sell signals.

Please do not fall into the trap of these robot scamming systems. Please do some research before putting your money into these platforms.

4. Trading system subscription scam

When you’re subscribing for a trading system, make sure to check for its pricing. Many trading systems offer exorbitant pricing. For example, they can cost you $5,000 or even more. This can be a possible scam.

Trading system developers, quantitative traders develop new trading systems every day. Usually, successful companies do not sell forex signals – they trade, manage other people’s money. Forex signals are not forex scam but false forex signals advertising and quick rich schemes promotion are a scam.
So, by definition, the Forex signal seller is an individual who is providing trade ideas related to a particular currency pair, trade director, stop loss, entry price, and target levels. Some tips on avoiding these scams are listed below:

– Subscription fees: Though these sellers show excellent results for forex trading without proof if the trader wishes to get access to these trades, the subscription fee demanded is very high. Subscription service is not a scam but false advertising and unrealistic results presentation makes bad reputation.

– Signals linked to broker: Some signal sellers will send their trading signals only to Forex traders who register with a forex specified broker. These signal sellers may be getting a commission from the broker they recommend even if the trader is making a loss. However, some of these sellers will try to ensure that the trader makes a profit so that he continues trading, and they receive their commission, which is the indirect payment for the service. It is important to verify the forex signal results, checking the proof, otherwise, they cannot be relied on. It is important to do due diligence before investing in any kind of money.

Commingling of funds is another persistent problem where the individual traders can not properly track and determine the exact performance of their investments. Commodity Futures Modernization Act of 2000 and its Section 4D have been issued to overcome the problem of fund segregation.

Another example of a common forex scam is the restriction in withdrawing money from investor accounts. Some brokers won’t allow you the withdrawal of money from your investor accounts. When you will try to withdraw money during a volatile market situation, it may flash warning signs. Beware of these systems and avoid them always.

Forex trading scam risks mitigation

Forex trading scam risks include the possibility of losing some or all of the original investment because of a lack of information or fact that actual gains will much differ from an expected outcome or return.

So there are a few main rules :

How to avoid forex trading scam risks:

1) Stay away from trading opportunities that sound too good to be true even in communication even in reading advertising material.
2) Avoid companies and persons that predict or guarantee large profits, that promise little or no financial risk
3) Invest money only in regulated forex brokers.

Forex scam recovery trader can do only with the help of a regulatory body. So if the scammer is from the UK you can contact FCA (UK Financial Conduct Authority) and ask them for help. Or for example, if you know for forex scams in Singapure than you can contact The Commercial Affairs Department (CAD) of the Singapore Police Force and Monetary Authority of Singapore (MAS). These organizations will help you to report forex trading scams in Singapore.

If you work with regulated brokers and organizations in the forex industry – you will always have protection.

Forex scams advertising

There are a large number of advertisements promoting Forex trading investment and Forex investment funds which may be fake. These slick ads promote results, which cannot be verified. They falsely claim that the investor will get excellent profits without any work after making an initial investment. Many people who send their money, get nothing since the company claims that it has not received the money. Another fraud is how these companies open an account with an unregulated broker. After a few trades, all the money is lost, and the company will blame the market conditions. Yet in reality, the money goes to the forex broker, who is unregulated, so the investor does not get his money.

Importance of Forex education

Since forex trading is risky, most traders will make some losses. The unskilled Forex trader is gambling his money. Retail traders are almost always undercapitalized and do not use leverage properly. In reality, most of the losses of the forex traders are because of incorrect trading strategies, not because they are cheated by their brokers. Unskilled beginner forex traders should spend their time trying to formulate better trading methods so that they are aware of the risks involved and avoid losses.

– Forex Trading Systems Without Proof: Many scammers are marketing forex education, trading systems, yet they are unable to provide any kind of proof of the trading history, the profits. In some cases, the scammers offer systems without any services or a trading room.

– Email spam requesting personal information: It is not advisable to provide personal information like name, phone number, home address to someone you do not know. Brokers should provide a written statement for risk disclosure and it should be read thoroughly

Avoiding investment and forex scams

The most effective way to avoid investment scams is by spending time doing research to determine the advantages and disadvantages. For a forex broker, it is advisable to search for more information using search engines, and check review sites, especially scam sites. Legal records, forums should also be checked for complaints, and people complaining should be contacted. A thorough background check reduces the risk involved. It is also advisable to avoid schemes which offer massive profits without much work since in reality, a lot of time is required for education, monitoring the forex market and decisions have to be taken quickly

Additional steps for protection

The terms on the forex brokers’ website should be compared with the regulations specified by the regulatory authority to find inconsistencies. Those who do not have the time or are inexperienced should contact a financial advisor for help. Business registration details should be verified before choosing a broker. It is important to read the fine print, at the time of account opening, since the terms may be used to block fund withdrawal. It is advisable to withdraw money at the earliest for a new account, to check the broker. A legit broker will usually offer a demo account. All terms and conditions should be specified in writing to avoid disputes at a later date.

Conclusion
You can easily avoid them if you are alert. Always be careful of offshore and unregulated brokers. Beware of automated robot trading and signal sellers. These systems are full of fake claims, they are not fully verified, and they do not yield profitable results.

If a forex broker is limiting customer withdrawal options or dealing with commingling funds, then it indicates a possible sign of shady and fishy practice. Another shady practice is a point-spread scam that some forex brokers oftentimes create.

The scammers are always trying to find new ways to cheat Forex traders. There are different types of investment scams, some like the Ponzi scheme have derived their name from their creator Charles Ponzi. Usually, uneducated traders and beginners are targeted by Forex scammers. Hence it is necessary for the trader to understand the Forex market well, before investing. The scammers understand that inexperienced traders do not have sufficient knowledge, are optimistic and fearful. Experienced traders are not duped by these Forex scammers easily since they know that the offers are not realistic.

Beware of all these forex scams. Also, be wary of the new forex scams. Before dealing with them, make sure to check if they are validated by the BASIC rule (Background Affiliation Status Information Center), created by NFA.

Net Debt-to-EBITDA ratio in Simple Words

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Most businesses do not make enough money initially to pay their business expenses like salaries, rentals, purchase equipment, and supplies for their functioning and growth. They will usually borrow the funds which they require for running their business from banks and other lenders. In other cases, established businesses will also borrow money from their lenders. Giving a loan is always risky for a lender, because there is a risk that the borrower may not repay the loan, and the lender will lose the money. Though the lender is usually asking for collateral, they will also want some information about the business finances.

The net debt-to-EBITDA ratio is a debt ratio for some companies that shows how many years it would take for a company to pay back its debt if net debt and EBITDA are held constant. The goal of this ratio is to represent how well a company can cover its debts. The difference between the debt-to-EBITDA ratio (DTER) and net debt-to-EBITDA ratio (NDTER) is that net debt subtracts cash and cash equivalents while the standard ratio does not. This ratio can be negative if the company has more cash than debt.

Let we learn in practice how we can use the Debt / Equity Ratio and Enterprise Value:

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EBITDA

Before approving the loan application, the lender would like to find out more about the business profit margins, whether it is making enough money to repay the loan according to the repayment terms specified. One of the main parameters used to measure whether a business is making enough profit is the earnings before interest, taxes, depreciation and amortization, abbreviated as EBITDA. The interest and taxes can be substantial for a business and reduce the money available for making further investment. The depreciation and amortization expenses are non-cash expenses and some lenders do not consider these expenses while assessing whether the business can repay the debt.

Debt

For a business the debt is the amount which the business owes the lenders. The business may have loans which have to be paid over a longer period of time, which may be five years or more. This is the long term debt of the business. The business may have also raised funds by issuing bonds or borrowing from others for a shorter period of time, usually a few months or years and this is called short term debt. The total debt of a business consists of the long term and short term debt of the business. If a business faces any financial problem, repayment of the debt is given first priority, hence it is an important parameter for calculating the credit rating of a business.

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Debt/EBITDA ratio formula

One of the popular parameters for determining whether a business is likely to repay the debt is the

Formula:  Debt to EBITDA ratio = Debt / Ebitda

where debt is the total debt consisting of both the long and short term debt, and the EBITDA is calculated from the earnings of the business using the financial parameters described above. Both the debt and EBITDA are specified in financial statements of the business like the profit and loss statement, the balance sheet for a particular period. The ratio is also calculated periodically.

Net debt/EBITDA ratio formula

Often the business may have raised funds using short debt and has not used these funds. These funds are cash or cash equivalent for the business. If required the cash equivalent or cash can be used to repay the loans and other debt of the business immediately. Hence it is more relevant to calculate the

Formula: Net debt to EBITDA ratio (NDTER) = Net debt/EBITDA

where net debt = debt – (cash + cash equivalent)

Most borrowers prefer to use the net debt for calculating the ratio since it is the amount that is actually owned by the business and has to be repaid.

Typical value for  Net-debt to EBITDA

The Net-debt to EBITDA ratio is an important ratio for investors and lenders to a business. It varies to a great extent depending on the business model and industry sector. This ratio is calculated periodically from the financial statements of the business. Most companies publicly declare their financial statements quarterly and annually, though the statements may be prepared internally, monthly. Usually, a low debt/Ebitda ratio is preferred for a business since it indicates that the business can easily pay off the debt in a few years. Typically for a well-run business, the ratio is usually 3 or 4. If the ratio is more than 5 , it could be a matter of concern. In some companies, the amount of cash and other cash equivalents is more than the debt of the company. So the net debt/EBITDA ratio may be negative in cash-rich companies.

Sector-wise variations

Though lenders usually prefer businesses with a lower debt/EBITDA ratio, they should realize that the ratio depends to a large extent on the business model and industry sector. Some businesses do not require much capital investment so the ratio of these business will be lower. On the other hand, other industries especially in manufacturing require a huge amount of investment in equipment and machinery. Hence companies in these sectors will usually have a higher ratio. So while calculating the credit rating of a business, the industry sector should also be considered.

Getting loans

Banks and other lenders will check the credit rating of a business before lending any kind of money to it. They will usually not lend money to business which has a low credit rating or may charge a higher interest rate for lending the money. The terms for the loan will also be more stringent. One of the most widely used parameters for determining the credit rating of a business is the debt/EBITDA ratio. The lender will usually not give a loan to a business whose ratio is more than 5 unless there are some other factors that are considered. This may be specific industry sectors with higher capital, and also startup businesses. The lender may also specify that the borrower should maintain the debt/EBITDA ratio below a particular level in the terms and conditions of the loan. If the borrower is unable to maintain the ratio, the lender may initiate action against the borrower or demand immediate repayment of the loan.

Analysis for debt/EBITDA ratio

It is also recommended that a business, debtors, and investors should monitor the net debt and debt/EBITDA ratio over a period of time since it offers valuable insights into the functioning of the business. If the ratio is reducing over a period of time, it indicates that the business is paying off the debt, so the debt is decreasing, while the income is increasing or remaining the same. On the other hand, if the debt is increasing, it implies that the business is borrowing more for growth or expenses, and its income is not increasing in the same proportion. Business owners, investors, and debtors should analyze the variation in the ratio over a period of time and then make a decision accordingly. For example, investors may increase their stake in the business if the ratio is decreasing and sell their stake if the ratio is increasing.

What is annual EBITDA?

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Have you been wondering what annual EBITDA entails due to hearing discussions about it recently? When you hear reference being made to the term EBITDA, this refers to earnings before interest, taxes, depreciation as well as amortization. This is defined as a metric that is applied for the sake of being able to conduct an evaluation of the operational performance for a business. It also has the potential to be viewed as a proxy in relation to a cash flow concerning the whole process of the operations of a business.

Annual EBITDA for any measurement year means consolidated net income before interest, taxes, depreciation, amortization, extraordinary items, LIFO Income and Expense items, the management fees. Usually, annual EBITDA means the consolidated adjusted EBITDA for the applicable fiscal year ending December 31. Annual EBITDA means EBITDA for the most recent financial year, as identified in the consolidated financial statements.

Annual EBITDA simple explanation video:

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The metric of the EBITDA poses as a varied operating income, which is regarded as EBIT, which is noted to provide the exclusion of expenses that are non-operational as well as some types of expenses that are categorized as being non-cash. The reason for the usage of such deductions is to engage in the removal of the elements that business owners tend to hold discretion over. Such elements are noted as being the structure of capital, financing of debt as well as methods of depreciation. It is further noted that this does relate to taxes to some degree. This can be applied for the sake of demonstrating the financial performance of a business with no need to take into consideration the capital structure of the business.

Annual EBITDA detailed explanation video:

When there is the usage of EBITDA in terms of business, it is realized that the approach is to place a concentration on the decisions pertaining to the operation of a business prior to giving consideration to the impact that is made by leverage, capital structure as well as items that are considered to be categorized as non-cash. Such items take into account depreciation.

It is worthwhile to note that this is not a metric that is recognized as being in usage according to the perception of the IFRS as well as US GAAP. The reality is that there are some who are investors, such as Warren Buffet, who holds a rather strong dislike in relation to the usage of this type of metric. This is due to the fact that the metric does not take into consideration the issue of the depreciation for the assets of a business. Take into consideration, for example, the fact that in such cases that a business possesses a vast quantity of equipment that is depreciable, which naturally is regarded as also holding an enormous level of expense in terms of depreciation, then the reality is that there is no recording of the expenses that are associated with the sustenance and maintenance of particular capital assets.

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In terms of reference being made to interest as it applies in the scenario of the usage of EBITDA, it is not included in the placement of EBITDA. This is due to the fact there is a reliance on the structure of the funding pertaining to a business. This is retrieved from the funds that are borrowed by the business in order to provide finances to allow the operation of the company. It is understandable that various companies tend to possess capital structures that are noted as being diversified, which thus causes the emergence of different expenses related to levels of interest. That is why it is considered to be more straightforward to engage in the conducting of a comparison of the respective performance of businesses when there is the addition of back interest while not giving consideration to the contribution of the capital structure in relation to the business. Do give consideration to the fact that payments for interest are regarded as being tax-deductible. This provides the indication that corporations can benefit from this scenario when there is the application of what is referred to as a tax shield at the corporate level.

Then when there is the reference to taxes as applied to the usage of EBITDA, there is the truth that there can be variations in regard to taxes. Thus, it is acknowledged that the rate of taxes is based on the location concerning the operation of the business. Taxes are regarded as being functionality in relation to tax rules. Taxes, however, are noted as not being truly a component that is utilized for the purpose of conducting an assessment of the performance of the management team. With this perspective in mind, it is realized that the majority of analysts in the financial sector tend to hold the preference to engage in the addition of them again in such cases that there is the conducting of comparisons of various companies.

For the issues of depreciation along with amortization, there is a reliance on the historical investments which have been conducted by the business. Therefore, there is the comprehension that there is no reliance on the operation performed at the present time. Businesses are recognized as placing investments into assets that are fixed and long term, which are known to emerge in a loss of value as a result of much usage for an extended period of time. Such assets tend to include vehicles as well as buildings. It is noted that the expenses that are associated with depreciation are founded on part of the deterioration of the assets that are tangible and fixed. On the other hand, expenses that are regarded as being associated with amortization are incurred in such cases that the asset is regarded as being an intangible item. A patent is an example of an item that undergoes amortization due to the fact that it possesses a life cycle of usefulness that is recognized as holding a time limitation prior to a date of expiration.

Depreciation as well as amortization are deeply impacted by the perceptions concerning the usefulness of the economic life of assets, the value concerning salvaging, along with the method of depreciation that is applied. Due to this principle, analysts may discover that the income for operating the business is actually not the same as what they perceive the number should indicate. That is why depreciation along with amortization is not part of the calculation process when EBITDA is applied.

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