Foreign Exchange (FX or forex) trading is when you attempt to generate a profit by speculating on the value of one currency compared to another.
Foreign currencies can be traded because the value of a currency will fluctuate, or its exchange rate value will change, when compared to other currencies.
Forex trading is normally conducted through ‘margin trading’, where a small collateral deposit worth a percentage of a total trade's value, is required to trade.
Financial regulators in the EU have also noticed an increase in unauthorised firms offering transactions, or platforms to trade, in currency derivatives in the forex market, such as ‘contracts for difference’ [CFDs], ‘FX forwards’, and ‘rolling spot contracts.
Forex trading is complex and risky. It involves predicting movements in currencies. Trading in international currencies requires a huge amount of knowledge, research and monitoring.
- DON’T KNOW HOW forex works in detail; AND
- DON’T HAVE TIME to do research and monitor your trades; AND
- DON’T UNDERSTAND the online platforms used for trading and their functionality; AND
- HAVE NOT READ OR FULLY UNDERSTOOD the product disclosure statement and DISCUSSED the risks with your financial adviser; AND
- DON’T AFFORD to lose more than the amount you invested
then STEER CLEAR FROM EVEN THINKING ABOUT FOREX TRADING. Last updated: Sep 07, 2016
> financial regulators in the EU have issued an investor warning alerting investors about the risks involved in forex trading - click here.
> The Australian financial regulator has an extensive page about the risks and pitfalls of forex trading - click here.