The Mechanism and Legality of Forex - ForeXposed

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Friday, September 1, 2017

The Mechanism and Legality of Forex



The Mechanism and Legality of Forex
Among the important factors in forex trading is a matter of legality. Just imagine in a forex investments, you have invested in forex and generate hundreds of percent profit from your forex trading. Then it was time to withdraw your money. And as it turns out, the companies you are investing is scam and illegal. Well up here, ended already your dreams to enjoy hundreds percent of profit.

For forex beginners and those who work directly in it tend to prefer to see platform presented or the regulation of trading in favor of consumers. But, I tell you: A great Platform and regulations favoring consumer does not guarantee the brokerage where you invest is a legal company!

So, continue to read this article if you do not want to get into the trap of the Forex Scammer!

As in any transaction, in forex trading also requires both sides, i.e. the buyer and seller. But there is a difference, buyers and sellers never make physical meetings directly, and also never happened handover physically. Everything is done in the form of the agreement and is mediated by the arvbitrase, commonly referred to as Brokers.

Brokerage firm is being kind of a transaction, the gatherer is done by retail investors under it, and then passed on to the market or the stock exchange. This Exchange is the meeting place between the seller and the buyer in the transaction. So, in fact, the stock market is, where the merging of the seller and the buyer.

The difference with conventional market exchanges is, usually, in Exchange does not occur in individual retail transaction, but usually accumulated, and then executed.

Well, there is such an investor, let's just say his name is Amir, sees the opportunity that the currency GBP (remember, GBP is Great Britain Pounds, the currency of the United Kingdom) will strengthen against the U.S. Dollar. Then, of course, as good an investor looking for profit, he bought GBP according the calculations, and then stored until the time the GBP strengthening, then, Amir will resell it.

Let's say,
Amir buying as much as 10,000 Pounds. 10,000 units in forex commonly called 1 lot. So, all transactions are counted in units of lots. 1 lot, 2 lot, 3 lot, and so on. 2 lot means 20,000 currency (depending currency bought/sold). So in forex transactions, we do not know the purchase of as many as 15,000 Pounds, for example, because the numbers are odd numbers, aka 1.5 lots. And 1.5 lot are not known in the forex world.

To purchase GBP, Amir make purchases through the broker in which he invests. Any order made. And abacadabra ... with a click on forex platform, Amir has committed 10,000 purchase action.

As easy as that. But it appears the: What really happens when Amir made the purchase through his forex platform?

Well, the answer is, in a fraction of a second, the transaction has taken place under account Amir, where he buys 1 lot.

Then, who is selling the GBP to the Amir. Well in this case, in time when transaction occurs between Amir and his broker, the broker hold all the orders done by Amir and other investors, who invest through the same broker. So, for a while, a transaction occurs between the Amir and his broker.

But, as I write above, such transactions occur for a while only. The next broker will forward all orders made by customers to higher institutions, namely the Exchange or other big banks. Investors need a Broker, because the investors cannot directly access to exchanges or big banks.

Well, basically, the exchange as I have mentioned before, is a meeting place between sellers and buyers in large numbers. Most of the perpetrators were major banks, brokers and other financial institutions, as well as the big boys.

In Exchange, all such transactions be reunited in total, between lot purchase and sale. In fact, the total transaction of forex (spot, forward, swap) is quite massive: reached 3.8 Trillion US dollars per day, throughout the world.

With a total market of this size, the brokerage firm where Amir make transaction can forwarding the his order. So, brokers get what is needed by him, and likewise with Amir. All that thanks to a mechanism called a Exchange. While the Amir, he did not take a giddy with the forwarding order by brokerage firms. He just needs to know, that in a split of second, the order has been satisfied by the broker, and then Amir just need to wait for price moves up in accordance with predictions that had being calculated. If the calculation is correct, the price will moving up, Amir will have an advantage / profit. If it turns out that the price moves instead, of course, Amir loss.

Well, that's the mechanism of forex trading in the world, everyday. There are a lot of exchanges. In Indonesia, futures trading regulated by PT BBJ (Jakarta Futures Exchange), United States has NYBOT, London has FTSE (Footsie) and Japan have Tokyo Commodity Exchange (TOCOM).

Keep in mind, though the forex market there are stock exchanges in different countries, but not only centralised in the exchanges such as the stock market. If in stock, can only be traded on a stock exchange where the shares are listed. Then, in the forex market, it is not the case, the forex market is open, rather than closed market, not like stocks that can only be traded in the stock exchange.

Everyone can trade currencies, all those using money in the transaction. You do an exchange of Rupiah with the Dollar also included part of the forex market. Where there are differences in the exchange rate, then there is speculation and investment occurs.


The legality

The Mechanism and Legality of Forex
Well, now we enter in the matter of legality. Something that is often overlooked by novice forex.

In an investment, the legal issue is one of the central part which is very important. Because, usually an investment firm also convened a Community Fund. This is very crucial, when there are problems of fraud or default by the company to its customers.

Well, that is why it is necessary for an agency of government regulators who oversee the activities of investment companies like this. Then how about Forex?
Forex belongs to the Futures Exchange. Namely investment derivatives from stock investment products and the like. At first, the derivative products began by trading index and commodity. Then grow new members, namely foreign exchange trading called forex.

Because it is no longer classified as investment securities, the forex trading has it’s own institutions same with index and commodity.

Then who?

In the United States there are regulations under the authority of the CFTC (Commodity Futures Trading Comission) and NFA (National Futures Association).

The CFTC and the NFA can be said to be a role model for other regulators in each country. The broker regulated under them must follow strict regulations and selected with strict anyway. That is why an international brokerage firm that became a member of the NFA and the CFTC was so elated with their membership status.

American law forbids its citizens to invest on a brokerage firm that is not under both institution. Even brokerage firms that are not members of the CFTC and  NFA prohibit any Americans open forex account through them.

Well, until here, I think there's a little enlightenment for those of you who are not familiar with the issue of legality. One thing is certain: Never open an account in forex broker that was not regulated under government institutions, anywhere. So, do not easily tempted by good platform and regulations as if the benefit of the customer, but when we asked the permission of the company, they are just say the permission is being taken care of, or even say they have the permission of the establishment of the company. Remember, being taken care means you don't have permission!

In fact, do not believe in the sweet promise of company marketer of the broker. Indeed, their task is to deliver the good stuff.

Well, now comes the question, is there any brokerage firm that not have permission from regulators aka illegal brokers?

There are.
A lot!

Yes, a lot. Both domestic and foreign brokers. Referred to as illegal, so reasonable, if the intention was not to do business, but it's deceptive. Remember, a real business is not fraud. There is no fraudulent activities which could be lasting. But there is a saying that says by Chinese businesses that classified as business has been lasting if it can stand for three generations. I've never heard of, there is a deceptive activities lasting for three generations.

These illegal brokerage companies have many ways to seduce people to invest through them. Yes, of course the investment without profit, aka fraud. Typically, they use their sweet promises. Some promise like this:

Earn up to $1000 within a week.
We guarantee your investment profit
is 30-40% per month.
However the
state of the market, up or down, you still get lucky!
We promise to restore any loss that may occur from your investment.

Well, is it too good to be true?
In fact, do not believe, even if they come with the history of the transaction that looks uphill, from lower left to upper right, heading to persuade
you to invest your funds at the company.

The Mechanism and Legality of Forex
Guess what, I can also make history like that. Just need a little touch of the computer or with Photoshop, and then ... There it all miraculously. We will never know that it's true or not.

Well, let me give some suspicious signs that you need to beware of before embedding your funds in a brokerage firm:


1.
Any suspect investment scheme that is too good to believed.

The bad news, forex is not a get rich quick scheme. Forex is the same as any other business. It requires perseverance and hard work of the investors to come forward.

2.
Avoid any companies that promise huge profits for the funds you invest.

Yes, I have already described in my previous explanation. All such comments in the previous explanation, about you need to suspect.

3.
Avoid companies that promise that there is no risk at all in forex trading through them.

This is the biggest bullshit I've ever heard. In fact, selling out in any market there is a risk of loss, let alone with forex investment? We are yet to discuss about forex trading risk here, but just think: What is a business that is not at risk? Even crossing the street any time there is a risk.

For those of you who think about the investment without the risks, I say: Don't dream! Wake up! If you want to succeed, there is no way a substitute for diligence and hard work. The hard work to determine the investment policies.

The hard work to determine the right timing. Hard work for the analysis and risk management. What they do not need to be considered?

4.
Don't do margin trading, unless you know what that means.

Margin trading is like a magnifying glass. Useful to enlarge your profit opportunity. But it can also enlarge your loss. So, watch out! Once again, Learn forex risk, before you embark on an investment.

5. Question those who claim that their trade
is through the Interbank Market.

Some brokerage firms claim, that they forward the transactions of its customers through the interbank market, so they can get better prices for themselves, so no need to overload its customers with transaction costs and other costs.

Interbank Market is usually used by world class banks for loan granting process and submission between the banking institution. Interbank Market does not involve small banks, let alone a small brokerage firm that only has assets of hundreds millions dollars. Well, something is overrated..

6. Be careful for each payment processing via internet and does not involve
the inter-bank transfers.

Some brokerage firms opening ease payments via e-gold, paypall and a variety of other payment methods. Not I do not believe, but often the customer forgot to view information beneficiary (recipient) funds, because the payment method already easy, and just click, and then finish. After the click, they usually just remembered, where funds are transferred or by what, and where the recipient's address. Many brokerage firms as it is not a member of the NFA and the CFTC.

7. Normally,
illegal broker targeting his promotion to developing countries or particular ethnic.

Psychologically, it is easy to understand. The lack of knowledge for those who have enough money in countries such as evolving, often makes the action fraud so much easier.

8. Make sure you know the track record of the companies in which you invest.

Now, however, a track record that speaks. It is a testament to the dedication and the work of the brokerage firm. So do not be lied to. If they don't even want to tell their track record or background of the company, leave it and seek other investment place.

9.
Find a third opinion.

This is indeed not easy. Sometimes, there is a lot of accomplices of illegal brokers strive to convey a positive campaign on the independent forums for reaching their position. Dare to explore. Again, start with the opinion, too good to be true is not true. Suspect those who commented too positive, in order to filter out all of the information.

10. Contact Your investment advisor before investing.

Well, if you are still in doubt, contact those who understand more about forex trading and ask your fund advisor if you want to invest in a company that you want to choose.