FX news: NFA publishes front page news. Or not
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Foreign Exchange

FX news: NFA publishes front page news. Or not

'Trading forex: what investors need to know'

This week the US NFA (National Futures Association) published a revised edition of its investor education booklet for consumers interested in the retail off-exchange FX market. Called Trading forex: what investors need to know, the booklet contains some useful information in its 24 pages: what transaction costs one might pay, how to close out a position, how to work out profits and losses, how much minimum deposit one might need – the sort of thing that, if anyone traded without knowing, they’d deserve to lose their shirt. It reminds me of the warnings on McDonalds takeaway coffee: “This product is hot”.

And then we come to the chapter: “The risks of trading in the forex market”. Perhaps some of the potential audience for this booklet need to be told that “the market could move against you”. But if that's true, then they shouldn’t be allowed out of the confines of their particular institutions without supervision. The next admonition is largely the same: “You could lose your entire investment” – especially if you haven’t come across the concept of a stop-loss, which strangely the booklet doesn’t mention. This is followed by other warnings, specifically for the perceived negatives of OTC trading, reliance on market-maker’s integrity, the fact that there is no central marketplace before we reach the final, apocalyptic: “The trading system could break down” and “You could be a victim of fraud” (surely not with the NFA standing guard?)

In conclusion the booklet states that it “cannot tell you whether or not you should participate in the retail off-exchange foreign currency market.”

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