Foreign currency trading can be risky business
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Hey there, time traveller!
This article was published 20/05/2007 (6754 days ago), so information in it may no longer be current.
VANCOUVER — Investors looking to trade foreign currencies at home should know that it is complex and takes expert knowledge and without this knowledge it’s very risky, the B.C. Securities Commission is warning.
“If you don’t have that information or that knowledge you’re likely to lose your money,” says Andy Poon, a spokesman for the B.C. stocks regulator.
“Foreign currency trading is not for inexperienced everyday investors,”
In foreign exchange or forex trading, an investor trades one country’s currency for another in hopes of profits from the differences in the exchange rate between the two.
Software platforms and seminars for aspiring home traders have popped up in recent years, opening up the world of foreign exchange trading to a broad range of investors.
But Poon says the programs and seminars are not a substitute for the research and expert knowledge needed to compete with the hedge funds and banks trading in currency markets.
“If investors look at these carefully, they’ll see that a lot of these products and services advertised bear warnings about the risks of this kind of investing and they take care to cite the limitations of their product,” he said.
Poon also said foreign exchange trading is sometimes about investing on margin in which people borrow money to make their investments. While that can magnify profits, it will also magnify losses.
The North American Securities Administrators Association also warns that foreign exchange trading is one of the top 10 traps facing investors.
“Foreign exchange trading can be legitimate for governments and businesses concerned about fluctuations in international currencies, and it can even be appropriate for some individual investors,” the association said in a recent warning.
“But the average investor should be wary when it comes to these complex markets.”
George Davis, chief FX technical analyst at RBC Capital Markets, has seen a “dramatic pickup” in retail investors in the market, but he said they still remain a small fraction of the overall currency markets as larger institutional accounts continue to dominate.
— Canadian Press