Investing online is a matter of choice ...and, of course, of convenience too!
The lure of trying one's hands on investing is simply irresistible! This is why we see a lot of first time investors trying it incognito via online brokers. Newbies who had always wanted to test their skills at handling their own investments are often the ones easily attracted
to online investing. Most of whom are individuals who have suddenly acquired some excess capital from a booming start-up business undertaking, or a blooming professional career. These people find online investing to be a "perfect fit" for their "dreamed fantasy". Well, why not? Not only does online investing allow them to manage their own investments in the comforts and confidentiality of their own abodes, it is also quick and easy (so it seems) to learn! With their first click on the mouse, newbies immediately experience an exhilarating transformation into their fancied and fantasized role of becoming a real stock or forex traders in that instant; executing orders at will while experiencing the thrill of pitting their own raw trading skills against seasoned money/stock traders online. With hundreds of sites offering free tutorial services, seminars, and e-books, plus a free live demo account to boot, online forex/stock trading is really catching fire with this lot of trader-wanna-bees! But, alas, these "George Soros Wannabees" should not fool themselves into believing that online investing (especially forex with its sometimes wild and wide price fluctuations) will be like "picking apples" all the time.
Investing on line should be treated no differently from traditional approaches to making serious investment decisions. An extensive, Due Diligence work on the chosen online broker must first be done - and should be a major factor to consider before deciding to take the plunge! Knowledge of the intricacies of the stock and foreign exchange markets is also vital and must be had before any actual placement is made. And most important of all, these "wannabes" need to do some honest soul searching first to find out if they have the patience and the guts and the temerity to deal with fast moving markets.
Every aspiring online investor need to ask themselves if they are prepared to give a sizable part of their hard earned savings to a total stranger - just like giving it away to the first person you meet on the streets! Surely, your answer here is no! but this might just be the case if they are not careful enough in making the right decisions specially in their choice of the right online broker!
Investing through an online broker is, in all respects similar to giving away your money to a total stranger. When you open an account with an internet-based money broker or a stock broker, you will actually be dealing with a faceless entity which can simply vanish sometime after you have deposited your money with them.
More often than not, when searching for an online broker, all information and background data you need to make an intelligent choice are based solely on information provided by their web sites....which are usually hardly revealing about the company you will be dealing with! Start-up traders are not provided enough information about the brokers from these websites. They have little choice but to base their decisions on their own initial impressions of the website itself. Start up traders are also often attracted easily by the beautifully designed and easy to navigate web sites of online brokers. Others are attracted by perky add-on services such as real time news feeds, free training, readily available expert advice, managed account services, user friendly trading platforms and the like. But ahhh, all these perks are also offered and provided free by illegitimate online brokers and scammers through their own websites! In fact, some of their sites are even more professionally designed than those of the legitimate brokers. This makes it harder for anyone to discern who is legitimate and who is not in the industry. Without care and proper guidance, start up traders may easily fall prey to scam websites posing as legitimate online forex brokers.
Brokers by definition are intermediaries. This means that they are (without reservation or exception) affiliated with, or officially represent certain market makers like banks, money exchangers, importers, and the like. In foreign currency trading, the brokers are part of an informal market which is basically an electronically-linked network consisting of large banking institutions (who are the traditional money traders), multi-national corporations and giant insurance companies (who need to move money globally their global operations), central banks (who need to buy and sell different currencies to defend the purchasing power of their own currencies and also to finance their international trade requirements), and large investment houses (who manages the investment portfolios of large clients oozing with cash and liquidity).
The rise in international trade in the last decade also saw the rise in the volume of foreign currency transactions which today as more than three trillion dollars in daily transactions...more than double the daily combined volume of the New York Stock Exchange and the Chicago Board Of Trade! This eventually gave rise to retail foreign currency brokers many of whom have established their own web presence promotes online currency trading.
Unfortunately, because the foreign exchange market is an informal market (meaning, it is not located in one single place and doesn't have a fixed trading floor like the NYSE and the CBOT), and because the technology and the electronically transmitted trading data are publicly available, 'sweat shops' or scammers posing as legitimate brokers have also proliferated and invaded the internet posing as legitimate forex brokers!
Care must be taken to avoid falling prey to scam artists posing as legitimate forex broker! Here are some tell-tale signs an online broker may be a scam artist.
1. Their websites don't provide you with specific, verifiable physical corporate address.
2. Their websites do not provide you sufficient information about the people behind the company.
3. They do not provide you with information about their company's affiliation with any currency regulatory body. (Chances are, they are not affiliated with any.)
4. They do not provide a clear cut course of action to take in case of disputes.
To be sure, and for your own sake so will have an alternative course of action you can take in case of disputes, deal only with online brokers registered with any of the following currency trading regulatory body:
- Australian Securities & Investments Commission
- Danish Financial Supervisory Authority
- Swiss Federal Department of Finance
- Swiss PolyReg
- UK Financial Services Authority
- US Commodity Futures Trading Commission
- US National Futures Association