Why isn't FX trading everyone's cup of tea?

If you're not a properly certified and experienced trader, forex trading is equivalent to gambling, and it should be avoided unless you're one of the few South Africans who have their financial affairs in order, according to top financial planner Craig Gradidge.

Before begining your Forex career, it is important understand the scams in the industry. WikiFX allows traders to view brokers in the most honest form. They are an independent third party broker enquiry app, that allows traders to fish out fake brokers and scams.

According to Gradidge, who holds the certified financial planner designation and is a director of Gradidge-Mahura Investments, a financial planning practice approved by the Financial Planning Institute, your financial affairs are “in order” when you have enough saved to cover your retirement, your children's education, your emergency fund, and your lifestyle.

Then, and only then, should you consider forex trading, he says, “and only as a substitute for gambling.”

“Forex trading's unpredictable outcomes are analogous to betting on black or red on a roulette table. In roulette, the green has a one-in-36 chance of appearing, therefore FX may be significantly less dangerous because the currency can move up or down.”

Given how few South Africans can afford to retire and maintain their quality of living, as well as our high debt levels, only a few people can safely dabble in FX trading.

People who profit [from forex trading] are frequently individuals who provide training programs or provide forex trading platforms, according to Gradidge.

While it is not impossible for the typical person to profit from forex trading, he claims that the odds are stacked against them.

Gradidge claims to have encountered frauds promising to quadruple your money in 30 days. If such returns were attainable, he claims that if you invested R100,000 and re-invested it and the returns every month, your investment would rise to R3.6 billion in two years and R1.7 trillion in less than four.

Such assurances are hollow promises designed to get you to part up your money. He responds, “You are the cause of their'return.”

Consumers should be wary of marketing methods employed by persons acting as forex traders, according to Faizan Anees, co-founder of broker ThinkMarkets.com South Africa.

He advises investors to consider why a stranger would wish to make them ultra-wealthy. Successful forex traders are reluctant to divulge their hard-won knowledge to the general public.

To avoid getting cheated, he recommends checking the reputation of the broker or bank they're dealing with, as well as if the organization is licensed and how long it's been in business. You can also ask for references.

Inquire about the broker's signed and certified statements, as well as whether or not the broker is regulated.

People that attempt to put you under strain, according to Anees, should be avoided. “Beware if the chance will pass you by and never return!”

He recommends starting with a little quantity of money. “A trader with a good plan may succeed with modest or huge sums of money, therefore there is no need to invest everything right away.” Furthermore, only invest money you can afford to lose.

'Cashflow' is no longer an option.

The Financial Sector Conduct Authority (FSCA) said last week that conmen posing as FX traders were convicted in two distinct schemes.

Port Elizabeth, South Africa-based David Wilmot collected money from clients under the pretence of trading forex on their behalf through his firm Nava Shore Holdings. According to the FSCA, Wilmot “infiltrated” a local church and used church contacts to misappropriate the majority of his customers' monies. The Financial Services Compensation Authority (FSCA) issued a public warning about Wilmot in 2013, stating that he was neither an approved financial services provider (FSP) or a representative of one. He was later found guilty of money laundering.

Meanwhile, the FSCA discovered that Jabulani “Cashflow” Ngcobo and Mzabalazo Welcome Dlamini portrayed themselves as approved FSPs who could trade FX on behalf of their clients. “This is a criminal offense, and the FSCA applauds the punishment imposed on them,” the FSCA states, “since it sends a strong message to unscrupulous financial companies and frauds.”

The two were sentenced to six years in jail, two of which were suspended, as well as a fine of R200,000, which was suspended in its whole for five years.

By downloading WikiFX and understanding the scams, will prevent you from dealing with all these scams. WikiFX allows traders to rate and review brokers, as well as, view ratings from other traders and the WikiFX. The app also allows traders to review customer support, which is vital to any traders well-being.