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By Francisco J. Colayco

I was watching an interview about foreign currency trading. The expert correctly stated that one should only use money that one is ready to lose. However, he also said that foreign currency trading is easy to learn. That statement reminded me of an email I received four years ago about a foreign currency trading firm. This company eventually turned out to be a scam.

I am not saying that all activities in currency trading are illegitimate. However, I am reminding everyone that currency trading is only for those who have a high level of education and many years of experience in the world of banking and finance. In fact, even those with those credentials still need to be very careful. The key risk factors in forex trading are leverage and volatility. These bring about inordinate risks that ordinary income earners are generally not equipped to manage.

Here is the email I want to share with you.

“I graduated from a private prestigious College and I got hired on my first job on June as a call center agent. Then I applied for a new job at Makati as a Business Executive which is a prestige jargon for ForEx broker. We were trained for one week before we officially became ForEx brokers.

After a month of being in the ForEx industry, I realized how difficult it is to be in this field because Filipinos have very little knowledge and some are not even aware of this business. There are times that when I present spot foreign currency trading to prospects, there are some who perceive it to be a scam and our company is sometimes thought to be an investment company which is very wrong, so I always differentiate the ForEx Market from the stock market and also give the difference of our Company from the investment firms. But I cannot blame those people because just like I’ve said Filipinos still have very little awareness about the industry. Unlike the stock market businessmen and corporations are still not aware of the benefits and advantages of foreign currency trading compared to the stocks exchange. It is not easy to convince people to invest $ 10,000 to an industry that only a few people know of.”

My reply:

You are right in your analysis of your industry’s situation. Your company is operating in a grey area since forex trading is one very sophisticated trade. Serious and knowledgeable investors will not deal with your local operations as there is no transparency and there are no validating third party information sources. More importantly, as we understand it, your company has no local regulatory body to protect the “investor-traders”. Moreover, while it is technically true that forex trading is not selling investments, it is very much like the stock market in operation and as such falls under the SEC mandate. Considering your level of education, perhaps, you might want to look at other options.

Wishing you a restful and prayerful Holy Week and a Blessed Easter!

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