E-commerce consists primarily of the distributing, buying, selling, marketing and servicing of products or services over electronic system such as the Internet and other computer networks. An electronic business application aimed at commercial transactions and can involve electronic funds transfer, supply chain management, e-marketing, online marketing, online transaction processing, electronic data interchange (EDI), automated inventory management systems, and automated data collection systems. E-commerce software typically provide a means of capturing a client's credit card information, but they rely on the software module of the secure gateway provider, in conjunction with the secure payment gateway, in order to conduct secure credit card transactions online.
Synonyms:
Shopping cart software, shopping basket, Internet Commerce Software, Web Commerce Software, Web Commerce Server Software, and Electronic Commerce Software
Ecommerce 2.0
A few years ago, Tim O’Reilly introduced the concept of Web 2.0 to make sense out of what was next for software solutions. Web 2.0 explains how the realities of tomorrow will change how software solutions are designed, created, and used.
By examining and extrapolating Web 2.0 principles, I began to see that they had important implications for online retailing. This is ultimately where the concept of eCommerce 2.0, and the Six Principles of eCommerce 2.0, comes from.
Understanding the new possibilities for software—and what principles are applied in creating it—is the foundation for understanding the future of eCommerce. It is also the foundation for taking advantage of eCommerce 2.0 principles and the new trends they drive. The Six Principles of eCommerce 2.0 Just as Web 2.0 is altering the software development landscape, the principles of eCommerce 2.0 will define how eTailers do business online. Below is an introduction to the Six Principles of eCommerce 2.0.
[edit] The Six Principles of eCommerce 2.0
1. Sell Everywhere – Be Seen and Be Shopped Customer expectations for how and when they buy products have changed substantially over the past few years. Multi-channel selling was once limited to managing direct sales, a call center, a website, and possibly a partner channel. With eCommerce 2.0, this has been expanded and refined to include various online channels. These new channels include additional branded websites, various online marketplaces (such as eBay, Amazon.com, Overstock.com, and others), and online shopping comparison engines (such as Shopping.com, PriceGrabber.com, and others).
2. The Long Tail – Target Niche Markets eTailers who can connect with niche markets and provide a better online experience are capitalizing on new-found revenue. In the past, the obvious strategy was to find the bulk of the market and then mass market to them. With so much competition, many online merchants have adapted by discovering new methods and tools that target specific niche markets. These niche markets are not flooded by the big brands and respond well to content and online experiences directed specifically at them. In many cases, the demands of these niche markets are simply not being met by big brands. The Long Tail principle of eCommerce 2.0 is about being able to reach beyond the traditional prospect base and tap the potential of niche markets.
3. Customers Rule – Build a Community of Raving Fans Buyers were once along for the ride in the eCommerce process. Now they are in the driver’s seat. The content buyers create through forums such as product reviews, blogs, and social networks influences other buyers as much or more than any promotion eTailers create. Forums like YouTube and MySpace underscore how content created by consumers has become a viable and valuable part of the promotional and sales cycle for retailers. The most frightening aspect of these forums for many eTailers is the perceived loss of control over content being published.
4. Personalized Shopping – Make It Fun to Shop and Easy to Buy Shopping has long been considered a recreational activity by many. Shopping online is no exception. In fact, with the sophistication and speed of online shopping tools, consumers are spending more and more on eTailer sites. The best of these shopping tools takes into account that buyers want to be entertained and pleased. Buyers also—just as in the brick-and-mortar world—do not like long checkout processes. When building your online brand, regardless of channel, remember that speedy checkout equates to happier buyers who are more likely to return and buy again.
5. Mash-ups – Integrate and Collaborate Integration is nothing new, but what is new is how dynamically these integrations need to be initiated, modified, and used. The eCommerce 2.0 environment is built upon many interrelated systems and processes that require information to be exchanged dynamically. This happens between many systems based on individual user experience and the context of a particular customer interaction or order. Seamless access and interaction between systems is what promotes increased conversions and buyer loyalty, as well as attracts new buyers.
6. Data is King – Collect a Wealth of Opportunities Gone are the days of looking at purely operational reports. Seeing how many listings you have in a marketplace is fine, but it does not tell you how you compare to other eTailers, what your performance is like over time, or what other channels may be more profitable. eCommerce 2.0 is about collecting and managing data from all online channels to enable better business decisions. Discovering product opportunities relies on being able to define business objectives carefully, identify related key performance indicators (KPIs), and receive continual data to act on it.
[edit] Putting it Into Practice
eCommerce is growing and changing at a rapid pace. It is being driven by ever-evolving technology and consumer needs. Keeping pace with this change can be difficult. This is a brief introduction to the principles that will drive future eCommerce. These principles can be used as a guidepost to evaluate where you are with your business today and where you can go with it in the future.
eCommerce 2.0, with all of its principles, represents a new creative frontier that will test your competencies, technology, and ability to form partnerships. It will also give you better information and more effective branding capabilities, and help you form more profitable online relationships. What eCommerce 2.0 ultimately gives you—by adopting its principles—is more control over your own data, processes, and profitability.
Wednesday, August 15, 2007
Tuesday, August 14, 2007
Adult Merchant account
Merchant account
A merchant account allows a business to accept credit cards, debit cards, gift cards and other forms of payment cards. This is also widely known as payment processing or credit card processing.
Merchants, or business owners who receive credit card payment for their goods or services, must apply for a merchant account typically through a merchant bank or MSP (Merchant Service Provider). The merchant account will typically be established based on several factors. Merchants who own businesses with poor or no credit may find it difficult to establish a merchant account through traditional routes
low cost merchant account,card credit merchant processing,card credit merchant service ...
Rates and fees
Merchant accounts are not free - a variety of charges are involved. Some fees are charged on a monthly basis but most are charged on a per-item or percentage basis. All of the monthly fees are at the discretion of the merchant account provider but the majority of the per-item and percentage fees are passed through the merchant account provider to the issuing bank according to a schedule of rates called Interchange fees, which are set by Visa and Mastercard.
Each transaction is categorized into an interchange category depending on the kind of card that was used for the transaction and the circumstances of the transaction. For example, if a transaction is made by swiping a card through a credit card terminal it will be in a different category than if it were keyed in manually. If a transaction is made using a rewards card it will fall into a different category than a standard card. The permutations add up - in total there are about 130 categories, each with a different rate.Merchant account providers usually group the 130 categories into 3 or 6 categories and apply a single rate to that entire bucket. This includes Retail, Mail Order / Telephone Order and eCommerce or Card Not Present. They base that rate on the average interchange rate that they expect for that category plus a markup for themselves.These tiers describe costs for different kinds of credit cards when processed under different kinds of circumstances. For example, a check card costs less than a consumer credit card which costs less than a business card. The method of how a credit card is processed changes which tier of Interchange is applied. For example, a swiped credit card costs less to process than one keyed into a credit card terminal.
Interchange Based Fees
3-Tier Pricing
3-Tier Pricing is the most popular pricing method, although 6-Tier Pricing is gaining in popularity quickly. In 3-Tier Pricing, the merchant account provider groups the transactions into 3 groups (tiers) and assigns a rate to each Tier.
Qualified rate
A qualified rate is the percentage rate a merchant will be charged whenever they accept a regular consumer credit card and process it in a manner that has been defined as "standard" by their merchant account provider. This is the lowest rate a merchant will incur when accepting a credit card. The qualified rate is also the rate commonly quoted to a merchant when they inquire about pricing. For example, for an internet merchant, the internet interchange categories will be defined as Qualified, while for a physical retailer only transactions swiped through or read by their terminal in an ordinary manner will be defined as Qualified.
Mid-qualified rate
Also known as a partially qualified rate, the mid-qualified rate is the percentage rate a merchant will be charged whenever they accept a credit card that does not qualify for the lowest rate (the qualified rate). This may happen for several reasons such as:
- A consumer credit card is keyed into a credit card terminal instead of being swiped
- A special kind of credit card is used like a rewards card or business card
A mid-qualified rate is usually 1.50% - 2.50% higher than a qualified rate. Interestingly, the kinds of transactions that are usually grouped into the Mid-Qualified Tier only cost 0.30%-0.50% more in interchange costs, so the merchant account providers make much of their profit from these transactions.
With the prevalence of rewards cards it is not uncommon for 15-40% of transactions to be mid-qualified.
Non-qualified rate
The non-qualified rate is the highest percentage rate a merchant will be charged whenever they accept a credit card. All transactions that are not qualified or mid-qualified will fall to this rate. This may happen for several reasons such as:
- A consumer credit card is keyed into a credit card terminal instead of being swiped and address verification is not performed
- A special kind of credit card is used like a business card and all required fields are not entered
- A merchant does not settle their daily batch within the allotted time frame
A non-qualified rate is usually 2.00% - 2.50% higher than a qualified rate (and only cost 0.50%-1.50% higher in interchange costs).
6-Tier Pricing
As a result of the Wal-Mart Lawsuit and to compete against Pin-Based debit cards (which are processed outside of the Visa and Mastercard networks), Visa and Mastercard lowered the interchange rates for debit cards well below those for credit cards. Merchant Account providers have gradually had to pass the savings on to their customers. Consequently, each of the 3 original tiers have been divided into Debit and Credit, for a total of 6 tiers.
Interchange Plus Pricing
Larger and more sophisticated merchants usually have their merchant account services priced on an interchange plus basis, which means that they pay a specified markup over and above the interchange costs.
Other Fees
The Authorization fee is charged each time a transaction is sent to the card-issuing bank to be authorized, usually between 10 and 20 cents each. Even if the transaction is declined this fee is assessed.The statement fee is a monthly fee associated with the monthly statement that is sent to the merchant at the end of each monthly processing cycle, usually a flat $5 or $10. This statement shows how much processing was done by the merchant during the month and what fees were incurred as a result -- although rarely in a way that clearly explains the tiered pricing and costs of "downgrading."
Monthly minimum fee
The monthly minimum fee is a way to ensure that merchants pay a minimum amount in fees each month. If a merchant's qualified fees do not equal or exceed the monthly minimum they will be charged up to the monthly minimum to satisfy their minimum fee requirements.
Example: A merchant has a $25.00 monthly minimum fee. Their qualified fees for their most recent complete month of processing total only $15.00. This merchant will be charged an additional $10.00 to meet their monthly minimum requirements. It is industry standard to charge a monthly minimum.
Batch fee
A batch fee is charged to a merchant whenever the merchant "settles" their terminal. Settling a terminal, also known as "batching", is when a merchant sends their completed transactions for the day to their acquiring bank for payment. It is industry standard to charge this fee.
Chargeback fee
If a merchant encounters a chargeback they may be assessed a fee by their acquiring bank. This fee is typically charged whether the chargeback is successful or not and is not dependent on the amount of the chargeback.
Methods of processing credit cards
For a credit card transaction to be processed correctly it must be sent electronically to an acquiring bank. The method of processing credit cards will vary by industry. A merchant account provider typically has the ability to sell or establish a means to process credit cards for a merchant.
Credit card terminal
A credit card terminal is a stand-alone piece of electronic equipment that allows a merchant to swipe or key-enter a credit card's information as well as additional information required to process a credit card transaction. A credit card terminal is a dedicated piece of equipment that only processes credit cards although it is common for related transactions including gift cards and check verification to also be performed. A credit card terminal typically must be plugged in to a power supply and connected to a telephone line. However, newer terminals may be powered by batteries and communicate over the Internet. Some credit card terminals are connected to the cellular network and communicate wirelessly. When a credit card is run through, it contacts the network to verify that the credit card can be charged. The actual billing of the charge is done at the end of day batch where all sales from the terminal of the day are sent out.
Most credit card terminals in current use consist of a modem, keypad, printer, magnetic stripe reader, power supply and memory card.
A merchant accepting credit cards with a terminal in the United States will usually acquire that terminal in one of 4 ways. They may purchase the terminal, rent the terminal, lease the terminal or be offerred the terminal at "no cost" in return for` contractual obligations from a merchant processor.As with computers, there is a wide range of memory capacities and other features like built-in printers and debit card pinpads that affect the manufacturing cost of a credit card terminal.Because of the general lack of knowledge regarding the cost of a credit card terminal, a business owner would be wise to make sure they are paying a fair price or making an acceptable contractual agreement before making a written commitment for processing and/or a credit card terminal.When a terminal is leased there is usually a 3rd party leasing company involved and it is not uncommon in many U.S. states for these leases to be non-cancellable.As with any cntractual agreement, a business owner should carefully review the terms and conditions before selecting a merchant processor and a credit card terminal. The written agreeent will always apply no matter what the processor's representative or terminal seller might state verbally.
Automated Response Unit (ARU)
An ARU allows the manual keyed entry and subsequent authorization of a credit card over a cellular or land-line telephone. A business typically imprints their customer's card with an imprinter and then processes the transaction instantaneously over the phone.
Payment gateway
A payment gateway is an e-commerce service that authorizes payments for e-businesses and online retailers. It is the equivalent of a physical POS (point-of-sale) terminal located in most retail outlets. A merchant account provider is typically a separate company from the payment gateway. Some merchant account providers have their own payment gateways but the majority of companies use 3rd party payment gateways.
Level 3 Processing - Purchasing Cards
Increasingly, corporations and government agencies are relying on this form of payment to compensate their service providers and suppliers. Businesses benefit by receiving their funds quickly and by winning competitive bids and government contracts where purchasing cards are the required form of payment. The downside, however, is the cost associated with receiving these payments.
For some businesses there are ways to process these transactions that allow them to maintain their margins and be competitive in the bidding process. For example, if government transactions are over $5,000, businesses can significantly reduce their transaction costs by including specific information about the purchase along with each transaction. For private large ticket transactions, businesses can save even more. Implementing such a program can enable them to recover a full 1% of their total transaction as pure profit – often as much as a 40% - 50% savings when compared to processing in a more traditional manner.
Some interesting link:
- Credit card
-windows xp patch
- Payment gateway
-windows vista
- merchant account provider
-windows upgrade
- Credit card fraud
-windows software - Chargeback insurance
- Payment card industry- PCI
- Cardholder Information Security Program- CISP
- uvme.blog.hr -windows xp profesional
Sunday, August 12, 2007
5 Things You Should Never Do In Forex
Revising my recent trades which were made during the last month I still find myself making the same mistakes I've been doing as a newbie trader. The amount of these mistakes lowered, but sometimes emotions overcome the mind and the strategy and as a result - pips are lost. Here is the list of most devastating and stupid things you can make in Forex trading:
1. Don't place stop-loss - sometimes I just forget to place, sometimes I hope for the price to eventually go in the right way and think that stop-loss will be an obstacle. This is wrong! Always place a stop loss - it's good to have it significantly lower than your targeted profit.
2. Trade in lots too big - even if you are100% sure that this position will be profitable, don't make it too large - 1%-5% is more than enough. Losing 20% of your deposit will require much more risk to recover.
3. Overtrade - everyone says that it is bad to overtrade, but for a trader it is always hard to stay away from market when there is "so many opportunities". Just try to set a limit of daily/weekly trades for yourself. Overtrading is a result of the mindless emotions, not your mind, so avoid it.
4. Closing the winning positions too early - it seems OK to get some guaranteed profit against risking to wait even more. But trading experience proves that early closing for winning positions and waiting for losing positions to go green - is completely wrong. Let your winning positions run and cut your losing ones early!
5. Following forecasts and signals - for some traders it's hard to avoid this, especially when there is some Forex guru they respect. Trading with your own strategy and full responsibility is the only way that can make you a professional and successful Forex trader.
Forex Guide Controlling Risk
Forex trading is a 24-hour activity, so how can you protect your positions when you are away from your screen?
There are a variety of automated orders that can be triggered at pre-set exchange rates and that can be deployed to control the downside and consolidate the upside:
Stop loss: An order to close out a position automatically when the bid or offer price touches a given level.
For long positions, you issue a stop loss order below the current exchange rate. If the market price falls through the stop loss trigger rate, then the order will be activated and your long position will be closed out automatically.
If you have a short position, you would set your stop loss above the current rate to be activated when the offer rate touches the trigger level.
A “trailing stop loss” is one that is adjusted behind a position as it moves into profit, to lock in gains.
In volatile markets, it may be impossible to execute stops at the precise limits.
Take profits order (TPO): The opposite of a stop loss. For a short positions the TPO order will be set below the current exchange rate, and vice versa for long positions.
Limit order: A buy or sell order that is activated when the current exchange rate passes through some preset threshold rate. Limit orders can be good for a specified period (e.g. a day, a month) or “good till cancelled”.
One cancels the other (OCO): A combination of a stop loss and a limit order (or two limit orders) at opposite ends of the spread. When one is triggered, the other is terminated.
There are a variety of automated orders that can be triggered at pre-set exchange rates and that can be deployed to control the downside and consolidate the upside:
Stop loss: An order to close out a position automatically when the bid or offer price touches a given level.
For long positions, you issue a stop loss order below the current exchange rate. If the market price falls through the stop loss trigger rate, then the order will be activated and your long position will be closed out automatically.
If you have a short position, you would set your stop loss above the current rate to be activated when the offer rate touches the trigger level.
A “trailing stop loss” is one that is adjusted behind a position as it moves into profit, to lock in gains.
In volatile markets, it may be impossible to execute stops at the precise limits.
Take profits order (TPO): The opposite of a stop loss. For a short positions the TPO order will be set below the current exchange rate, and vice versa for long positions.
Limit order: A buy or sell order that is activated when the current exchange rate passes through some preset threshold rate. Limit orders can be good for a specified period (e.g. a day, a month) or “good till cancelled”.
One cancels the other (OCO): A combination of a stop loss and a limit order (or two limit orders) at opposite ends of the spread. When one is triggered, the other is terminated.
Monday, August 6, 2007
Forex trade, Online Forex broker, Marginal treding on forex
Forex:
"The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is by far the largest financial market in the world, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. The average daily trade in the global forex markets currently exceeds US$ 2 trillion. Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks."
The Retail forex(Retail Currency Trading or Retail Forex or Retail FX) market is a subset of the much larger Foreign exchange market. The Foreign Exchange market trades around 1.9 trillion daily, and retail trading is about 20 - 25 billion of that volume.
Retail Forex is usually highly leveraged
-->The idea of margin (leverage) and floating loss is another important trading concept and is perhaps best understood using an example. Most retail Forex market makers permit 100:1 leverage, but also, crucially, require you to have a certain amount of money in your account to protect against a critical loss point. For example, if a $100,000 position is held in Eur/USD on 100:1 leverage, the trader has to put up $1,000 to control the position. However, in the event of a declining value of your positions, Forex market makers, mindful of the fast nature of Forex price swings and the amplifying effect of leverage, typically do not allow their traders to go negative and make up the difference at a later date. In order to make sure the trader does not lose more money than is held in the account, Forex market makers typically employ automatic systems to close out positions when clients run out of margin (the amount of money in their account not tied to a position). If the trader has $2,000 in his account, and he is buying a $100,000 lot of EUR/USD, he has $1,000 of his $2,000 tied up in margin, with $1,000 left to allow his position to fluctuate downward without being closed out.
Typically a trader's trading platform will show him three important numbers associated with his account: his balance, his equity, and his margin remaining. If trader X has two positions: $100,000 long (buy) in EUR/USD, and $100,000 short (sell) in GBP/USD, and he has $10,000 in his account, his positions would look as follows: Because of the 100:1 leverage, it took him $1,000 to control each position. This means that he has used up $2,000 in his margin, out of a $10,000 account, and thus he has $8,000 of margin still available. With this margin, he can either take more positions or keep the margin relatively high to allow his current positions to be maintained in the event of downturns. If the client chooses to open a new position of $100,000, this will again take another $1,000 of his margin, leaving $7,000. He will have used up $3,000 in margin among the three positions. The other way margin will decrease is if the positions he currently has open lose money. If his 3 positions of $100,000 decrease by $5,000 in value (not at all an unusual swing), he now has, of his original $7,000 in margin, only $2,000 left. As discussed above, if you have a $10,000 account and only open one $100,000 position, this has committed only $1,000 of your money plus you must maintain $1,000 in margin. While this leaves $9,000 free in your account, it is possible to lose almost all of it if the position dives. On the other hand, if you have 5 positions open in a $10,000 account, you can lose only $5,000 because the other $5,000 is held in margin. However, this does not make it safer to hold more positions. The Forex market fluctuates so rapidly, that with shallow margins, you are much more likely to be closed out of your position and lose it entirely when it might have recovered from a temporary fluctuation if you had had sufficient margin to cover the variation. The more positions open at one time, the more risk the trader is exposed to.
Marginal Trading on FOREX
Marginal trading is the term used for trading with borrowed capital. It is appealing because of the fact that in FOREX investments can be made without a real money supply. This allows investors to invest much more money with fewer money transfer costs, and open bigger positions with a much smaller amount of actual capital. Therefore, one can conduct relatively large transactions with a small amount of initial capital. Marginal trading in an exchange market is quantified in lots. The term "lot" refers to approximately $100,000, an amount which can be obtained by putting up as little as 0.5% or $500.
But you always should remember these rules:
Margin trading can make you responsible for losses that greatly exceed the dollar amount you deposited.
Many currency traders ask customers to give them money, which they sometimes refer to as "margin," often sums in the range of $1,000 to $5,000. However, those amounts, which are relatively small in the currency markets, actually control far larger dollar amounts of trading, a fact that often is poorly explained to customers.
Don't trade on margin unless you fully understand what you are doing and are prepared to accept losses that exceed the margin amounts you paid.
The CFTC lists 9 warning signs for foreign exchange trading fraud:
1. Stay away from opportunities that seem too good to be true
Always remember that there is no such thing as a "free lunch." Be especially cautious if you have acquired a large sum of cash recently and are looking for a safe investment vehicle. In particular, retirees with access to their retirement funds may be attractive targets for fraudulent operators. Getting your money back once it is gone can be difficult or impossible.
2. Avoid any company that predicts or guarantees large profits
Be extremely wary of companies that guarantee profits, or that tout extremely high performance. In many cases, those claims are false.
The following are examples of statements that either are or most likely are fraudulent:
"Whether the market moves up or down, in the currency market you will make a profit."
"Make $1000 per week, every week"
"We are out-performing domestic investments."
"The main advantage of the forex markets is that there is no bear market."
"We guarantee you will make at least a 30-40% rate of return within two months."
3. Stay Away From Companies That Promise Little or No Financial Risk
Be suspicious of companies that downplay risks or state that written risk disclosure statements are routine formalities imposed by the government.
The currency futures and options markets are volatile and contain substantial risks for unsophisticated customers. The currency futures and options markets are not the place to put any funds that you cannot afford to lose. For example, retirement funds should not be used for currency trading.
g. You can lose most or all of those funds very quickly trading foreign currency futures or options contracts. Therefore, beware of companies that make the following types of statements:
"With a $10,000 deposit, the maximum you can lose is $200 to $250 per day."
"We promise to recover any losses you have."
"Your investment is secure."
4. Don't Trade on Margin Unless You Understand What It Means
Margin trading can make you responsible for losses that greatly exceed the dollar amount you deposited.
Many currency traders ask customers to give them money, which they sometimes refer to as "margin," often sums in the range of $1,000 to $5,000. However, those amounts, which are relatively small in the currency markets, actually control far larger dollar amounts of trading, a fact that often is poorly explained to customers.
Don't trade on margin unless you fully understand what you are doing and are prepared to accept losses that exceed the margin amounts you paid.
5. Question Firms That Claim To Trade in the "Interbank Market"
Be wary of firms that claim that you can or should trade in the "interbank market," or that they will do so on your behalf.
Unregulated, fraudulent currency trading firms often tell retail customers that their funds are traded in the "interbank market," where good prices can be obtained. Firms that trade currencies in the interbank market, however, are most likely to be banks, investment banks and large corporations, since the term "interbank market" refers simply to a loose network of currency transactions negotiated between financial institutions and other large companies.
6. Be Wary of Sending or Transferring Cash on the Internet, By Mail or Otherwise
Be especially alert to the dangers of trading on-line; it is very easy to transfer funds on-line, but often can be impossible to get a refund.
It costs an Internet advertiser just pennies per day to reach a potential audience of millions of persons, and phony currency trading firms have seized upon the Internet as an inexpensive and effective way of reaching a large pool of potential customers.
Companies offering currency trading on-line will usually be located in different legal jurisdictions to you. Even if they display an address or any other information identifying their nationality on their Web site it may be false. Be aware that if you transfer funds to foreign firms it may be very difficult or impossible to recover your funds.
7. Currency Scams Often Target Members of Ethnic Minorities
Some currency trading scams target potential customers in ethnic communities, particularly persons in the Russian, Chinese and Indian immigrant communities, through advertisements in ethnic newspapers and television "infomercials."
Sometimes those advertisements offer so-called "job opportunities" for "account executives" to trade foreign currencies. Be aware that "account executives" that are hired might be expected to use their own money for currency trading, as well as to recruit their family and friends to do likewise. What appears to be a promising job opportunity often is another way many of these companies lure customers into parting with their cash.
8. Be Sure You Get the Company's Performance Track Record
Get as much information as possible about the firm's or individual's performance record on behalf of other clients. You should be aware, however, that It may be difficult or impossible to do so, or to verify the information you receive. While firms and individuals are not required to provide this information, you should be wary of any person who is not willing to do so or who provides you with incomplete information. However, keep in mind, even if you do receive a glossy brochure or sophisticated-looking charts, that the information they contain might be false.
9. Don't Deal With Anyone Who Won't Give You His Background
Plan to do a lot of checking of any information you receive to be sure that the company is and does exactly what it says.
Get the background of the persons running or promoting the company, if possible. Do not rely solely on oral statements or promises from the firm's employees. Ask for all information in written form.
If you cannot satisfy yourself that the persons with whom you are dealing are completely legitimate and above-board, the wisest course of action is to avoid trading foreign currencies through those companies.
Good luck, you will need it ;)
"The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is by far the largest financial market in the world, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. The average daily trade in the global forex markets currently exceeds US$ 2 trillion. Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks."
The Retail forex
Retail Forex is usually highly leveraged
-->The idea of margin (leverage) and floating loss is another important trading concept and is perhaps best understood using an example. Most retail Forex market makers permit 100:1 leverage, but also, crucially, require you to have a certain amount of money in your account to protect against a critical loss point. For example, if a $100,000 position is held in Eur/USD on 100:1 leverage, the trader has to put up $1,000 to control the position. However, in the event of a declining value of your positions, Forex market makers, mindful of the fast nature of Forex price swings and the amplifying effect of leverage, typically do not allow their traders to go negative and make up the difference at a later date. In order to make sure the trader does not lose more money than is held in the account, Forex market makers typically employ automatic systems to close out positions when clients run out of margin (the amount of money in their account not tied to a position). If the trader has $2,000 in his account, and he is buying a $100,000 lot of EUR/USD, he has $1,000 of his $2,000 tied up in margin, with $1,000 left to allow his position to fluctuate downward without being closed out.
Typically a trader's trading platform will show him three important numbers associated with his account: his balance, his equity, and his margin remaining. If trader X has two positions: $100,000 long (buy) in EUR/USD, and $100,000 short (sell) in GBP/USD, and he has $10,000 in his account, his positions would look as follows: Because of the 100:1 leverage, it took him $1,000 to control each position. This means that he has used up $2,000 in his margin, out of a $10,000 account, and thus he has $8,000 of margin still available. With this margin, he can either take more positions or keep the margin relatively high to allow his current positions to be maintained in the event of downturns. If the client chooses to open a new position of $100,000, this will again take another $1,000 of his margin, leaving $7,000. He will have used up $3,000 in margin among the three positions. The other way margin will decrease is if the positions he currently has open lose money. If his 3 positions of $100,000 decrease by $5,000 in value (not at all an unusual swing), he now has, of his original $7,000 in margin, only $2,000 left. As discussed above, if you have a $10,000 account and only open one $100,000 position, this has committed only $1,000 of your money plus you must maintain $1,000 in margin. While this leaves $9,000 free in your account, it is possible to lose almost all of it if the position dives. On the other hand, if you have 5 positions open in a $10,000 account, you can lose only $5,000 because the other $5,000 is held in margin. However, this does not make it safer to hold more positions. The Forex market fluctuates so rapidly, that with shallow margins, you are much more likely to be closed out of your position and lose it entirely when it might have recovered from a temporary fluctuation if you had had sufficient margin to cover the variation. The more positions open at one time, the more risk the trader is exposed to.
Marginal Trading on FOREX
Marginal trading is the term used for trading with borrowed capital. It is appealing because of the fact that in FOREX investments can be made without a real money supply. This allows investors to invest much more money with fewer money transfer costs, and open bigger positions with a much smaller amount of actual capital. Therefore, one can conduct relatively large transactions with a small amount of initial capital. Marginal trading in an exchange market is quantified in lots. The term "lot" refers to approximately $100,000, an amount which can be obtained by putting up as little as 0.5% or $500.
But you always should remember these rules:
Margin trading can make you responsible for losses that greatly exceed the dollar amount you deposited.
Many currency traders ask customers to give them money, which they sometimes refer to as "margin," often sums in the range of $1,000 to $5,000. However, those amounts, which are relatively small in the currency markets, actually control far larger dollar amounts of trading, a fact that often is poorly explained to customers.
Don't trade on margin unless you fully understand what you are doing and are prepared to accept losses that exceed the margin amounts you paid.
The CFTC lists 9 warning signs for foreign exchange trading fraud:
1. Stay away from opportunities that seem too good to be true
Always remember that there is no such thing as a "free lunch." Be especially cautious if you have acquired a large sum of cash recently and are looking for a safe investment vehicle. In particular, retirees with access to their retirement funds may be attractive targets for fraudulent operators. Getting your money back once it is gone can be difficult or impossible.
2. Avoid any company that predicts or guarantees large profits
Be extremely wary of companies that guarantee profits, or that tout extremely high performance. In many cases, those claims are false.
The following are examples of statements that either are or most likely are fraudulent:
"Whether the market moves up or down, in the currency market you will make a profit."
"Make $1000 per week, every week"
"We are out-performing domestic investments."
"The main advantage of the forex markets is that there is no bear market."
"We guarantee you will make at least a 30-40% rate of return within two months."
3. Stay Away From Companies That Promise Little or No Financial Risk
Be suspicious of companies that downplay risks or state that written risk disclosure statements are routine formalities imposed by the government.
The currency futures and options markets are volatile and contain substantial risks for unsophisticated customers. The currency futures and options markets are not the place to put any funds that you cannot afford to lose. For example, retirement funds should not be used for currency trading.
g. You can lose most or all of those funds very quickly trading foreign currency futures or options contracts. Therefore, beware of companies that make the following types of statements:
"With a $10,000 deposit, the maximum you can lose is $200 to $250 per day."
"We promise to recover any losses you have."
"Your investment is secure."
4. Don't Trade on Margin Unless You Understand What It Means
Margin trading can make you responsible for losses that greatly exceed the dollar amount you deposited.
Many currency traders ask customers to give them money, which they sometimes refer to as "margin," often sums in the range of $1,000 to $5,000. However, those amounts, which are relatively small in the currency markets, actually control far larger dollar amounts of trading, a fact that often is poorly explained to customers.
Don't trade on margin unless you fully understand what you are doing and are prepared to accept losses that exceed the margin amounts you paid.
5. Question Firms That Claim To Trade in the "Interbank Market"
Be wary of firms that claim that you can or should trade in the "interbank market," or that they will do so on your behalf.
Unregulated, fraudulent currency trading firms often tell retail customers that their funds are traded in the "interbank market," where good prices can be obtained. Firms that trade currencies in the interbank market, however, are most likely to be banks, investment banks and large corporations, since the term "interbank market" refers simply to a loose network of currency transactions negotiated between financial institutions and other large companies.
6. Be Wary of Sending or Transferring Cash on the Internet, By Mail or Otherwise
Be especially alert to the dangers of trading on-line; it is very easy to transfer funds on-line, but often can be impossible to get a refund.
It costs an Internet advertiser just pennies per day to reach a potential audience of millions of persons, and phony currency trading firms have seized upon the Internet as an inexpensive and effective way of reaching a large pool of potential customers.
Companies offering currency trading on-line will usually be located in different legal jurisdictions to you. Even if they display an address or any other information identifying their nationality on their Web site it may be false. Be aware that if you transfer funds to foreign firms it may be very difficult or impossible to recover your funds.
7. Currency Scams Often Target Members of Ethnic Minorities
Some currency trading scams target potential customers in ethnic communities, particularly persons in the Russian, Chinese and Indian immigrant communities, through advertisements in ethnic newspapers and television "infomercials."
Sometimes those advertisements offer so-called "job opportunities" for "account executives" to trade foreign currencies. Be aware that "account executives" that are hired might be expected to use their own money for currency trading, as well as to recruit their family and friends to do likewise. What appears to be a promising job opportunity often is another way many of these companies lure customers into parting with their cash.
8. Be Sure You Get the Company's Performance Track Record
Get as much information as possible about the firm's or individual's performance record on behalf of other clients. You should be aware, however, that It may be difficult or impossible to do so, or to verify the information you receive. While firms and individuals are not required to provide this information, you should be wary of any person who is not willing to do so or who provides you with incomplete information. However, keep in mind, even if you do receive a glossy brochure or sophisticated-looking charts, that the information they contain might be false.
9. Don't Deal With Anyone Who Won't Give You His Background
Plan to do a lot of checking of any information you receive to be sure that the company is and does exactly what it says.
Get the background of the persons running or promoting the company, if possible. Do not rely solely on oral statements or promises from the firm's employees. Ask for all information in written form.
If you cannot satisfy yourself that the persons with whom you are dealing are completely legitimate and above-board, the wisest course of action is to avoid trading foreign currencies through those companies.
Good luck, you will need it ;)
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