Expert gives advice on how to avoid losing money in scams, forex deals

To avoid being victimized in foreign exchange trading scams, investors must study the market carefully and turn to expert market analysis.

This was the advice given by Jonathan Ocampo, financial consultant of the Performance Foreign Exchange Corp. (PFEC), a company engaged in inter-bank spot currency trading, after noting the increase in pyramiding and ponzi scams victimizing hundreds of gullible individuals in the Philippines.

Ocampo said that if a company offers or guarantees "returns on investments" which "sound too good to be true – such as interests or profits of five percent or more monthly – the potential investor should exercise caution and cross-check with verifiable data in order to realistically assess the offer."

"The billions of pesos lost by well-intentioned investors in scams and non-viable business ventures can be avoided by studying the market carefully," according to Ocampo.

In currency trading, the spot foreign exchange market is the primary venue available to most investors in the Philippines, Ocampo explained. "Traditionally, spot trading involves the buying and selling of one country’s currency in terms of another for settlement in two business days."

The company also said that there is no futures forex trading in the Philippines, in which forex transactions are agreed for settlement beyond the period of two business days, because there is no formal exchange in foreign currency trading in this country.

"But because of the volatility in the foreign exchange market, due to international developments, prospective investors should be very careful in putting in their hard-earned money in the business," Ocampo added.

"Nevertheless, because of the unstoppable process of globalization the FX market has become a convenient venue for the movement of capital to take advantage of the prospects for economic growth and development in various parts of the world. Thus FX trading is the biggest market in the world, 17 times bigger than the New York Stock Exchange," Ocampo explained. Worldwide, FX trading amounts to $1.2 trillion daily, while in the Philippines the daily amount traded in foreign currency is about $100 million.

The Philippine peso, however, is not traded in the spot currency trading market, stressed Ocampo. Thus the peso is not being subjected to pressure from the market. Its volatility stems from other factors, declared Ocampo.

However, the PFEC consultant advised prospective players to resort to expert and reliable market analysis before investing in FX trading where sometimes fortunes are made, such as the fabulous fortune of international FX trader George Soros. "We cannot all be Soroses but we can avoid losses and generate reasonable profits through prudent and judicious investments."

To protect their investments in the FX market, Ocampo said, veteran investors turn to what is called "market analysis". "Simply put, market analysis is what is done when someone tries to determine where a given currency is going. It is an attempt to determine future price levels based upon historical price action and current market conditions."

The FX trading expert explained that there are two ways in which investors may analyze markets: fundamental and technical. "The fundamental refers to that approach which uses factors involving economics, politics and other real world situations, while the technical is based upon the history and trend of price movements and their derivatives."

According to Ocampo, "although most, if not all, investors use both analytical approaches, a good majority of them have come to rely heavily on technical analysis. This is in part due to the simplicity of the following basic assumptions: prices move in trends, prices discount everything, and history repeats itself."

But, as in the stock market, "if you cannot afford to lose any money, don’t play in the FX market, because as in all business investments, such as the stock and securities markets, risks are necessarily involved. But the rewards for judicious investment can also be great," Ocampo concluded.