EDITORIAL (Halbeeg News) – For the last several months, people who have been venturing online trading in foreign exchange, also known as Forex have claimed to have secured handsome returns but there are also many risks involved, including being conned.
Many people started seeking to get involved in Forex with the help of brokerage firms set up by Somali youth acting as money managers after number of people claimed to have gained a lot of profit from the business. Thus, this way these brokers lured many people to join the field.
Money managers is defined as an entity that acts as a link between the foreign exchange market (through the market maker) and the client in return for a spread.
The brokers provided the best sign up bonuses for new traders from Somalia with some gaining 50 plus profit.
Before embarking on Forex Trading, the person has to pay 300 USD as a registration fee and deposit certain amount of investment depend on his or her financial status.
This piece is not meant for criticizing the business but to warn the investors against imminent risk they could face by handing over their investment to unregulated brokerage firms based in Somalia and money managers who make sure to convince many people Forex trading to be a piece of cake.
The foreign exchange (FX) market is the largest and most traded financial market in the world with a total volume of trillion traded daily. The market dates back five decades of existing in the world.
Online trading and Contract for Difference (CFD) trading refers to an agreement to exchange the difference between the entry and the exit price of an underlying asset.
The trade is not illegal as well as bad thing but the field needs proper analysis of the market and to understand the trading dynamics to avoid losses.
Risks
It is sure that trading forex on margin carries a high level of risk.
This trade is new to Mogadishu and several other places in Somalia and Somalis in country have been doing it not more a year.
Thought there has been no reports of loses countered, yet there is imminent risk.
The market is delicately dependent on stability in the world. Events and politics in the biggest economies influence how the market operates. Foreign currencies fluctuate in value by the minute.
In accordance with fatwas issues by Muslim clerics, the Forex is involving in usury which is of course completely prohibited in Islam.
The other risk is, this market which started out of blue in Somalia has not been based on regulations and data analysis (conducted by Somalis) to manage if risks emerge as it involves in investment. The Forex trade in Somalia somehow disagrees with global one.
In other parts in the world, after equipped knowledge and skills about Forex exchange, the investors open their own accounts and ventures the field while operating independently with the help of ideal broker but in Somalia the case is different, people give their money to a brokers operating at certain offices in city. The person inks deal with the brokers indicating that certain fixed monthly returns would be paid to the client but this signals danger as something could go wrong at any time.
Online Forex Trading can be defined as speculation of currencies whereby a person trades on one currency against the other with the anticipation of making profits.
One makes profits by buying a currency that gains value in a buy trade and selling a currency that its price drops in a sell trade and losses occur when the opposite happens.
Therefore, by making a pledge to give some certain fixed monthly profit to the clients is somehow beyond the logic manner. So, this is an indication which this article warns against.
investors chasing big returns are increasingly sinking thousands of US dollars in unregulated online trade in foreign currencies. Other countries with strong governments have established a regulatory body known as Capital Markets Authority (CMA) which controls and regulates the market.
Therefore as Somalia is yet to set up such body, the Central Bank of Somalia last December ordered closure forex accounts in commercial banks with immediate effect but still some forex companies operate, increasing the risk to loss huge sum of money the brokers owed to their customers as it is difficult this kind of business run without bank accounts.
The other discouraging issue is, non-dealing online foreign exchange brokers also referred to as a straight-through-processing (STP) brokers are mainly young people with no financial back up so this is another where STPs can escape if the plan goes wrong.
Ways to get good returns
Hundreds of small scales have closed and auctioned their businesses and sold their goods in order to invest forex trade and hope goods returns.
This is another risk as those who invested the field could end up empty-handed if the forex fails to generate good returns and could affect lives of hundreds of families who previously depend on the auctioned businesses before their breadwinners moved to forex trade. It can also affect the economy of the country.
Move can have negative impact the country’s entrepreneurship as many will quit the previous position to secure good returns and think about the management of the unpredictable profits.
However, this piece would not encourage people to quit forex trade but is meant only to shade light on the hidden risks of the field which could be seen in the future.
Therefore, the following are ways to avoid risk and get good returns.
– To try to avoid the aforementioned risks, entrust your wealth with trustworthy money manager with valid license.
– Everyone with aim to join the field should get knowledge about what kind of business is forex and certainty of his money.
– After good research and analysis, one should seek training and join the field by following the right procedures.
– To abstain usury, one should seek guidance from Muslim clerics and those with good knowledge of the topic.
– By joining this field, one should be risk taker.
– Never to have full confidence in Somalia’s Forex trade as the money manager lured people with fake goods returns.
– Finally, the government which is responsible for welfare public wealth should ensure to safe the wealth of its citizens from the risk.
As the government banned the accounts of Forex companies, it should also take another step to ensure properties and money of its citizens are secured.
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