Auto Forex Trading Sweeps Up Retail Investors - But Will it Be Another Dot-Com Bust?

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Auto forex trading began just a few years ago but did not really become mainstream until the development of high-speed programs for desktop computers and the opening of the foreign currency trading markets to the general retail investors. Given the trading leverage afforded to retail investors and the availability of auto forex trading software is it any wonder that the foreign currency market has taken off this year?

Many Brokers Make for Confusion Amongst Traders
Brokerages of all shapes, names, and sizes have sprung up all over the place and offer significant trade privileges even to accounts with as little as one thousand dollars. Some accounts are able to trade with leverage ratios of 200: 1 or even 400: 1 in some cases. The problem with this of course is that they do not always explain the risks of using massive leverage with small equity accounts. For those readers not up to date with the parlance of currency trades what leverage means is that an investor with one thousand dollars could make transactions as though he or she had two hundred thousand dollars at the 200: 1 leverage ratio. A gain as small as half a percent would result in earnings equal to the initial investment of $ 1000. Doubling your money for just a half a percent gain in a cross rate? It seems strange but it is happening every day. Of course it is just as easy (and all too likely the way the game is rigged) to lose your entire capital stake with the same half a percent drop in price.

Risks and Lack of Regulation Not Deterrents to Growth
The growth rate of retail currency trade accounts was staggering toward the end of the last decade. Estimates vary but over 30% growth rate appears to be the average for that time period. In previous investing cycles this sort of moths to the flame activity has drawn retail investors in only to fleece them when the market peaked. As fate would have it, this has exactly been the case so much so that whole new series of regulations have been developed - mostly in the form of Dodd-Frank. It was interesting to see whether those using the auto forex trading accounts would fare better than those retail investors who got taken by the dot-com and real estate busts. As it turned out the currency market participants fared OK - not so much so for the hedge fund investors and certain futures market participants.

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Source by Steve B Wise