Disadvantages of the Forex Market
High Risk of Investing
Trading on the Forex market carries a high level of risk.
No Exchange
Despite this also being an advantage, some Forex professionals say that the lack of a central exchange (or a number of central exchanges) is also a disadvantage. Some traders find comfort in the support of an exchange for their transactions. Also, the lack of a centralized exchange can lead to a discrepancy among information from one bank to the next, leading to the possibility of uninformed trading activities
The Complex Nature of the Market
A concern for many dealing with the Forex market is the factors that affect exchange rates and currency value (see Factors affecting currency trading). Unforeseen political crises and economic downturns can significantly affect a trader's account or a bank's foreign exchange practices.
Forex Scams
Unfortunately, according to The Wall Street Journal, Forex scams are common in the Forex market. A Forex scam is the model used by brokers/investors with an intention to embezzle traders' actives by offering them fast and significant profits earned by risky trading. Usually the scam involves an investment with an unusually high, and quick, return. The fact that the investment is usually relatively small draws investors to this shady aspect of the Forex market.
According to the National Futures Association, between 2001 and 2007 there were more 26,000 victims of Forex scams, resulting in losses nearing 460 million dollars.
