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Posted: 6:00 a.m. Tuesday, Feb. 12, 2013

Is foreign currency trading worth the risk?



By Clark Howard


Have you seen the ads that are everywhere touting how you can get rich quick by trading foreign currencies? I'm getting so many calls from people who want to know if this can be their ticket to instant wealth as the pitch makes it seem.

I will tell you, this is playing with fire. Foreign currency trading is a very high risk venture.

Barron's magazine wrote a story about foreign currency trading titled "Pitfalls of the Currency Casino." (The title alone practically tells you all you need to know!) The article details how amateur foreign currency traders have a 75% chance of losing their money.

So who is getting rich from foreign currency trading? For the most part, it's the clowns who sell you those startup kits to get you in the game, that's who!

Even worse, Barron's explains people are doing foreign currency trading with borrowed money, even cash advances on their credit cards. The leverage can be as high as 50-to-1!

Now the regulatory body of the futures industry is considering banning retail currency trades done on credit card. The Wall Street Journal  reports that some 60% of currency trades are now done on credit. So if you lose "your money" that you've borrowed, not only are you wiped out, but you also owe the loan to the credit card company!

Foreign currency trading is best left to professionals who are highly experienced and trained in this field. (And even then the big boys can lose big too.) So the next time you see or hear one of those ads, I hope you remember my words.