What is the foreign exchange market (FOREX)?

FOREX (short for “foreign exchange”) is a market where investors, including banks and pension funds, exchange currencies.

For example, an investor may promise to exchange a certain number of Canadian dollars for a certain number Japanese yen promised in return by another investor.

Investors can make a profit on the FOREX market if they can correctly predict movements in the exchange rate between two currencies. Using the previous example, if the value of the yen increases, the investor receiving the yens can resell them at a higher price.

Investors who trade on the FOREX market usually use an Internet platform. The platform is often operated by a dealer or by a provider on behalf of a dealer.

What are the risks?

The value of currencies is influenced by several factors, including:

  • weather
  • political events
  • economic events

Investors who trade on the FOREX market must have enough time and knowledge to analyze a large volume of information.

Some strategies used on the foreign exchange market are complex. For example, leverage involves borrowing money to invest. Investors who use this strategy must repay the borrowed amount, even if the investment isn’t profitable. Investors can also lose more than the initial investment if the foreign exchange market doesn’t behave as predicted. It’s a risky strategy.

Who is qualified?

Warning

Beware of promises that sound too good to be true!

  • Become a FOREX pro in under a month!
  • Open a no-risk account!
  • The easiest and safest way in the world to make money!
  • Get rich from the comfort of your own home!
  • This is the most lucrative market in the world!
  • Avoid taxes!

Even though some people on the Internet and social media may tout its merits, the foreign exchange market is complex, volatile and very risky.

End of the warning

How to protect yourself against fraud on the foreign exchange market

The foreign exchange market isn’t for every investor.

Don’t listen to anyone who tells you otherwise. Don’t believe ads touting sure-fire methods, expensive software or training seminars and promising to turn you into an expert so you can earn quick cash.

As a general rule, be very careful if you’re guaranteed high returns without any risk. There’s no such thing as a risk-free high-return investment.

Insight

AMF investor warnings

The AMF routinely issues investor warnings about unregistered companies that solicit Québec investors to invest in FOREX.

Always check whether the person or firm offering you a FOREX investment is registered with the AMF and therefore authorized to sell you this type of product. If in doubt, contact an agent at our Information Centre.

If you receive this kind of offer or are solicited by a firm that is not registered with the AMF, we urge you to report it.

End of the insight

Thinking about investing on the foreign exchange market?

Before investing, you should have a solid grasp of the market’s features and risks. Is FOREX suited to your investor profile? How would a loss impact your financial situation?

Check that the firm and person offering you a FOREX investment is authorized to do so. Call the AMF Information Centre at 1-877-525-0337 or consult the Register of firms and individuals authorized to practise.