Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

ASIC warns retail investors of dangers in FX trading

There is much promoting to retail investors of the benefits of learning to trade foreign exchange. ASIC has warned of the dangers.

The FX market is a network made up of banks, central banks, commercial companies, fund managers, non-bank foreign exchange brokers and retail investors. This means that there are no exchanges for FX trading as there are with listed products such as equities.

The average daily market activity in April 2013 increased to $5.3 trillion up from $4 trillion in 2010. The UK boasts the highest global turnover at 41% with the US accounting for 19%. Japan, Singapore and Hong Kong SAR each have turnover of around 5% while activity in Australia is just under 3%.

Here is an extract from ASIC's website.

 

ASIC warns of dangers of foreign exchange trading for retail investors

ASIC today urged consumers to ensure they understand the risks of foreign exchange trading before putting their money on the line.

The warning about this complex investment comes after liquidators were appointed to GTL TradeUp Pty Ltd (GTL), a Sydney-based company involved in foreign exchange (FX or forex) trading. ASIC is investigating GTL and the circumstances around its collapse.

FX trading, which is becoming more accessible via electronic trading platforms, is when you buy and sell foreign currencies to try to make a profit. It involves speculating on the value of one currency compared to another.

It is normally conducted through ‘margin trading’, where a small collateral (property or asset) deposit worth a percentage of a total trade's value, is required to trade.

FX trading raises the stakes further by letting investors trade with borrowed money (leverage), but they are responsible for all losses, which may exceed their initial investment

‘Forex trading is complex and risky. Even the most skilled and experienced forex traders have difficulty predicting movements in currencies. Trading in international currencies requires a huge amount of knowledge, research and monitoring,’ ASIC Commissioner Greg Tanzer said.

‘Like any investment, it is vitally important investors fully understand what they are getting into, and FX trading is no different. Unless you fully understand what investment you are making and the risks involved with that investment, don’t do it.’

Further, ASIC has seen an increasing number of people setting up businesses that promote this type of investment strategy.

ASIC banned Robert Lloyd Wilson from providing financial services and have warned the public against dealing with him for his promotion of a program that showed ‘when to get in and when to get out’ of trades. These trades included, among other things, FX trades (refer: 13-282MR).

‘We will not hesitate to take action when we see people or businesses and their dodgy practices preying on innocent investors who may know little about these risky investments,’ Mr Tanzer said.

To successfully trade in FX, you will need to have good knowledge of foreign exchange, leverage, volatility, the conditions of each country whose currency you are trading, and counterparty risk – knowing where your funds will be kept and the risk that an issuer will default on its obligations to clients, including failing to return client money.

It is very risky because:

  • There are significant investment risks as currency fluctuations may move against you, causing you to lose money. Exchange rates are very volatile – they tend to move around a lot even within very short periods of time.
  • Markets are open 24 hours a day 6 days a week (due to time zones), so you need to devote a lot of time to tracking your investment.
  • Currency markets are extremely difficult to predict because so many factors affect exchange rates.
  • Even small market movements can have a big impact, because most forex trading products are highly leveraged.
  • Risk management systems, such as stop loss–orders, will only give you limited protection by capping your losses. You may have to pay a premium price to guarantee your stop loss order.

 

  •   21 October 2013
  •      
  •   

 

Leave a Comment:

RELATED ARTICLES

Behavioural reasons why we ignore life annuities

We need to talk about risk

banner

Most viewed in recent weeks

Want your loved ones to inherit your super? You can’t afford to skip this one step

One in five Australians die before retirement and most have not set up their super properly so their loved ones can benefit from all their hard work and savings. 

Super is catching up, but ageing is a triple-threat

An ageing Australia is shifting the superannuation system’s focus from accumulation to the lifecycle of retirement. While these pressures have been anticipated for decades, they are now converging at scale and driving widespread industry change.

Has Australia wasted the last 30 years?

The 20 years after Peter Costello left Treasury have been deemed wasted...by Peter Costello. The missed opportunities for Australia began long before.  

The 5% deposit scheme is bad for homeowners and Australia

An ‘affordability’ scheme making the county more vulnerable to economic shocks and contributing to the deteriorating financial situation of everyday Australians.

Indexation implications – key changes to 2026/27 super thresholds

Stay on top of the latest changes to superannuation rates and thresholds for 2026, including increases to transfer balance cap, concessional contributions cap, and non-concessional contributions cap.

3 ways to defuse intergenerational anger

With the upcoming budget increasingly likely to include bold proposals to alter the tax code I’ve outlined three incremental steps with fewer unintended consequences.

Latest Updates

Superannuation

Indexation implications – key changes to 2026/27 super thresholds

Stay on top of the latest changes to superannuation rates and thresholds for 2026, including increases to transfer balance cap, concessional contributions cap, and non-concessional contributions cap.

Economy

Central banks need higher inflation targets

In a shift away from solely targeting low inflation, central banks are considering raising inflation targets to combat economic challenges, but face potential drawbacks and conflicts in policy implementation.

Exchange traded products

The missing 30%: how LIC returns are understated, and why it matters

The perceived underperformance of LICs compared to ETFs is due to existing comparison data excluding crucial information, highlighting the need for proper assessment and transparent reporting.

Latest from Morningstar

Alpha isn’t dead. You’ve just been measuring it wrong

New research shows smarter portfolio construction—not new factors—is the real edge in the hunt for alpha. However, finding it requires a fundamentally different mindset.

Investment strategies

The diversification illusion: why 'balanced' portfolios may be exposed

Many 'diversified' portfolios are increasingly driven by the same narrow set of forces. As concentration builds beneath the surface, understanding how portfolios behave - not just how they’re constructed - is critical for investors.

Investment strategies

The case for staying the course in credit

Rising oil prices and inflation pushed Australian yields higher. Markets expect further tightening, but weaker growth may reverse rates. Locking income and maintaining duration is a sound strategy for widening credit spreads.

Investment strategies

One risk after another

Investors often focus on front-of-mind risks, reacting to each headline event without considering long-term impacts. Cass Sunstein and Timur Kuran define this as an "availability cascade," affecting financial decision-making.

Sponsors

Alliances

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.