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NFA Alert on FX trading

Trading in the Retail Off-Exchange Foreign Currency Market - What Investors Need to Know
This publication is the property of National Futures Association ("NFA") and every prospective investor is encouraged read this NFA publication in order to have a clear understanding of the risk as well as the rewards of currency trading.   http://www.nfa.futures.org/investor/forex.asp

 
Trading cash Foreign Exchange ("FX") contracts carries the same high level of risk as futures trading (Futures Trading Disclaimer). However cash FX, unlike futures FX contracts that are regulated by the Commodity Trading Futures Commission, are not regulated by any governmental agency. In addition, because there is not a central clearing house for cash FX transactions, there is also a counterparty risk for each contact. For additional information please read the National Futures Association ("NFA") August 2003 "NFA Investor Alert" below.

NFA Investor Alert - Risks of Trading FOREX
NATIONAL FUTURES ASSOCIATION INVESTOR ALERT - AUGUST 2003
UNDERSTANDING THE RISKS OF TRADING IN THE RETAIL OFF-EXCHANGE FOREIGN CURRENCY MARKET

Although every investment involves some risk, the risk of loss in trading off-exchange forex contracts can be substantial. Therefore, if you are considering participating in this market, you should understand some of the risks associated with this product so you may make an informed decision before investing.

Forex dealers are not all regulated the same way.
Only regulated entities, such as banks, insurance companies, broker-dealers or futures commission merchants, and affiliates of regulated entities may enter into off-exchange forex trades with retail customers. Therefore, you should make sure the dealer is regulated and check out the dealer's registration status and background with its regulator. Although forex dealers must be regulated, firms and individuals can solicit retail accounts for forex dealers and manage those accounts without being regulated. Therefore, you should find out if these persons are regulated. If they are not, you may be exposed to additional risks. You can verify Commodity Futures Trading Commission (CFTC) registration and NFA membership status of a particular firm or individual and check their disciplinary history by phoning NFA at (800) 621-3570 or by checking the broker/firm information section (BASIC) of NFA's Web site at www.nfa.futures.org/basicnet/. You may also contact the other organizations listed at the end of this Alert.

You should protect yourself from fraud.
Beware of investment schemes that promise significant returns with little risk. Carefully check out the firms and individuals you are dealing with. You should also take a close and cautious look at the investment offer itself and continue to monitor any investment you do make.

The market could move against you.
No one can predict with certainty which way exchange rates will go, and the forex market is volatile. Fluctuations in the foreign exchange rate between the time you place the trade and the time you attempt to liquidate it will affect the price of your forex contact and the potential profit and losses relating to it.

You could lose more money than you initially invest.
You will be required to deposit an amount of money (often referred to as "margin") with your forex dealer in order to buy or sell an off-exchange forex contract. Only a relatively small amount of money can enable you to hold a forex position for much more than the account value. This is referred to leverage or gearing. The smaller the deposit in relation to the underlying value of the contract, the greater the leverage. If the price moves in an unfavorable direction, high leverage can produce large losses in relation to your initial deposit. In fact, even a small move against your position may result in a large loss, including the loss of your entire initial deposit and the liability for additional losses. Buying and selling forex options present additional risks. Many of these risks are similar to those inherent in buying options on futures contracts. Therefore, you should consult NFA's brochure, Buying Options on Futures Contracts: A Guide to Uses and Risks.

You are relying on the creditworthiness and reputation of the other party to the transaction.
Retail off-exchange forex trades are not guaranteed by a clearing organization. Furthermore, funds that you have deposited to trade forex contracts are not insured and do not receive a priority in bankruptcy. Therefore, you should know who you are dealing with.

There is no central marketplace.
Unlike regulated futures exchanges, in the retail off-exchange forex market, there is no central marketplace with many buyers and sellers. The forex dealer determines the execution price, so you are relying on the dealer's integrity for a fair price.

The trading system could break down.
If you are using an Internet-based or other electronic system to place trades, some part of the system could fail. In the event of a system failure, it is possible that, for a certain time period, you may not be able to enter new orders, execute existing orders, or modify or cancel orders that were previously entered. A system failure may also result in loss of orders or order priority.




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Disclaimer The risk of trading can be substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not necessarily indicative of future results. Striker is a member of the National Futures Association ("NFA"), the Managed Funds Association ("MFA"), and the National Introducing Broker Association ("NIBA"). Striker is registered with the Commodity Futures Trading Commission ("CFTC"), and was formerly registered with the Securities Exchange Commission ("SEC"). Additionally, Striker is a former member of the Financial Industry Regulatory Authority ("FINRA"), and the Securities Investor Protection Corporation ("SIPC"). FINRA is the largest non-governmental regulator for all securities business in the United States. Please read Striker Disclosure Statement for the additional disclosure.

Futures Trading Disclaimer:
Transactions in securities futures, commodity and index futures and options on futures carry a high degree of risk. The amount of initial margin is small relative to the value of the futures contract, meaning that transactions are heavily "leveraged". A relatively small market movement will have a proportionately larger impact on the funds you have deposited or will have to deposit: this may work against you as well as for you. You may sustain a total loss of initial margin funds and any additional funds deposited with the clearing firm to maintain your position. If the market moves against your position or margin levels are increased, you may be called upon to pay substantial additional funds on short notice to maintain your position. If you fail to comply with a request for additional funds within the time prescribed, your position may be liquidated at a loss and you will be liable for any resulting deficit. For accounts that are deemed abandoned or inactive, Striker may charge up to a $35.00 monthly inactivity fee, depending on the clearing firm where the account is held. If the Net Liquidity of an account reaches a Daily Loss Limit of 80%, open positions will attempt to be liquidated. Clients are responsible for monitoring their positions and are financially responsible for any losses generated by open positions in the account. Striker retains its right to liquidate positions in any account, at its sole discretion, with no forewarning.

Forex Trading Disclosure:
Trading cash Foreign Exchange ("FX") contracts carries the same high level of risk as futures trading (Futures Trading Disclaimer). However cash FX, unlike futures FX contracts that are regulated by the Commodity Trading Futures Commission, are not regulated by any governmental agency. In addition, because there is not a central clearing house for cash FX transactions, there is also a counterparty risk for each contact. For additional information please read the National Futures Association ("NFA") August 2003 "Investor Alert" found on the Striker Disclaimer Page.