3

The Truth about Forex Trading

Anyone with even a casual interest in currency trading online must have noticed the barrage of online advertisements inviting newcomers into the fx exchange market.

However, even with all that information being peddled online about the forex market, it is still rather difficult to separate fact from myth, truth from fiction. This difficulty is further compounded by the vested interests held by those who publish the information about forex trading.

These publishers may include brokers trying to promote a particular trading style that earns them most profit, sometimes at the expense of the trader.

There are a few truths every broker and trader should know from the very beginning about the foreign exchange market. These are:

Currency trading truth

High Volatility = High Profitability

Forex traders make their profits from the price fluctuations of different currencies. Therefore, a highly volatile market means there are increased opportunities for a trader to profit.

This is the main reason why the forex market is the largest market in the world, with at least $4 trillion being traded on a daily basis. This high liquidity is the reason why the forex market is one of the best investment options one should consider.

No Brokerage Fees

One of the best advantages of trading forex rather than investing in other financial instruments is the fact that there are no brokerage fees or commissions charged on the trader. The broker gets paid by the “spread” which is the difference between the bid price and the buy price.

This is a big advantage especially for the small beginner trader. Your entry into forex trading is made easier by the fact that you can start small without worrying about paying any brokerage fees and commissions. All you have to do is cover the spread.

 Opportunities for Higher Gains

Another big advantage that forex trade has over other investment methods is the fact that you can make so much from a small investment. The fx market offers many opportunities for higher gains by means of margins and leveraging. For instance, an initial investment of $1000 can give you a start of around 10 cents per pip.

Typically, one pip is equal to about 1/100 of a cent. This may look insignificantly small but it really does add up to a substantial profit during trade. You can adjust your thousand-dollar account to a lot size that leverages $1000 on a mere $100 margin.

If your currency pair moves a modest average of 20 pips a day, it means you will be earning $20 daily out of your $100 investment.

Only About 5% of Traders Will Succeed

The possibility of having as high as 50% of all traders succeeding exists…theoretically. However, in reality, over 90% of all newcomers into the foreign currency exchange market will fail and lose all their investment in the first few months.

Very few of them will come back. This is because most new traders enter the market with expectations of fast and easy money. They do not realize that one needs to put in some hard work and long hours before they can attain success in the forex market.

Sure, they may get lucky a few times and make profitable trades. But without due diligence and a little studying of the market, there is no way a trader can enjoy sustainable profits in the long term.

Signals Benefit Providers

Forex trading signals assist traders in making trade decisions on when to enter and exit a trade profitably.

Most of these signals are provided by individuals and businesses that act as market analysts. Most of these signal providers will charge the trader a monthly subscription to receive their signals.

Do not believe any signal provider’s hype about risk-free instant profits by using their signals. These are just marketing ploys to get you to sign up. Neither should you blindly and unconditionally follow any of the signals provided.

Be more discerning since forex trading is a serious investment. Remember, you are the one taking the risks, the signals provider gets paid regardless of your performance.

Realistic Goals

Most newcomers into forex trade enter the market with lofty ideals of quick, disproportionate gains made from low investments and requiring only a little amount of work done. This is a very incorrect approach towards any kind of serious investment.

When entering the fx market, the first thing you should do is to set up realistic goals on what you are likely to achieve from your investment and what you will be required to do to achieve these goals.

For instance, if you are going to start out with a $1000 investment, is it realistic to expect to double your money to $2000 in the first week? It is doubtful that such a feat can be achieved in even six months.

You should not just leave your day job expecting to make it huge trading currency online. Make sure you have a solid investment plan before embarking on any trades.

When setting your investment goals, remember to set something aside to ride out any losses you may experience.

How to Succeed in Forex Trade

In life, there are no short cuts, especially when trading in the forex market. The simple recipe for forex trading success is being hard working, patient, and disciplined.

You must work hard to acquire money management skills and have the discipline to adhere to them. You must be patient enough to resist the urge to enter into just any trade.

Stick to a working trading strategy and gain consistent profits rather than being greedy and rushing blindly after every opportunity. The foreign exchange market is a fluid global market, which constantly reacts to many economic push and pull factors.

Therefore, expect to dedicate a lot of time in learning how the market reacts to different influences. Commit yourself to studying books and economic reports related to the fx exchange.

Recognize that a forex trader’s life is a continuous, never-ending learning process. Learn how to conduct accurate analysis based on economic events.

Summary

The foreign exchange market is one filled with truths and myths. There are a lot of forex success stories that you can try to replicate to ensure your own trading success.

The first truth you have to accept right from the outset is that forex trading is not a game. It is a serious investment opportunity that needs to be treated as an investment portfolio with high gain potential rather than a gambling game where you place bets and expect instant high gains.

There are lots of scammers in this four-trillion-dollar-per-day market and this means as a trader you have to always be on the lookout lest you lose your investment to unscrupulous characters.

Sticking with an experienced, regulated broker makes chances of getting ripped off less and raises your chances of gaining success in your trading career.

Filed in: Forex Articles

Share This Post

Recent Posts

3 Responses to "The Truth about Forex Trading"

  1. iherb referral code says:

    I appreciate, cause I discovered just what I used to be looking for.
    You’ve ended my 4 day long hunt! God Bless you man. Have a great day.
    Bye

  2. Forex Auto Trader says:

    Hi there to every one, the contents existing at
    this web site are truly awesome for people knowledge, well, keep up the
    nice work fellows.

Leave a Reply

Submit Comment

© Forex Trading Big. All rights reserved.
Website designed by Opidue Services.