Why Would You Trade Foreign Exchange?
Posted at by ifydcat on category UncategorizedWhy Should You trade forex? This is a good question. The foreign exchange market is the most liquid of all the different financial markets. Nowadays fx trading is accessible to almost everyone. With the recent influx of retail brokers offering trading accounts with very low minimums in a wide variety of different currencies, trading currency really is now possible for the masses.
What are the risks?
Forex must always be considered risky. It is traded on margin meaning as a trader you have the ability to open position sizes that are larger than the size of your account. Whilst this leverage can increase your profits, it also increases your losses.
Currencies can be quite volatile and difficult to predict. The credit crisis that began in 2008 is evidence of this. The British Pound fell 35% in a few months. Imagine if you had a long term leveraged position, and the market went against you like in this scenario.
Is it difficult to learn forex?
Learning to trade forex isn’t difficult. You don’t need to be Einstein to understand the mechanics.Despite this, most traders lose money, sometimes even a substantial chunk of their net worth.
So it’s not rocket science, but most people lose… why is this? The biggest reason is lack of discipline. It takes very high levels of discipline and the ability to stick to a set of trading rules. You need a solid trading plan that you are able to stick to during good periods, as well as the bad periods. An emotional trader is always a losing trade.
How about automated trading?
There are many trading robots out there. Most of them run on the trading software Metatrader.
The issue with automated robots if the fact that they almost never stand the test of time. Whilst many of them will be successful in the short term, they ultimately fail in the end.
There are lots of clever internet marketers trying to sell these automated systems, but ask yourself one question; if they really had a trading system that was a “sure thing”, do you really think they’d be selling it for a measly price online? Of course, they wouldn’t.
How about forex managed accounts?
A managed forex account is where you open an account with a fx broker, then give another individual or companythe authority to trade your money for you.
There have been many traders offering their services. Unfortunately, 99% of them end up negative.Without the need to sound overly skeptical, most managed accounts allow the trader to profit from commissions even if he or she is losing money for you.
As a result of this there have been a massive influx of traders offering to trade your money, even when their trading ability is well below par, simply to gain the lucrative commissions.
Conclusion
Forex trading can undoubtedly be highly profitable. However, if you don’t have the desire to work hard and be extremely disciplined, it is not appropriate for you. Forex isn’t the key to instant riches, but with effort and dedication, it could be your pathway to long term financial security.
Learn more about fx trading, visit here. If you want to invest in a managed forex account just visit here.