5 Things You Should Know About Forex Trading

5 Things You Should Know About Forex Trading

by Roman on March 1, 2010

Forex trading takes place 24 hours a day and it basically involves all the currencies in the world. This means that Forex currency trading is bigger than all the stock markets in the world combined.
Thanks to time zone differences the currency markets are always open – when trading ends in Asia it starts in Europe.

Thanks to the incredible size of the Forex Market and its continues hype there are 5 things everyone should know before starting Forex Trading.

1. It is incredibly difficult

Forex traders agree that 90% of all traders lose money. 5% of traders break even and only 5% will make money.

Forex trading is a zero sum game – this means that the 5% of best traders will end up taking the money of all the other traders.

2. You can make a lot of money

Forex brokers usually allow for a maximum leverage of 500:1. This means that with only a deposit of $1000 you can make transactions with up to $500,000 dollars.
If you make 1% profit this means that you make 5000 dollars.

That is a very nice sum when you started with only $1000.

3. You can lose everything almost instantly

High leverage means high risk. To continue the example above – If you have $1000 in your account and you are allowed to make transactions with $500,000 dollars and you lose 1% – this means a loss of 5000 dollars. This means that you will lose your 1000 dollars and will owe another 4000 dollars!
Thanks to the efforts of your broker your account will however most likely be closed as soon as you lose the 1000 dollars (that is -0.2%)

While there is potential for large gains there is an even larger likelihood of losing everything you have!

4.  No one has a working system

There are tons of people saying they have found a magic formula that helps to make money trading currencies 24/7. These people are usually selling their secret for a small sum because their biggest wish is to help you get rich! NOT!

This is marketing bullshit!

In reality these people have realized that they will never make any money with Forex. They are better off selling partially working systems and robots to people who want to get rich fast.
In reality these systems will always lose you money.

5. If someone has a working system he will keep it secret

If someone actually has a working system and makes money on trading currencies he will never reveal his secret.
This is true because of the way forex trading works – if enough people know of a certain way to make money the method will cease to work simply because a lot of people are trying to use it.

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{ 4 comments }

Car Insurance Phi March 1, 2010 at 5:07 pm

It certainly sounds risky! Although the stock market in general is already risky…Thanks for this article on Forex trading. I didn’t really have a clear understanding of what it was prior to reading your article. Looking forward to more posts from you soon! Hope everything’s going well with school. =)

Roman March 2, 2010 at 2:29 am

Yes, in my opinion it is very risky! I have a few friends that are into it and mostly they start out by trading a few months on a demo account just to get a hang of it without actually spending your own money.

None of them have gotten rich from Forex trading… or maybe they are just keeping it to theirselves? :)

For some reasons all your last comments have went straight to spam… good thing I checked the spam comments!

And school is great! I can basically say that now I have a bachelors degree in computer science :)

Yasir March 4, 2010 at 11:53 pm

Hi roman .. how to check a spam comment??? and how to read the “Recent comments” which is given on the right side top. .. as wehn I click for any of these comments it doesnt lead me to this comment…

Roman March 7, 2010 at 7:42 am

Hi Yasir!

To view recent comments on the right sidebar just click on the name of the person who has left the comment and you are taken to the comment!
For some reason it doesn’t seem to work 100% of the time so thanks for bringing it into my attention – I’ll look into it when I’ll get the time!

As to spam comments – you can not check them – only me, the owner of this website, can do that!

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