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FOREX Trading Facts
Trading foreign currencies is a challenging
and potentially profitable opportunity
for educated and experienced investors.
Whenever we consider it to invest our money somewhere, we have to consider the risk involved in the investment.
We can take the following guideline as a rule to follow:
The higher the potential income, the higher the risk
and on the opposite side of the investment spectrum
the lower the risk, the lower the potential income.
The implication is:
If you cannot afford to take a risk (due to age, lack of money or other considerations), stay away from any type of investment where the risk may be too high for you. Unfortunately you will have to be comfortable with a very low income.
On the other hand: If you are aiming for high returns and are willing to take a risk, do not cry or complain if you lose some (or even all) of your money!
As a rule we never trade with money we cannot afford to lose!
The following picture will give you an idea of the risk involved in different types of investments:
You can clearly see that investments on the stock exchange and forex are regarded by many people as investments where there is a lot of risk involved.
However, due to the potential of a high income, people are willing to accept the risk that is involved in investing in stocks and forex.
Which is the best - investing in stocks or forex?
You will find that people who are involved in trading in the stock exchange will tell you: Stay away from forex, it is too risky.
I have been trading forex since 2002 and in my opinion forex trading is much safer than trading stocks and is therefore a much better investment opportunity.
Let's do a comparison:
Stocks: The duration of a transaction for the normal person may be days, weeks and months in order to make a profit.
Forex: The duration of a transaction can be measured in minutes and hours to make a profit. I have done successful trades in less than 40 seconds from start to finish. Quick trades like this is called scalping.
Stocks: A stock exchange is only active during office hours, and if a problem appears after hours, you will have to wait for the next day to contact your broker.
Forex: The forex markets are active 24 hours per day, and you can trade any time of the day or night. If you hear something late at night on the tv or radio, you can log into your trading account and use the opportunity to make a profit.
Stocks: You trade mainly in one direction (when the graphs are moving upwards). When they are moving downwards, you are losing money.
Forex: You can trade up and down, and can make money in any direction as long as you are trading in the direction the market is moving.
Stocks: You can only convert your shares to money if there is somebody who is willing to buy it from you. Most other people will only buy when they think they are buying a bargain. It can therefore be difficult to convert you shares back to money at the time and moment you need it most.
Forex: The product we buy and sell is money. All people need money. I have never had a problem to get out of a trade and get my money back into my account.
Stocks: You use costly software and must pay for delayed data. Working on outdated data is very risky.
Forex: Most companies make the software available for free. The data feed is also available for free and is up to date.
The end result of this is that you can make so much more profit on forex as compared to trading on stocks in any period of time!
I'd like to share an example to illustrate my point:
The following headings appeared recently in the newspapers - (May 2012)
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JPMorgan sees big trading losses |
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JPMorgan Chase, the largest bank in the United States, announced on May 10th
that in the past six weeks, they had suffered a
$2
billion trading loss on a complex derivatives portfolio that
was initially designed to reduce risk. Typically known for a conservative
approach to investing, this mistake has cost the bank nearly 10% of its
stock price.
Shareholders are now suing the bank and its management for excessive risks
that led to their large trading losses. The bank’s individual trades were
not being monitored by the Office of the Comptroller of the Currency, which
has over 70 people devoted to monitoring just JPMorgan’s banking activities.
A major downfall of the stock market is the limited amount of control
traders are able to have. Chase investors had no control in this extreme
loss.
In the Forex market, traders can take control of their trades without using a middleman.
Forex traders can also determine their own risks and gain their own rewards
It is important to understand:
You can control the risk when trading in the forex markets.
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You can determine the amount of money you are going to use per trade and the amount of risk you are willing to take.
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You can enter stops and limits which will close the trades at certain places.
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You can close trades any time (except over weekends) you wish.
In my opinion:
Forex trading
is a fantastic opportunity
for the careful and skilled trader.
Risk Warning
It is an unfortunate fact that the majority of stock, futures and forex self-traders are losing their money.
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If this is the case, then it is even more true for the untrained or inexperienced person. He / She may lose some or even all of his / her money while trading forex. |
Why? Because most people don’t have :
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Quality trading education and know-how
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A trading system that really and consistently works
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A trading plan to impliment when trading
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A money management plan
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The skills developed through hours of practicing
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The patience to wait for the right moment to do a trade
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The discipline to stick to the rules
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Enough money to trade with. Trading with the money that one cannot afford to lose is putting unnecessary pressure upon you.
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and the psychological make-up to trade.
Therefore, if you want to trade, it is of the utmost importance to see to it that
you will get the best training possible.
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The better the training, the higher the probability of making a success of your trading career.
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You really do have a choice.
The easy decision is to stay where you are and go with the flow.
The only problem is that you may find yourself in the same position
ten years from now.
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It is said that if you don't know where you are going, any road will take you there.
Life without purpose, passion and a plan is like a ship without a sail or destination.
Most of the 6 billion people on planet earth are aimlessly drifting from job to home simply living to make a living. This is a tragedy and should never be the lot for any human soul.
I am convinced that the key to life is the discovery of a clear personal purpose, a sense of destiny and a vision that motivates. I am also certain that the discipline necessary for fulfilling that purpose is the crafting and adherence to a strategic plan.
Success is not a gift, but a result.
Everyone was created to succeed, but
only a few are willing to pay the price. Dr Myles E. Munroe
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The smart decision?
Take action.
Do something
about your future ...
Learn to trade forex ...
Please note: Forex trading should be considered as an option only by people who have thoroughly considered their financial suitability for trading
and the risks associated with trading.
FX Masters can help you if you'd like to become involved in forex trading ...
NFA Publication
"Trading
in the Retail Off-Exchange Foreign Currency Market - What Investors Need to
Know" (PDF format)
>>> Click here to learn more about the FX Masters Forex Trading Course
Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.