How Difficult is Forex Trading?

Last Updated July 23rd 2021

15 Min Read

How hard is Forex trading?

It's a question that most novice Forex traders want to know before they get started trading Forex.

At first, trading Forex may seem complicated and hard, but it isn't. That's not to say that trading Forex is easy. It is simple, but it isn't easy to master, and there are good reasons for that, which we'll cover in this article.

Forex is an acronym for Foreign Exchange. It's one of the most liquid financial markets available to traders. Every trading day 24-hours/5 days a week, you can trade Forex.

If you want to trade forex, check out eToro platform

Contents

How is Forex Trading Done?
Can You Get Rich By Trading Forex?
Do I Need To Be Smart To Trade Forex?
Why Forex Is So Difficult
Does Anyone Make Money Trading Forex?
How Long Does It Take To Learn Forex?
How To Become Good At Forex Trading?
Can You Make A Living Trading Forex?
How To Successfully Trade Forex
Can I Trade Forex With $100?
Recap On How Difficult Is Forex Trading

How is Forex Trading Done?

Forex traders make money from the market price fluctuations with currencies. The currencies come in pairs, such as EUR/USD (Euro/United States dollar), and the Forex trader decides upon whether the price will rise or fall.

Trading Forex is not gambling. Professional, experienced Forex traders enter a trade after careful technical analysis of the price charts for the currency pairs. They may also do fundamental analysis, checking the state of the economy for both currencies.

The Forex trader then enters the trade. He sets a stop loss, so it is not a significant loss if the trade goes against him. And he has a profit target where he will exit the trade.

The Forex trading process sounds simple. After all, you have a 50% chance of being right. How hard can it be to trade Forex profitably?

We will outline why Forex is so difficult and the steps needed for how to trade Forex for beginners.

In conclusion, you will understand how difficult is Forex trading and what is necessary to master Forex trading. Then you can decide for yourself if you are ready to make a living from trading Forex.

Can You Get Rich By Trading Forex?

Many people think of Forex as a way to get rich.

Do a Google search about Forex, and you'll return many websites telling you how easy it is to make money trading Forex. You'll see stories and photographs of Forex traders who have (supposedly) made it big trading Forex.

The problem is, many of these sites want to sell you an expensive course on how to trade Forex or get you to sign up to a scammy broker.

But we're not here to do that. We are here to educate you on becoming a successful Forex trader and overcoming the difficulties of trading Forex.

Read More: Can Forex Trading Make You Rich?

Do I Need To Be Smart To Trade Forex?

The short answer is no. The long answer is yes, to a degree, but we'll explain.

You do not need to be a mathematical genius to trade Forex.

Having too much genius leads to over-thinking, something to be avoided when trading Forex. What you may not yet realise is that trading Forex successfully is more about psychological skills. You have to learn to be disciplined and patient and override your natural instincts.

Novice traders can get overwhelmed by data. You may think you need a complicated trading system and dozens of indicators, but you don't. Simple is best.

Why Forex Is So Difficult

Airline pilots make the best Forex traders, that's a fact.

We are hard-wired for survival and to avoid risk.

Our emotional system – the Limbic system – kicks in when we feel stressed, worried, or fearful, which can be the slightest physiological response. Our brain has not evolved from the stone age, and this is where the problem arises when trading Forex.

Forex is risky. The chances are you will lose money trading Forex. But, even professional traders have losses, but they have mastered the art of their winnings exceeding their losses.

It seems crazy to equate losing a few dollars to a sabre tooth tiger coming round the corner, but your physiological response is pretty much the same.

When your trade loses or profits start moving into loss, your body and mind respond. Your heart rate elevates, and you may be holding your breath. You move closer to your computer screen, and you may be clenching your hands. Even your body temperature rises.

Nobody tells you this about trading Forex, do they?

Pilots face risk every time they cruise down the runway, and they train to manage that risk. In effect, you have to undo your human responses to risk. It's the reason why Forex is so difficult and why 95% of Forex traders fail.

Read Also: The Risks of Forex Trading

Does Anyone Make Money Trading Forex?

Yes, many thousands of professional Forex traders make an excellent living from trading Forex.

Are professional Forex traders different from you?

Well, yes, in a way. For one thing, they don't focus on money. They focus on percentages. The objective for a professional Forex trader is to build up their working capital so they can withdraw weekly or monthly profits whilst retaining and building the working capital.

For instance, let's say a professional Forex trader has $100k working capital and generates 5% profit a month. That is a return of $5k. We hear you. $5k for a $100k account? It doesn't seem a lot of money.

In reality, many top Forex traders make more money than that, but they keep building their capital while controlling their risks.

A professional Forex trader does not gamble. He knows that the more capital he has, the more money he can make, and he takes care to protect that capital.

So, when you start as a new novice Forex trader with, say, $1000, the end game can look a long way away.

But don't despair.

How Long Does It Take To Learn Forex?

Many brokers and sellers of Forex trading systems want you to believe that trading Forex is easy and you can do it fast. They will try to sell you the magic system, the failproof indicator, or the automated expert.

Look, there is no fast way to succeed with Forex trading. Is trading Forex worth it? Yes, it is if you are prepared to do the work and put in the time.

We're not trying to discourage you because you can make money from trading Forex, but it will take time.

Here's Joe, a Forex trader who has been trading Forex for three years:

"If anyone had told me it would take almost three years before I even started to make progress trading Forex, I probably wouldn't have done it. I did everything right. I bought a How to trade Forex for Beginners course, read Forex books, and listened to everything about Forex.

I kept searching for the magic bullet, the one thing that would make me profitable, but it never happened.

I was at the point two years on, where my account was 75% down. I took a few months off and thought about why I was failing. I realised I kept changing everything except myself.

That was a light-bulb moment. I got back to trading with a different attitude.

I still lost money, but I no longer got emotional about it and always made it back. I trade a lot less than I did and only look for perfect setups. I don't get excited about wins either, and overall, I am calmer and less excited by trading Forex.

Now, I know I will succeed at trading Forex because I stopped being in a rush."

The trick is to take your time and commit to educating yourself about Forex.

Is trading Forex easy or difficult? Yes, both, depending on your approach.

Spend 3-6 months practising with a Forex demo account. When you have doubled your account with low-risk Forex trading, then you are ready to trade Forex live.

Start with micro-lots and only risk 1% of your capital. Don't focus on the money; ALWAYS concentrate on becoming a better Forex trader.

How To Become Good At Forex Trading?

There's a secret to becoming a successful Forex trader, but you may not like it.

Can you get rich by trading Forex?

Everyone assumes that the Forex lifestyle is exciting. You imagine the big house, yachts, holidays, top of the range sports car and tons of money in the bank. The focus is on the material gains. Not that this is wrong, we all deserve a little luxury. But approaching the Forex market with this intent is a sure way to disappointment.

This is why Forex trading is so difficult. Expectations exceed reality.

The secret is that successful Forex trading is boring.

Eh, what? Surely not?

Well, yes. Do you remember earlier we discussed the survival mind? When you are excited, passionate, or emotional, your logical mind is clouded. You make poor decisions based on feelings and emotions.

The pro Forex trader makes decisions based on what he or she sees on the chart - nothing more, nothing less.

So, that's boring for most people.

What isn't dull is your success. Can you get rich by trading Forex? Yes, you can, and this is the approach to riches from trading Forex.

Check Out: Top 4 Things Successful Forex Traders Do

Can You Make A Living Trading Forex?

Yes, absolutely.

Many traders make a good living from trading Forex. But the caveat is that the more you need to make money from trading Forex, the harder it becomes.

Putting pressure on yourself to make money to pay the bills from trading Forex will result in losses. You will likely take risks and gamble. And, if you lose money, it is your fault. You decided to take the trade.

FOMO, fear, or greed got you into the trade, not your broker or an indicator or any other tool. Forex results are dependent on you and your ability to reason before trading Forex.

The ability to self-reflect on every trade will save and make you money from trading Forex.

As a Forex trader, you must take responsibility for every trade.

There's no doubt that the idea of success from Forex is exciting, and most novice traders start out feeling excited and passionate about trading Forex.

Trading Forex is a paradox. The more you want to make money, the less you will make. The less you care about it, the more you are likely to make.

Novice traders try to force trades into the Forex market, hoping for exponential returns. And, when you lose, you feel compelled to make back the loss, which results in more losses and too much risk.

Don't Miss: The Benefits of Forex Trading

How To Successfully Trade Forex

Trading Forex successfully is a process. Entering blindly into trading Forex is why trading Forex is so difficult for so many novice Forex traders.

A lack of experience and knowledge results in a high failure rate of 95% for new Forex traders.

Heres are some guidelines for overcoming the difficulties of trading Forex:

Spend 3-6 months trading Forex with a demo account – using a demo account for a period acquaints you with all the moving parts of Forex. You can practice with strategies and indicators and any other tools. By the time you go live trading Forex, you are mentally prepared for the difficulties of trading Forex
Open an account with a regulated Forex broker – there a lot of scam brokers online. Find a Forex broker regulated to your country. Regulated Forex brokers have to jump through many hoops to achieve licensing, and it is costly. So it is in their interest to take care of their customers. And you have some redress with the licensing body if something goes awry with the broker
Have a Forex trading plan – your trading plan will include risk management and risk to reward ratio (RTR) for trades and exit plans for if a trade goes wrong. Your plan covers a walk away decision after a certain number of losses and a percentage goal for the week or month
Backtest Forex strategies – before going live trading Forex, you want 2-3 Forex strategies to suit different market conditions. You need to know what you are looking for as a signal to enter and exit a trade
Keep a Forex trading journal – track your trades every day in your journal, documenting why you entered a trade, what happened and what you may do differently next time. A trading journal can also help with a good rant when things go wrong
Develop a Traders Mindset – practice relaxing at your trading station. Breathe deeply and focus on staying calm whatever happens on the chart. Tell yourself it's just money, and teach yourself to wait before entering a trade. Avoid revenge trading after an unexpected loss

This six-stage protocol prepares you for trading Forex live. But, be aware that your emotions will rise when you are trading Forex with real money.

Start small and play the long game.

Can I Trade Forex With $100?

Yes, most Forex brokers let you open a Forex account with a little as $100.

But, if you expect to make money from a $100 Forex account, you face an uphill struggle.

The consensus for risk and money management in Forex trading is only to risk 1% of your trading capital. 1% of $100 is $1, which gives you limited scope to take trades.

On such a small account, 1% may be a ten pip stop loss, which offers little room for your trade to breathe.

You may find yourself taking bigger risks and soon find your $100 has shrunk down to zero. It's easy to write off $100, but mentally it can knock your confidence for trading Forex.

What do you do next? Deposit another $100 and start again?

The best route to learn how to trade Forex with micro-lots is to have sufficient balance for reasonable stop losses, so your trades aren't stopped out all the time.

An ideal amount to begin trading Forex is $1000 or more. 1% of $1000 is $10, and it's easy for you to work within that range and still stay below the 1% risk per trade.

Recap On How Difficult Is Forex Trading

We've established that, for many new Forex traders, trading Forex is difficult, so is Forex trading profitable, and is Forex trading worth it? You don't need to be smart to trade Forex. But you do need to learn Forex trading and spend 3-6 months practising trading Forex in a demo account.

Allow for several years of experience trading Forex to build up your trading skills and your Forex trading capital.

It isn't possible to get rich quick from trading Forex, and the more you focus on the money, the more likely it is that you will lose money.

The professional Forex traders who make a good living have done their time trading Forex over many years. They have been where you are and lost money too. Some Forex traders take years before considering themselves a professional Forex trader and making a good living trading Forex.

There is a 95% failure rate for Forex traders, but success is purely down to mindset. Develop a traders mindset and aim to trade Forex like the 5% of successful Forex traders do.

Please note that the above information is not providing advice on tax, investment, or financial services. We provide the above information without consideration for risk tolerance and a specific investor's financial circumstances.

Trading or investing in financial instruments such as Forex may not be suitable for all investors. It does involve risk and the possibility of a loss of capital.