Is Forex Trading Worth the Risk?
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If you search the mass of forex related forums, you'll find they all have one thing in common: lots of novice traders who have all lost their investment. In the news, you'll also see endless stories about large Wall Street investment firms which have gone bust and lost millions of dollars.
The risks involved in trading are heightened due to the lack of industry regulation and the plentiful numbers of less than honest brokers, who seek to prey on those starting to trade who possess very little forex knowledge or prior experience of the market. In addition to this, the technology and market analysis tools provide major financial institutions with an information edge, which can barely be matched by everyday traders.
Despite these limitations, the forex market attracts huge numbers of traders looking for the potential to earn vast sums of money and improve their standards of living. But is currency trading worth these numerous risks, or is it an industry full of traders caught in an endless chase? This Trading Education article will help you decide is forex worth it and what day trading strategies you should use.
For a profession to be considered profitable and worthy of the potential risks and effort it should:
• Offer a higher than average earning potential
• Provide an adequate amount of leisure time
• Require minimal levels of physical and mental stress
• Not require vast amounts of knowledge to be learnt
• Require minimal financial investment
So, based on these factors, we can begin to decide whether forex trading is actually worth the risk.
If you are beginning to research the possible earning potential through investing in the foreign exchange market, it is likely that you will be offered free advice from numerous people, which will all promise you the potential to earn unlimited amounts. This often leads potential traders to dream of mansions and luxury cars.
Instead, try to ask these advisers how much they have made themselves from trading. In most cases, they will have lost their investments or made an initial profit before losing the next investment. It is true that currency trading can offer an unlimited earning potential, but it is not as easy to reap the financial rewards as many people expect.
To benefit from trading in the forex market, you need extremely high levels of commitment. There are many companies around which promise accounts to assist in trading, with free demo accounts for a set period of time to teach you everything you need to earn a six-figure salary in just a few short months. Successful traders are always aware of opportunities, changes in the market and events around the world. Rather than learning everything required to trade in a short amount of time, success lies in continuing to study throughout life and understanding forex technical analysis.
There are no guarantees that a trade will be successful, despite a track record of making profitable investments. As the stakes are so high when investing full-time in the currency market, experienced traders will often advise you to start trading on a part-time basis.
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The industry actually provides compulsory leisure time for two days every week over the weekend, as the markets close at 20:00 GMT on a Friday, sometimes earlier. This is because the forex brokers want to discourage trading by switching off their servers every Friday. This level of free time is seen by many traders as a great perk of the job when compared to many professions. The free time is a chance to refresh both mentally and physically, ready for the following week.
There are often times when our lives require a degree of flexibility in the workplace, which suits the trading profession perfectly. If there are family issues or an unexpected event, it is always possible to stop trading at any point in the week.
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A successful trade is just a well-educated guess, as the vast number of influential external factors make predicting the outcome of a trade impossible. This means that regardless of knowledge and experience, all traders will face stress when an investment is open. If the leverage is increased, it is highly likely stress levels will also increase.
The highest levels of stress for beginners is often seen when traders try to recover a loss too quickly through revenge-trading. The second trade is likely to end in a larger loss, resulting in mounting levels of stress.
Even the most experienced traders who follow a disciplined trading schedule are subjected to high levels of stress, as every loss creates an immediate impact. It doesn't take long for losses to begin to build and, with each loss, the responsibility increases.
Other professions will usually result in lower levels of stress, as the company usually has a backup plan in place to protect itself from the impact of a poor decision. If forex trading was purely based on the resulting stress levels, it would not be worth the risk.
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In today's market, most forex brokers do not stipulate a minimum investment required to start trading. However, it is not sensible to expect to make millions with an initial investment of under £10. A low initial investment reduces the potential to grow an established trading account. There is also a temptation to use higher levels of leverage to grow earnings quickly, which usually results in you losing everything.
A reasonable investment would be around £10,000 or more, as this provides you with the ability to generate consistent and sustainable levels of profit in the short to medium term. However, it is worth remembering that alternative businesses can be started with a much lower investment. This means that, from an investment point of view, other industries can provide a better return over currency trading.
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It is common for forex trading forums to advertise that they will provide all education required so that anyone can learn to trade in a very short period of time. There is no doubt that the educational tools are brilliant value, but keep in mind that it may take time and practice to learn everything required to make profitable trades.
There are many times when indicators will produce contradicting signals, so without an in-depth knowledge to segregate the fake signals from real indicators, it can be impossible. The learning curve in forex trading is definitely steep and there are no guarantees how long it will take.
Currency trading has a number of advantages when compared to other professions, such as leisure time and earning potential. However, there are drawbacks when it comes to investment requirements, the knowledge required and the high stress levels. Here at Trading Education, we believe trading is only suitable for those who do not have financial concerns and have a strong desire to learn new things.
For more investment news and tips, please take a look at the articles listed on our website, or contact our knowledgeable team.
The original article was published on www.earnforex.com