Can you make big money in forex

Coz the market and charts somewhat deceiving…. Curiosity is natural. Very instructive! These are the three things I wish I knew when I started trading Forex.

Can forex trading make you rich? Forex trading may make you rich if you are a hedge fund with deep pockets or an unusually skilled currency trader. But for the average retail traderrather than being an easy road to riches, forex trading can be a rocky highway to enormous losses and potential penury. But first, the stats. A Bloomberg article in November noted that yiu on reports to their clients by two of the biggest publicly traded forex companies — Gain Capital Holdings Inc. Fogex this could be interpreted to mean that about one in three traders does not lose money trading currencies, that’s not the same as getting rich trading forex.

Long/Short

It’s the market where currencies from different countries are traded. Remember, currencies are commodities just like anything else. On some days, they’ll go up in value. On other days, they’ll go down in value. You can use forex to take advantage of the fluctuation in foreign currency prices to make money.

Put the Trading Process Before Profits

Can forex trading make you rich? Forex trading may make you rich if you are a hedge fund with deep pockets or an unusually skilled currency trader. But for the average retail traderrather than being an easy road to riches, forex trading can be a rocky highway to enormous losses and potential penury.

But first, the stats. A Bloomberg article in November noted that based on reports to their clients by two of the biggest publicly traded forex companies — Gain Capital Holdings Inc. While this could be interpreted to mean that about one in three traders does not lose money trading currencies, that’s not the same as getting rich trading forex. Note that those numbers were cited just two months before an unexpected seismic shock in the currency markets highlighted the risks of forex trading by retail investors.

The surprise move inflicted losses running into the hundreds of millions of dollars on innumerable participants in forex trading, from small retail investors to large banks. Losses in retail trading accounts wiped out the capital of at least three brokerages, rendering them insolvent, and took FXCM, then the largest retail forex brokerage in the United States, to the verge of bankruptcy.

Here then, are seven reasons why the odds are stacked against the retail trader who wants to get rich through forex trading. A trader who shorts EUR 5, at 1. If the trader used the maximum leverage of permitted in the U. Of course, had the trader been long euro at 1. In some overseas jurisdictions, leverage can be as much as or even higher. Because excessive leverage is the single-biggest risk factor in retail forex trading, regulators in a number of nations are clamping down on it.

If you still want to try your hand at forex tradingit would be prudent to use a few safeguards: limit your leverage, keep tight stop-losses and use a reputable forex brokerage.

Although the odds are still stacked against you, at least these measures may help you level the playing field to some extent. Your Money. Personal Finance. Your Practice. Popular Courses. Excessive Leverage : Although currencies can be volatile, violent gyrations like that of the aforementioned Swiss franc are not can you make big money in forex common.

For example, a substantial move that takes the euro from 1. But the allure of forex trading lies in the huge leverage provided by forex brokerages, which can magnify gains and losses. Asymmetric Risk to Reward : Seasoned forex traders keep their losses small and offset these with sizeable gains when their currency call proves to be correct. Most retail traders, however, do it the other way around, making small profits on a number of positions but then holding on to a losing trade for too long and incurring a substantial loss.

This can also result in losing more than your initial investment. Platform or System Malfunction : Imagine your plight if you have a large position and are unable to close a trade because of a platform malfunction or system failure, which could be anything from a power outage to an Internet overload or computer crash. This category would also include exceptionally volatile times when orders such as stop-losses do not work.

For instance, many traders had tight stop-losses in place on their short Swiss franc positions before the currency surged on January 15, However, these proved ineffective because liquidity dried up even as everyone stampeded to close his or her short franc positions.

No Information Edge : The biggest forex trading banks have massive trading operations that are plugged into the currency world and have an information edge for example, commercial forex flows and covert government intervention that is not available to the retail trader. Currency Volatility : Recall the Swiss franc example.

High degrees of leverage mean that trading capital can be depleted very quickly during periods of unusual currency volatility such as that witnessed in the first half of OTC Market : The forex market is an over-the-counter market that is not centralized and regulated like the futures market.

This means that forex trades are not guaranteed by a clearing organization, which gives rise to counterparty risk. Market manipulation of forex rates has also been rampant and has involved some of the biggest players.

For more, see How the forex «fix» may be rigged. The Bottom Line. Compare Investment Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation.

Related Articles. Partner Links. Forex is the largest financial marketplace in the world. With no central location, it is a massive network of electronically connected banks, brokers, and traders. Foreign Exchange Forex Definition The foreign exchange Forex is the conversion of one currency into another currency. Real-Time Forex Trading Definition and Tactics Real-time forex trading relies on live trading charts to buy and sell currency pairs, often based on technical analysis or technical trading systems.

Currency Futures Definition Currency futures are a transferable contract that specifies the price at which a currency can be bought or sold at a future date.

Keep Good Records. Justin Bennett says Thanks for the question. I must say can you make big money in forex your longer time frame approach really has helped me improving my results, since i have adopted your style of Forex trading as gorex as possible. Anyone can learn to trade price action or swing trade and utilize the various strategies of. I can keep occupied and stop losses seem stupid just wait til goes back up. Brgds and thx. That same mentality is exactly how to bag each profit target in forex. Enter your email for a chance to win. Whatever account size you ,oney doesnt matter. This is the same strategy, same risk managementand same trader.