Can you get rich by Trading Forex?

Topic [Show]

Can you get rich by trading forex? Surely in our hearts we feel we will not be able to get a wealth just from a trading alone. But an actually such wealth can be achieved if we can meet certain conditions. Forex trading can make you rich if you are the hedge a trader with large funds or you are one of the very talented traders. For such types of traders, a trading can be one of the smooth paths for achieving a wealth. But for a retail, or individual traders, a trading is usually winding and the rocky road that has the potential to cause the loss and a poverty.

But first, let's look at the statistical data. I found an article in Bloomberg in November 2014 noted that based on the report, there are two large-scale Forex companies namely Gain Capital Holdings Inc (GCAP) and FXCM Inc (FXCM) where 68% of its investors have suffered losses from currency trading in the last four months. Although this incident can also mean that 1 in 3 traders do not experience losses when trading currencies, but this also can not be equated with gaining success in such trading.

Remember that the data is only quoted 2 months before there is a seismic shock in the forex market that further clarifies the risks of forex trading to retail investors. On January 15, 2015, the Swiss National Bank lowered the value of the Swiss Franc by 1.20 against the Euro in 3 years. As a result, the Swiss franc soared as high as 41% against the Euro and 38% against the USD on the day.

The next step has been to inflict losses of hundreds of millions of dollars by countless traders in forex trading, from retail investors to big banks, all suffered losses. Losses in trading accounts caused at least three major brokers to go bankrupt including FXCM which was once America's largest forex brokerage retailer.


Here are the things that traders should consider if they want to succeed in forex trading

Great Leverage. Although the currency can be very volatile, totality events such as those already told above relating to the Swiss Franc are very rare indeed. For example: the substantial movement that keeps the Euro from 1.20 to 1.10 against the USD in one week is still changing by at least 10%. On the other hand, stocks, could easily trade up or down 20% or even more in one day. But the appeal of forex trading lies in the huge leverage offered by forex brokers, which can multiply profits (as well as losses). Traders who sell EUR 5000 at 1.20 against the USD and close a sell position at 1.10 will generate a net profit of $500 or 8.33%. If traders use the maximum allow ability leverage in America which is 50:1 to trade euros, ignoring trading fees and commissions, the potential profit will be $25,000, or 416.67%.

Had a trader opened a long euro position at 1.20, using leverage of 50:1, and a close position at 1.10 against the USD, the potential loss would have been $25,000. In some overseas jurisdictions, you can use leverage up to 200: 1 or even higher. But remember, because excessive or excessive leverage is the largest single risk factor in the retail Trading Forex, regulators in a number of countries do not allow traders from their countries to use too much leverage.

Asymmetric Risk to Profit: Experienced forex traders keep their losses small and offset them with considerable returns when the direction of the currency they have predicted proves correct. Most retailing traders, by contrast, make small profits on a number of positions but then maintain positions that cause even greater losses. This kind of thing also causes a loss that is nominally greater than your initial capital.

Platform and trading system malfunctions: Imagine the losses you would experience if you had a large position and you could not close your position due to a platform malfunction or system failure that occurred at the time, which could be anything like a power outage or connection interruption, or suddenly, your computer was damaged. It also results in something volatile when orders such as stop loss do not work properly.

For example, many traders applied a tight stop-loss to their short positions of the Swiss franc before the currency surged on January 15, 2015.

However, however, this is proving ineffective because liquidity is reduced even, and everyone is trying to close their short positions in the franc.

Limited Information: The largest foreign exchange trading banks have large trading operations connected to the world of currencies and have information advantages (e.g., commercial foreign exchange flows, and covert government interventions) which are not available to retail traders.

Currency Volatility: Remember the example of the Swiss franc above. High levels of leverage also mean that trading capital can run out very quickly during periods of unusual currency volatility as seen in the first half of 2015.

OTC Market: The forex market is a free market that is not centralized and regulated like a futures market. This means that forex trading is not guaranteed by clearing organizations, which poses counter party risk.

Fraud, and Market Manipulation: There have been several cases of fraud in the forex market, as did Secure Investment, which eliminated more than $1 billion in investor funds in 2014. Manipulation of the forex exchange rate market has also been rampant and involves several large players. In May 2015, the big four banks were fined nearly $6 billion for attempting to manipulate exchange rates between 2007 and 2013, bringing the total fines imposed on the seven banks to more than $10 billion.

If you still want to try your luck at forex trading, it would be wise if you also use some protection measures: such as limiting your leverage, maintaining stop-loss and using a reputable forex broker. Although there is always the possibility of experiencing losses, but at least the tips above can help you survive forex trading longer.

Tag: Books on trading currency Forex trading profit per day "forex made me rich" Can you make a living trading Forex Can you get rich off forex Reddit How much can you make with 1000 in forex How to start Forex trading Successful Forex traders stories Is Forex trading profitable Reddit