Forex trading is a great venture for those who are comfortable with losing some amount of money in exchange of the chance to gain something bigger. Also, it’s an ideal venture for those who have cash and time to spare. But if you’re the type of person who prefers stability to thrill and quick large gains, then forex trading may not be for you.
That’s because this venture can be extremely risky. It’s a highly leveraged market with high liquidity, volume transaction, and volatility. So, while it’s okay for beginners to try it, those who are very much risk averse may want search for another market they can trade. Here are some of the biggest reasons why.
Not much Different
One fact about the forex market is that it really isn’t very different from other markets like equities or commodities.
Maybe one can cite the difference in minimum deposits and the way trades are done to the assets as the features that make the forex trading venture unique.
However, these features can also be found on other markets, just in a different way or with a different name.
At the same time, forex trading can be super risky and dangerous if you are not sure what you’re signing up your money for.
This is a highly leveraged market. So, there will be times when you will be able to trade 1000 times as much as the money you put up. This capability can be quite overwhelming.
However, it’s also the same when it comes to your losses. You can lose 1000 time of the money you have put up.
The marketing tactic, however, is to mention the downside as appropriate but emphasize the advantages all the time. It’s about marketing. So, don’t get to excited yet about leverage.
No Secret Formula
When forex traders first start trading, many of them think that it’s a get-rich-quick scheme. However, that is not the case.
There is no secret formula to forex trading. There will always be those traders who think that a certain trading strategy or signal will help them gather considerable profits and make them rich.
The reality is that forex trading can only work if you have the discipline needed when making any kind of trade. You also have the guts to face losses and accept defeat when it comes to your trades.
More than charts and systems, forex trading can be a psychological game, in that your biggest opponent is your fear or greed or any other prevailing emotion that can take control of your decision-making capabilities.
You Need Substantial Capital
Although the forex market has been touted as a financial market that’s very cheap, in that you only need a small capital to get started, it’s still actually best and more viable to pour in a substantial amount of capital to start trading.
Being undercapitalized can be fine, as long as you can settle for small initial returns. If you start small, you gain small. However, this also means you’re not putting too much money on the line.