Forex trading does it make me rich?
Although the answer to this question would be an undisputed “no,” this answer should be eligible. Forex trading can make a person rich if you own a Forex hedge fund with many deep pockets or you are an unsurpassed expert currency trader. But if you are a regular retail trader, the alternative to having an easy path to wealth, Forex trading can be a very fast path to massive losses.
But first, know the stats that indicate that 68% of Forex investors have experienced a net financial loss from their currency trading in the past year. While this can be interpreted as one in three Forex traders not losing money in currency trading, this does not represent you getting rich when trading Forex.
The Forex market is not as perfect as you think
Many Forex traders turn to the Forex market in order to look for quick profits.
Most of the statistics and reports indicate that most aspiring Forex traders may fail, and some may even lose huge amounts of money.
Leverage is a double-edged sword, as it can lead you to make huge profits but also can lead you to huge losses.
In contrast to stock and futures trading which are traded on most stock exchanges, Forex pairs can be traded in the OTC market without a pivot clearing firm.
The unexpected move by the Swiss National Bank has caused calamities in the vast numbers of dollars to endless members of the foreign exchange, from small individual financial backers to mega-banks. Misfortunes in retail exchange accounts liquidated at least three companies, driving them into debt, and taking a company considered at the time, the largest retail Forex financier in the United States, to the brink of bankruptcy.
One-time unexpected events are by no means the only risk facing Forex traders. Below are various motives behind why the situation is favorable for a retail trader who needs to get rich in the Forex market exchange.
Excessive Leverage
Although currency rates are volatile by nature, violent price fluctuations are not uncommon on an ongoing basis. You can easily trade stocks up or down by 20% or more in one day. The secret that Forex attracts a lot of people is the profits that occur to them as well as the losses that occur to them, but the advantage here is when you realize that your profits cover a lot of your losses
Asymmetric Risk to Reward
Experienced Forex traders keep the small losses they receive and are patient to make up for them by getting big gains to cover their losses. However, most novice retail traders do the opposite, making small profits on many positions but unfortunately after that they lose trades for a long time, incurring the big loss that breaks their back. This can also result in the loss of more than your initial capital.
Platform or System Malfunction
Imagine the size of your loss if you have a large position and cannot close the trade due to a failure in your platform, which can occur due to a power outage, internet overload or your computer failure. This category will include incredibly volatile times and when stop-loss orders are not working.
No Information Edge
There are big Forex trading banks doing a lot of massive Forex trading connected to the world of Forex trading and they have the advantage of owning information such as Forex trading flow and secret government intervention which is not available to the average Forex trader.
Currency Volatility
High degrees of Forex leverage mean that you can deplete your trading capital very quickly during days of unprecedented currency fluctuations. As these events can come without warning and the Forex markets move before you have a chance like most individual Forex traders do to react.
OTC Market
The Forex market is a private market that is outside the stock exchange, which is decentralized and also unregulated like the stock market or the Forex futures market. This also means that most Forex trades are not guaranteed by any of the clearing institutions, which may cause counterpart risks.
Fraud and Market Manipulation
It has been known that there have been some occasional cases of fraud occurring in the Forex market, such as a case called safe investing, which went away with more than a billion dollars in investor money in 2015. The spectacle of Forex market manipulation has also spread to the prices of foreign currencies and also involved some of the biggest traders. In May 2016, for example, a number of major banks were fined approximately $5 billion for attempting to manipulate the exchange rates of currencies between 2006 and 2014, causing the total amount of fines imposed on these banks to rise to an amount of approximately 8 billion dollars.
Summary
If one still wants to try out the Forex trading market, it would be wise and wise to use some of the safeguards that secure you such as: limit your leverage, keep your stop loss, and use a reputable Forex broker. All of these things make you ensure that Forex makes you a rich person, some patience and give him your effort.
