While only a part of the title is true, but when we talk about investment that is required to trade in the foreign exchange market, in monetary terms that is pretty negligible. Do you know that more than half of the forex trades happening globally are immensely leveraged? Hence, the minimum amount of the money required for a forex trade is just 0.5% of the total trade value which is indeed a negligible amount for most people. However, we must not forget that forex trade like any other business is subject to several risks and an individual is responsible for the outcome of the full trade value, irrespective of the amount of money invested.
Now that you know about the amount of money required for forex trading, let us discuss more about the various aspects of foreign exchange trading or forex.
What is Forex?
Similar to stock trading, forex trading involves the buying and selling of foreign currencies and generating profits through the continuously fluctuating prices of the various currencies. So the game is simple, just try to buy currencies when their prices are low and sell them when their prices are higher to earn a profit. But as easy as it sounds, most people would want to know that more than 80% of forex trades end in losses and it is only that the most experiences traders that make profit. This means that trading in forex is risky and even though you are required to pay only a small amount of money to trade, you can lose much more.
Why Is Forex Trading So Risky?
Most risks in forex trading are a result of human error and leveraging. Because you can make more trades than the money you have in your pockets, it often becomes a honey pot for people, who are lured in the market to earn quick profits. Foreign exchange is one of the most fluctuating markets in the world and there is a high chance that the trade you make will result in losses. Forex trading is also a tedious process, as the markets are open 24 hours for 6 days during a week and tracking investments can take a lot of time. It also takes a lot of time to analyze and learn the basics of stock trading before you can make regular profits at the market. Despite of the several risk management tools such as take profit and stop losses, one has to pay a special premium price for each time they use them to curb their losses.
Is Forex Trading The Right Choice For You?
Whether trading is right for you or not depends on how well you can act under pressure, analyze the situations with calmness, and use the leverage and the various risk management tools properly. It must be noted that even the oldest players in the forex market tend to lose money time to time due to the highly fluctuating prices of the currencies. For being successful in the forex market one needs to be able to make some really pinpoint predictions though years of experience in forex trading. Learning to use the online trading platform is also a tough task and one needs to know how to handle the various risk management tools as well. Using these tools at wrong points can also result in an early exit from the market without taking full advantage of a certain situation.
Learn To Trade in Foreign Exchange
Learning foreign exchange trading takes years of experience and there are several courses, seminars and programs that one can attend to know more about foreign exchange. You can also visit the various online programs and others can also help you get more information about the various things that you need to keep in mind when you trade for the first time. There are several companies which might try to sell you the idea of investment in foreign exchange and claiming it to be a ‘get rich quick’ scheme. However, no matter what you do there is no particular way to predict the movement of the market which remains as one of the most volatile marketplaces in the world.
Luke is an experienced forex trader and also likes to write articles about finance, forex, and trading on various websites and blogs around the internet. He likes to spend his free time researching about the latest happenings in the market.