6 Reasons Why Forex Trading can’t make you RICH

December 23, 2015

Forex Trading image 1

Can you get rich via Forex trading?

Despite the fact that our initial response to that question would be  in the affirmative, we need to explain it further in the hopes of making it crystal clear to all who wants to venture into this business.

Forex trading might make you rich in the event that you are a hedge fund with deep pockets or a strangely talented currency trader.

shutterstock_275735078Be that as it may, for the average Joe (meaning regular retail trader) instead of being an easy road to wealth,

Forex trading can be a tough road that leads to colossal misfortunes and potential penury.

A Bloomberg article in November 2014 noticed that in light of reports to their customers by two of the biggest traded on an open market Forex organizations – Gain Capital Holdings Inc. (GCAP) and FXCM Inc. (FXCM) – 68% of financial specialists had a net misfortune from trading currencies in each of the previous four quarters.

While this could be deciphered to imply that around one in three traders does not lose cash trading currencies, that is not the same as getting rich trading Forex.

Here then, are six reasons why the situation is anything but favorable for the retail dealer who wants to get rich through Forex Trading.

6 Reasons why Forex Trading can’t make you rich

awry Risk to Reward

Forex Trading image 2Seasoned Forex dealers keep their misfortunes little and counterbalance these with size able gains when their money call turns out to be right.

Most retail brokers, be that as it may, do it the other way, making small profits then clutching a losing trading for a really long time and bringing about a considerable misfortune. This can likewise bring about losing more than your initial investment.

Platform or System Malfunction

Imagine your predicament in the event that you have a huge position and can’t close a trade in light of a stage glitch or system malfunction, which could be anything from a force blackout to an Internet over-burden or PC crash.

systemThis classification would likewise incorporate astoundingly unpredictable times when requests, for example, stop-losses don’t work.

Case in point, the currency surged on January 15, 2015 had numerous dealers setting up their short Swiss franc positions with tight stop-losses.

Notwithstanding, these demonstrated ineffectual on the grounds that liquidity became scarce even as everybody charged to close his or her short franc positions.

No Information Edge

The greatest Forex Trading banks have huge trading operations that are connected to the cash world and have a data edge (for instance, business Forex flows and covert government intercession) that is not accessible to the retail dealer.

Money Volatility

Recall the Swiss franc for example. High degrees of leverage imply that trading capital can be drained rapidly amid times of unusual money instability, for example, as in the first half of 2015.

OTC Market

The Forex market is an over-the-counter market that is not brought together and regulated like the futures market. This implies Forex trading is not ensured by a clearing organization, which offers ascend to counterparty risk.

Misrepresentation and Market Manipulation

There have been intermittent instances of extortion in the Forex market, for example, that of Secure Investment, which vanished with more than $1 billion of investor funds in 2014.

Market manipulation of Forex rates has likewise been widespread and has included a percentage of the biggest players.

In May 2015, four noteworthy banks were fined almost $6 billion for endeavoring to control trade rates somewhere around 2007 and 2013, bringing all out fines levied on seven banks to over $10 billion.

In the end

In the event that despite everything, you still need to try your hand at Forex trading, it is reasonable to utilize a few safeguards: restrain your leverage, keep tight stop-losses and go for a legitimate Forex broker.

In spite of the fact that the chances are still stacked against you, in any event these measures might help you level the playing field to some degree and earn some money to boot!

Refine Your Financial Vocabulary

Investopedia’s FREE Term of the Day offers you some assistance with gaining a superior comprehension with specialized and straightforward clarification.

So there you go, 6 reasons why Forex Trading can’t make you rich, but with a lot of learning and luck, you might just get rich or die trying any way!

If you have any questions, suggestions or comments on the article, don’t hesitate to contact us today!