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Investing in Forex is nothing new. Since its inception in the 20th century, the foreign exchange market has not stopped growing. So much so that it is currently the market with the highest trading volume in the world. According to the Bank for International Settlements (BIS), the foreign exchange market moves $5 trillion every day. In other words, the forex market does in one day what the New York Stock Exchange (NYSE) does in a month. With this data on the table, is it profitable to invest in Forex? How to make money in Forex?
The first question is difficult to answer. It is possible to trade profitably in the Forex market. Another thing is that it’s easy. Everything about trading the markets requires a lot of time, dedication and knowledge. Like any discipline, it requires a methodology. Methodology known among traders as a trading system.
One of the reasons that suggest investing in the stock market, and forex in particular, is not easy is the percentage of traders who lose money. Most of the reputable studies done on the subject confirm that the percentage of losers is over 90%.
It is often said in the investment community that 95% of traders lose money. We cannot say this information is false, but we cannot say it is true. The studies carried out so far by centers such as Yale University or the University of California do not allow us to have a chair on this subject.
Regardless of whether the percentage of losing traders is 95%, 90% or 70%, this is a very high margin of error. So much so that you are asking yourself several questions. Among these topics, we at Economy-Wiki.com have considered the following to be the most important:
As we said at the beginning, it can be profitable. Investing in forex is profitable if you know the forex market, brokers and operations and are an experienced trader.
The forex market is notable for being a much more volatile market than other markets. Volatility offers many opportunities to make bigger profits but also bigger losses. The same thing is said by all serious Forex traders:
The expression is too simplistic as learning to successfully invest in Forex is far more complex than learning to drive. However, it makes the idea very clear. The first first and then the second. In other words, step by step.
In summary, investing in Forex can be profitable if the trader knows what they are doing, why they are doing it and has a robust trading system.
Whether investing in Forex is recommended depends on a trader’s experience and knowledge. If the trader has several years of stock market experience, creating a Forex trading system could be a good option. Well, if you are a person who has only been in the stock market for a year or two with little education and little experience trading, this is not recommended.
Consistent with the above, another reason why it is not recommended for beginners is due to the high leverage that brokers allow. During the first two years of a trader’s activity, it is very common to make big mistakes. One of them is trying to make a lot of money in a short period of time. Which causes the trader to use high levels of leverage and lose even more money than they invested.
In my experience, after many failures, I think it is better to trade securities with lower volatility in the medium or long term. For example stocks or bonds.
It’s the million dollar question. But from the millions of dollars. Who has not wondered what it takes to make money investing in the forex market. And not only on the foreign exchange market, but also on the stock exchange.
It could take years to develop the answer, but while we try, we will summarize the three most important aspects of making money trading forex independently.
Trading psychology, money management, and stock analysis are some of these.
Every trader uses a different type of stock analysis. Most traders who trade with small capital (less than $500,000) usually do so using technical analysis. Analyses of this type are the most common. Although technical analysis, used well, can allow you to make profits in forex trading, it is useful to know one important detail. Quantitative analysis is frequently used by Forex traders who trade large sums of money. That is, automatic algorithms. Concept that we should not confuse with that of high-frequency trading. Expert Advisors, Expert Advisors or EAs are a type of automatic algorithm.
Monetary management is more important than stock market analysis. Most beginners rack their brains trying to find the holy grail. That is, an indicator or system that is always or almost always correct. That does not exist. What are profitable long-term trading systems? Because the percentage of success doesn’t matter, money management can mean the difference between being a successful trader or not. As George Soros would say, it matters how much you make and how much you lose.
It doesn’t matter if you’re right or wrong. What matters is how much you win when you’re right and how much you lose when you’re wrong.”
It’s useless to know the perfect theory if the trader isn’t disciplined later. We can hold in our hands the best trading system in history. If we don’t follow the rules, we will end up losing all our money. The psychology of trading is what most gurus cite as the key aspect.
However, the problem usually lies in not knowing what is being done. If you don’t know the trading system perfectly, you can easily fall into psychological errors. Therefore, by mastering the first two aspects, the psychology of trading largely disappears. In any case, an aspect that worries many traders, at Economy-Wiki.com we have a guide to the most important aspects of trading psychology.
After all, before investing in Forex, we need to educate ourselves and train very well. There are many scams on the internet. Lots of people who claim to be millionaires and aren’t. Lots of fake traders promising breakneck returns to attract capital. And unfortunately, there are more and more distributors who lose money but sell themselves as the ultimate solution.
Be careful and find out. Any questions about investing in Forex you can comment and we will solve them in the best possible way.