Why Should You Trade Forex?

Why should you trade forex? This is a good question. The forex market is the most liquid of all the different financial markets. Nowadays forex trading is accessible to almost everyone. With the recent influx of retail brokers offering trading accounts with very low minimums in a wide selection of different currencies, currency trading really is now possible for the masses.

What are the risks?

Forex must always be considered high risk. It is traded on margin which means as a trader you have the ability to open position sizes that are larger than the size of your account. Whilst this leverage can increase your profits, it also increases your losses.

Currencies can be very volatile and difficult to predict. The credit crisis that began in 2008 is evidence of this. The British Pound fell 35% in a few months. Imagine if you had a long term leveraged position, and the market went against you like in this scenario.

Is it difficult to learn forex?

Learning to trade forex is not difficult. You don't need to be Einstein to understand the mechanics. Despite this, the vast majority of traders lose money, sometimes even a substantial chunk of their net worth.

So it's not rocket science, but most people lose... why is this? The biggest reason is lack of discipline. It requires very high levels of discipline and the ability to stick to a set of trading rules. You need a solid trading plan that you are able to stick to during good periods, as well as the bad periods. An emotional trader is always a losing trader.

What about automated trading?

There are many different trading robots out there. Most of them run on the trading software Metatrader.

The problem with automated robots if the fact that they almost never stand the test of time. Whilst many of them will be successful in the short term, they ultimately fail in the end.

There are many clever internet marketers trying to sell these automated systems, but ask yourself one question; if they really had a trading system that was a "sure thing", do you really think they'd be selling it for a measly price online? Of course, they wouldn't.

What about forex managed accounts?

A managed forex account is where you open an account with a forex broker, then give another individual or company the right to trade your money for you.

There have been many traders offering their services. Unfortunately, 99% of them end up negative. Without the desire to sound overly skeptical, most managed accounts allow the trader to profit from commissions even if he or she is losing money for you.

As a result of this there have been a massive influx of traders offering to trade your money, even when their trading ability is well below par, simply to gain the lucrative commissions.

Conclusion

Forex trading can undoubtedly be highly profitable. However, if you don't have the desire to work hard and be extremely disciplined, it is not appropriate for you. Forex is not the key to instant riches, but with hard work and dedication, it could be your pathway to long term financial security.

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