Forex trading can be an extremely high-risk endeavor. Although the returns can be substantial, its associated risks should not be taken lightly if using leverage is involved. If you are unprepared to accept such risks it’s wise to stay away from Forex. But for those willing to accept them and put in time to develop their skills it could provide additional income streams.
New traders often question if forex trading really works when they enter into it with false motivations and unrealistic expectations, expecting to quickly make wealth by copying friends’ strategies or following some quick forex strategy with no basis in reality. Unfortunately, nine out of ten traders lose money because it’s an unpredictable gambling activity with high leverage that provides no expected return; only brokers and their service providers benefit financially from forex.
Prior to diving in to online Forex trading, it’s essential that one has an understanding of its nature. Imagine an ocean with lots of fish ranging from multi-billion leviathans to smaller fry. Central banks and multinational corporations make waves through monetary policy decisions and purchasing power decisions while hedge funds, private investors, and financial brokers also compete on this market.
The market is open 24 hours a day, five and a half days a week around the globe and makes trading easier, enabling smaller investments to have a big impact (though with increased volatility). Furthermore, being an international market ensures it offers greater liquidity which reduces price manipulation.
Forex trader profits are rarely presented in dollar amounts but rather as percentages of initial deposits, making it hard to assess them accurately – for instance, an aspiring trader with small deposits might think a 1% daily profit may not mean much; but for more experienced traders with larger accounts it could amount to millions or billions! Furthermore, because this market is broker-driven it may not always be fully transparent; one cannot know how orders are fulfilled or whether they’re getting the best prices available when placing quotes.
To be successful at forex trading, you need to understand and apply the principles of market analysis to your own trades. There are two major schools of analysis: fundamental and technical. Both approaches have their own set of strengths and weaknesses, so it is key to select the appropriate one for you in light of your individual circumstances. A thorough knowledge of economic forces that shape markets will give you an edge over other traders; you’ll be better able to anticipate trends and avoid costly mistakes by understanding economic fundamentals better. A great way to start is micro lot trading initially before gradually increasing stakes as your confidence and experience increase; by doing this you won’t risk losing everything while simultaneously learning from any mistakes made along the way.