December 26, 2021 by admin
You have probably heard, if not experienced for yourself, that forex trading is difficult. In the beginning, I made it hard for myself too, simply couldn’t get all things right. And that’s ok! Depending on who you ask, chances are you’re going to get a different response, of course.
As a rule of thumb, traders who consistently make a return in forex would give you a certain answer, and that, you already know. Compare this to those who are still new to the markets, the newbies, and you get a different response.
Let me explain how I see forex trading …
Forex trading is similar to how one finds driving a car difficult the first couple of times. But the difference between the two is that while driving a car, you are bound to follow the rules. With forex trading, traders tend to forget or ignore the rules, for a long time...
This is because trading involves a ton of emotions generated by greed and fear. These emotions rule, which usually leads you to take on undue risk.
Looking at various statistics, over 90% of retail traders lose money in the forex markets. This is partly due to the fact that forex trading has fewer regulations than trading stocks. Furthermore, the amount of capital needed is also lower than in stocks or futures trading.
Due to this, traders tend to leverage their positions and end up blowing their accounts in just a few trades. Without understanding how the markets work and what the reasons are behind the market behavior, traders open positions. More often than not, the losses pile up rather quickly, to the point that their trading capital is completely gone.
There could be a number of reasons, but primarily, it is because traders are an impatient bunch.
The urge to make money from the currency markets overwhelms logic, tricking retail traders into thinking that trading is easy. We can blame this partly on the false marketing videos one gets to see on Youtube about how you can become rich with forex.
In reality, retail traders fail because they do not give themselves enough time to understand forex trading and how the markets move. Many traders think that they are ready just a month or two after making some profits on a demo account!
Most forex brokers offer the opening of a demo trading account for free. The greedy ones perhaps not, but in most cases, you will find yourself able to get your hands on a demo trading account and start practicing.
But, it is not only about getting free access to a trading account. That won’t necessarily put you in the winning path. It is also about the new emotions haunting you when you first do get your mindset around how much you can make when trading forex. Usually, after making a few returns on a demo trading account, traders fall into the trap that they are prepared for the real markets. And that is dead wrong!
It is not just about learning about forex trading but also understanding the underlying reasons behind the market moves. Many traders start to learn about the technical indicators quickly and believe that this is all that matters. Also, wrong! There is a lot more into it than just using moving averages and an RSI.
If price action moves due to technical buy and sell signals, trading would really be very simple. As with any financial markets, it is the market sentiment or the other institutional players in the market that influence the price.
This influence on price comes from a number of factors, from assessing the health of the economy to understanding what a central bank will do on interest rates.
The answer to this question is as simple as asking yourself what you did when you were learning to ride that bicycle. As you might know, riding a bicycle is about learning how the breaks and the gears work and also learning how to balance yourself.
Similarly, in forex, it is all about learning how to use the tools (technical indicators) that are available to you when trading. It also requires you to learn how to read the markets through fundamental analysis. And of course, balancing your emotions!
Unfortunately for many traders, they tend to remove the training wheels rather too quickly. To be successful in forex trading, you need to have the right expectations and give yourself time to learn how to trade – it matters.
In the forex markets, chances are that no two days are the same. Similarly, trading for just one month and thinking that you are an expert is the perfect recipe to lose money quickly. The amount of time it takes for one to learn how to trade forex can of course differ, that’s why patience is a key ingredient here.
But at the same time, if you take the right approach chances are that you will be able to slowly but consistently learn how to turn a profit and start pocketing some buck.
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