There are numerous things that would’ve enticed you to join
the field of forex trading, one of them being the offer of great income. But
that’s not all forex trading is made up of.
Here are the most important things you must remember when
entering the field of forex trading.
#1: Leverage can
cause you to lose money despite having a winning strategy
There’s always a chance for excessive leverage to result in
the loss of capital despite having an otherwise profitable strategy. The best
way to understand this is through an example.
For instance, let’s say I’m flipping a coin and the
conditions were this: if the heads land, you stand to earn $2, but if the tails
land, you then lose $1. Now my question is this: would you flip that coin?
Most people would say yes and I’m guessing that you would
too, maybe even consider flipping the coin over and over. Having a 50/50 chance
between gaining $2 and losing $1 is an opportunity that you would most
definitely accept.
Now let’s say that I still have the same coin but the stakes
are different. This time: if the heads land, you will triple your net worth,
but if the tails land, you will lose every single possession you have. Same
question as before: would you flip that coin?
I’m guessing you wouldn’t be too keen on trying out the coin
that can cause you to lose everything you own. Despite having the same
percentage, the same coin, the stakes are different and more extreme, just one
wrong flip and it can ruin your life.
Going “all-in” on one or two unlucky trades can result to
you losing everything. This is one of the ways that leverage can cause even a
winning strategy to lose money.
#2: Forex is not a “get
rich quick” opportunity
Always keep in mind the saying “It takes money to make
money.” Contrary to popular belief, forex trading is not going to turn your
$10,000 account to $1 million overnight. Your strategy does play a huge role in
determining the amount of money you earn, but it’s not the only factor you
should consider. One of the important factors includes the amount of money you’re
actually risking.
But this doesn’t mean the forex trading is no longer worth
your time. There are numerous successful Forex traders in the field who trade
for a living. The main difference is that their success was achieved and
developed over time; they were also able to increase their accounts to a level
that can create sustainable income.
Conclusion
Before signing up with any broker makes sure that you know
enough and that you won’t be easily manipulated, not all brokers out there will
prioritize your well-being.
Forex trading comes with the full package, meaning the good
and the bad. There are potential for great gains but there are also the risks
that you must familiarize yourself with. Just don’t forget to research and
learn as much as you can about the trading field and the forex market before making
any final decision.
Forex trading is not just a part-time job or a hobby; it can
also be your main source of income with the right combination of strategy and
experience. Moreover, having the right broker can help you go a long way, so
make sure to choose wisely.
