Forex Trading - Fear, Greed, Stupidity
Over the past few years Forex trading has become a popular activity on the Internet. Unfortunately, as is often the case on the wild, wild, net many of the statements promoting forex trading are misleading, only partially true, or outright lies.
What? There are folks on the Internet who will say anything only to get your money? Hmmmmmm. I expect that you already know the answer to that question. As always, beware of the easy money pitches.
Forex trading is a very fascinating speculative endeavor. However, like many professions it requires a special skill set in order to trade successfully. If forex trading were as easy as many of the online pitchs claim everyone who wanted to could become very rich very fast. Of course in the real world things don’t work that way. While anyone can get lucky now and then the profits eventually end up in the pockets of those who know what they are doing.
Many of the online advertisments for forex trading point out the wonderful leverage offered by most brokagage firms. For example, at some firms you can get up to 200 to 1. That means that with a deposit of only $1,000 you can trade up to $200,000 of currency.
Sounds impressive, eh? And indeed it is. But what does it really mean?
On winning trades that type of powerful leverage is good stuff. A 1% favorable move in the market will turn your $1,000 into $3,000. Since you will benefit from a gain on the total value of the forex you control, $200,000, a 1% gain on the $200,000 equals $2,000. Nice.
However, here is the downside. A 1/2% move in the wrong direction will wipe you out. 1/2% of $200,000 is $1,000, right?
The firms that you really should stay away from will let you open accounts for as little as $200 to $300 dollars, even less. If you are like most folks you have about zero chance of being perfect and perfect you must be to make money trading forex exchange with so little staying power. If you get the opportunity to open a forex trading account for $300 just resist the offer and go out on the town one evening and blow the $300 bucks. You will have a lot more fun.
If you want to trade forex successfully forget about the super high leverage. Those making the offer know that in no time at all your margin money will be their money and you will be kicking yourself for being so stupid.
That doesn’t mean that good money can’t be made by trading forex, perhaps you have the skill sets or can with some work develop them. You will need to know what you are doing. A good place to start your research is here.
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Posted in Business World