• Saturday, June 15, 2024
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BusinessDay

Forex trading isn’t a way to get rich quick

Forex

At first glance, day trading seems easy. Enter and exit trades as the price fluctuates, make a small profit, and repeat the process tomorrow. Unfortunately, there are many dangers lurking in the markets for day traders, and new traders are not aware of these dangers and how they can drain their trading accounts.

Two out of three Forex customers lose money. Most OTC Forex customers lose money when considering all the credits, finance charges, fees, and other costs. Over the past year, about a third of registered OTC forex brokers’ clients made a profit, while two-thirds lost money.

73% to 95% of the broker’s clients lose money. There is almost always a sizable portion of traders that are neither losing money nor making money.

87% of retail traders who traded currency in 2022 lost money, according to statistics made accessible by brokers. management guidelines. Retail traders have a greater potential for profit (and greater risk) when managing smaller sums (less than $1 million) than corporate dealers.

Unless you buy Forex futures or options on a regulated exchange, you are trading “over the counter”. This means you are not trading on the open market; you are only trading with your broker. When you buy, your agent is the seller; When you sell, your agent is the buyer. Your broker makes money when you trade more often, at a loss, or pay fees, spreads, or commissions.

The house controls the trading floor. When you trade on a broker’s electronic trading platform, mobile app or website, you are not connected to a live exchange. You log into the dealership, and the dealership controls the information you see on the screen, including prices. In many cases, unregistered brokers used popular trading software to appear legitimate but manipulated trading data to steal from customers.

Compare prices with third-party sources to verify that you are seeing legitimate market fluctuations and prices. The biggest danger new traders face is not having risk management processes in place or having an incomplete risk management strategy. New traders are often optimistic about their trading skills (why start trading if you’re not optimistic about its potential), which can cause them to overlook important risk management steps.

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Eager to start trading and making money, many new traders learn about a strategy, what it looks like, then jump in and start trying it out with real money. Others are a bit more cautious and try to test trade the strategy first. If they make money using this strategy on a few trades, they will start trading with real money. Such approaches can disappoint in the future.

Successful day traders test a strategy in different types of market conditions and learn the strengths and weaknesses of the strategy before using it with real capital. They do this by conducting demo trades – usually for at least three to six months (or more) – as well as by looking at historical price charts, seeing how the strategy would perform over time and utilize trading rebates.

Before you risk real money with a strategy, know when you should trade it and when you should refrain from it. Know how the strategy works when the market is trending, volatile, volatile, and calm. By testing your strategy with different market conditions, you will be able to execute your strategy effectively when those conditions materialize

Bottom line: Forex trading is for well capitalized/informed individuals that can create trade scenarios, strategy, and prediction models.

Adesina a France-born Nigerian, is a Certified Investment Trader, with more than a decade of working expertise in Investment Trading