The foreign exchange market, more commonly known as Forex, is by far the largest financial market in the world. It is even larger than the stock market with a daily volume of over five trillion dollars. Even the smallest share in this market could translate to thousands and millions of dollars. Even though forex has started getting attention only recently, with more and more people talking about it, and even some get rich quick scams, the market is as old as money itself.

Often when globalization is discussed, international trade is highlighted as one of the key pillars of it. In reality, international trade is impossible without forex. Every nation in this world has its currency. Even before paper currency existed, gold was traded. However, just like currencies today, not all gold coins are equal in value. Some were made out of good quality gold, while some had impurities. Fast forward to the modern world, this inequality between different currencies still exists. It has become even more complicated, with almost 180 currencies in existence.

To simplify things, when businesses or individuals buy or sell goods and services in other countries, they have to trade using the host country’s currency. The place where all of these transactions take place is called the forex market. During the 90s, the internet made forex trading so accessible that it became a mainstream way of making money, just like the stock market. People bought and sold different currencies like other commodities based on their speculations. The value of these currencies was determined by the basic economic rule of demand and supply.

Losing money in Forex Trading

All traders including the forex traders lose money at one point or another. However, the number of times they lose it can vary from one individual to another. Around ninety percent of the traders end up losing money mainly due to a lack of proper planning, thinking through things, and just wanting to make easy money. If you have average money management skills it is advised to not jump into trading at all. If you are unemployed or do not have easy disposable money, forex trading is not for you.

The huge size of the forex market makes it one of the most popular markets for speculation. Often-times people from outside have the view that everyone is making big money in this, which is far from true. The money in forex trading is limited to a little percentage of the traders and this shows that it’s not everyone’s cup of tea. 

Being fit for Forex Trading

The art of trading requires a whole lot of discipline which numerous traders lack and the hope that everyone gets to make huge money in this often leads to disappointment. Forex trading is easily one of the most difficult endeavors known to mankind but also one of the most financially rewarding. Some amateur traders see this as a way to get rich in a short time but one should never forget that huge profits only come after taking huge risks and the results could be either if you don’t take calculated risks. Everyone in this field needs to devise a proper trading strategy that would involve risk-taking, minimizing the losses, and having good trading skills. Forex trading is not a scheme for you to earn easy money without making an effort.

Forex Trading: a skill

The introduction above might make it sound like there is no hope for the ones in this field however, that is not true. Skilled traders exist in this field like in the others and they do make a lot of money through trading. This success like in the other fields requires persistence and hard work and would not come served in a silver platter. If it had been easy money, all of the traders would be rich which not the case is. Well-established and experienced traders encounter losses as well which might not be as frequent as the rest but still exist.

How is Forex Trading different from the Stock Market?

A lot of people jump into forex based on their experience and success in the stock market. Unfortunately, what they don’t realize is that unlike the stock market where you have plenty of information and time to analyze a certain company’s data and figure out if it is undervalued or overvalued and make rational decisions based on that, which in most cases turn out to be profitable in the long run, the forex market is different. It is based more on speculations.

This is because there are so many factors in play that can influence a certain currency’s value, such as the political situation and even the domestic policies of a country. All of these factors combine to make the market even more volatile than the stock market.

The big players in the market, such as banks trade among each other in huge volumes and are capable of easily crushing you no matter how big your investment is. It is common for new and amateur traders to lose their position because they do not have the awareness and knowledge of the market. Often, they get emotional or greedy and make the wrong decisions.

Final say

If you’re determined to make your name via forex trading then you need to be mentally prepared for not getting money as soon as you set foot into trading. Work on developing a trading strategy and spend time doing this because it needs to be thorough with a lot of focus around managing the risk.

When your expectations would be around managing the risk rather than avoiding the risk altogether only then you would be able to make progress. That is because no matter how good you are at this there will be instances where you will be at the losing end and you should be ready and well prepared for those.

The final say on this matter has to be that it is 100% possible to become rich by forex trading however the number of people who have achieved that are not many.