It is very sad that majority of the people that get involved in the forex business end up losing their money but I will explain the major reasons why this happens below:
1. Leverage and Margin - Trading on margin seems like a fast way to make quick profit however, this gives birth to greed as a result of margin abuse. Research has shown that high leverage contributes largely to the number of capital losses prevalent with margin trading. Without margin, trading forex and cfds will be like every other business. It is therefore not surprising that CFTC (commodities and futures trading commission of the US) made it compulsory for all brokers in the US to offer a maximum leverage of 1:50. Statistics have shown that since the CFTC rule was set in 2010, more retail traders are now profitable.A proper understanding of leverage and margin is very important if any trader is to be successful in the business for the long term.
2. Half baked education- This is another major mistake many traders make. When a trader is trained by someone who cannot hold an account for more than 3 months consistently, you don't expect the trader to be consistent. You cannot learn how to drive in a driving school where the teacher cannot drive. Next time you want to learn any business, please make sure you approach someone with a proven track record in the business. Many forex trainers do not have performance history of even 3 months. Forget all the sweet talk, proof is everything.
3. Pressure - In my over 12 years trading career, I have seen very good traders who lost all their money over and over as a result of pressure from bills. If you put the weight of your bills on your small trading account, it is bound to crash. The best traders in the world make an average of 3% monthly ROI. They have large funds and its almost effortless. Forex trading is not a get rich quick scheme so quit the gambling if you must be consistent.
I left my job as a general manager of a forex brokerage firm to go into full time forex trading, forex account management and coaching. I would not do that if I was not convinced that this industry is very profitable.
My personal slogan is "Slow is smooth and smooth is fast". The fastest way to success is slowly.
Very well said
It is therefore not surprising that CFTC (commodities and futures trading commission of the US) made it compulsory for all brokers in the US to offer a maximum leverage of 1:50.
I wish to say something about the CFTC, i was with forex.com and they don't allow hedging
During the years i found many strategies work well in-case you know the market but eventually hedging can double or triple the profit with very low risk taken "since you can go in both directions"
I dunno if this law changed or not, but if not then this is going towards bad risk management against the traders
US session has some of the strongest moves and price can shoot like a bullet in the opposite direction
I agree with Chinedu. There is no way to get super rich fast in FX market. Slow and consistent is the way to trade even with a small account.
Leverage help a lot, but you have to be very careful.
Point number 2 is critical to your success - Would you learn to fly an aircraft from an instructor that taught himself (if he is still alive) - My FX education was expensive and very flawed until I found a former FX bank trader and found out exactly how to trade properly. I am new on this forum so I have not included a link as Im not sure about the rules on that.