Is Forex Trading Worth The Risk?

Forex related forums are full of stories from aspiring traders having their accounts burned. There is no shortage of stories about Wall Street companies that have lost millions of dollars. The risks of trading are further compounded by the lack of regulation and the many unscrupulous brokers looking to attract newbies with little knowledge and experience.

Lastly, the technology, market analysis tools, and the edge provided by information from major financial institutions can hardly be matched by retail traders.

Despite these drawbacks, forex trading continues to attract numerous traders who are constantly looking for an opportunity to make money and improve their standard of living.

So, Is currency trading worth the risk? Or is it just a mirage pursued by aspiring traders? Let's find out in this article.

 

A profession can be considered profitable and is worth the effort and risk when:

 

Offers above-average earnings.

Allow adequate leisure time.

Keeps physical and mental stress to a minimum.

It doesn't require a very steep learning curve.

It requires a minimal investment of money.

Based on the above factors, we will assess whether currency trading is worth it based on the risk involved.

 

Earning potential

When a novice trader seeks advice on the earning potential of the forex market, there is a high probability that the person offering free advice will say that there is unlimited earning potential.

In most cases, that will be enough for the person who sought advice to start dreaming about buying a Ferrari or Lamborghini. However, if you ask the person who gave you the advice how much they have earned so far, then there will be a rapid change in their facial expression.

Usually that will be followed by statements like "I doubled the investment, but lost when I was not feeling well" or "the market changed course when I was sleeping" etc. There is no doubt that the market offers unlimited profit potential. However,

 

Great dedication is a must to consistently earn money in the forex market. Some people mislead beginning traders by saying that we can practice on a demo account for a few weeks or months and then start earning what a doctor or engineer earns after several years of university studies. The trader should always keep his eyes and ears open. It is a lifelong study process. No trader can claim that the next position he is about to open will result in profit just because he has a track record of success. Therefore, the stakes are high when a person decides to trade the forex market full time . That is one of the reasons experienced professionals recommend trading.part-time to beginning traders.

 

Leisure

As the currency markets are not active on weekends, Forex brokers discourage participation by deactivating their servers on Friday, usually at 20:00 GMT or even earlier. In this way, full and compulsory leisure time is offered for two days a week. Other professions may or may not allow a person to stay home for every weekend of the month. Therefore, free time allows the trader to rest physically and mentally. In this sense, Forex has an advantage over other professions. In particular, a trader can stop trading for a few days to take care of other family matters, without asking anyone's permission. Not all jobs allow for that flexibility.

 

Stress

A successful operation is nothing more than a well-founded assumption.There are innumerable external factors that determine the outcome of an operation. Therefore, a trader, regardless of their experience, will face a certain amount of stress when holding open positions. Stress would only increase with an increase in the use of leverage. Losses are often compounded as beginning traders get stressed out and try to quickly recoup losses with another trade (revenge trading). This second trade usually ends with an even bigger loss. However, people in other professions do not face these problems as often. Even if they fail, most companies have a backup plan or someone who can right them. Even professional traders who trade in a disciplined manner are under stress. No trader is going to laugh at losses. Liability increases with each consecutive loss. Therefore, forex trading is not really worth the risk when doing an assessment based solely on stress.

 

Investment

Today, most Forex brokers do not place any restriction on the minimum capital required for trading. However, one should not dream of earning a million dollars starting with an investment of 1 or 10 dollars, as some Forex brokers often advertise. A low investment decreases the chances of growth of a trading account. Also, there will be a great temptation to use higher leverage, which will ultimately result in bankruptcy of the account.

A reasonable investment of around $ 10,000 or more is required to start generating consistent and sustainable profits over the medium term. However, there are businesses and professions that can be started and run successfully with much less investment.

To summarize, although there are practically no restrictions when it comes to minimum capital requirements for Forex trading, To generate consistent income, traders will likely need a higher investment than in other professions and companies. From this point of view, other professions and companies certainly have an advantage over Forex trading.

 

Learning curve

Forex brokers and forums related to currency trading claim that they provide all educational toolsto master trading in a short period of time. There is no doubt that the educational tools offered are of immense value and offer knowledge related to trading in the best possible way.

However, it takes a long time for a trader to perform fundamental and technical analysis in a systematic way and come to a profitable conclusion. Many times, at least two indicators will show conflicting signals about the potential direction of the price movement of a financial instrument.

Only the trader with deep knowledge will be able to distinguish between real and false signals. Similarly, two data posts can sometimes contradict each other. Therefore, it may be difficult for a novice trader to choose the direction based on general market sentiment.

 

Conclusion

From what we saw above, it can be seen that Forex trading has an advantage when factors such as the availability of leisure time are considered. However, it has a downside when factors such as stress levels, learning curve, capital requirements for sustainable income, and earning potential are taken into account. Other professions do not put the person under frequent stress. Plus, there's a fixed earnings guarantee and a reasonable end to the learning curve. Therefore, we can argue that currency trading is only suitable for people without immediate financial concerns and with a great desire to learn. People whose focus is only on money should look for other business opportunities.