Disadvantages when Trading Forex

Everyone seems to be interested in becoming a Forex trader. The idea of being your own boss and working when and if you want appeals to traders.

But, this is just a dream. The cruel reality is that over ninety percent of Forex traders lose their first deposit.

Not only that they lose it, but they don’t learn anything from the process. Yes, Forex trading leads to great returns, but only if you do your homework and put the time to learn the business.

Trading for a living is like running your own business. While being your own boss, you’ll end up dedicating more time to it than being a regular employer.

When you have a regular job, when the working day is over, most of the people simply forget about the job and enjoy the rest of the day. Some with their families, others relaxing…like they should do.

It is not the same when you depend on the financial markets. As a trader, you’ll make money only if the market moves. However, most of the times the market doesn’t move.

Cons of Trading Forex

Despite the low odds to succeed, online retail trading grew in popularity in the last years. Advertising is a reason for it.

What can be so difficult? After all, there’s a two-way street: price can only go up or down.

The following are reasons why you should NOT get into Forex trading. Read them calmly, and then consider if you still want to trade Forex for a living.

Emotional Roller-Coaster

As a retail trader, you’ll be inclined to take small profits. Hence, you’re most likely to be a scalper. By definition, this means you’ll trade smaller time frames (like the five-minute and hourly charts) and news, with the idea of making a quick buck.

But Murphy’s laws apply to Forex trading too. The moment you go long, the market goes South. You reverse and sell, only to see the price surging.

The idea is that there’s no perfect place to enter a trade. The entry should be based on a sound technical or fundamental analysis. Which, sometimes it works, sometimes it doesn’t.

To make sure you survive in the long run and the account is not depleted, you need a money management system. There’s no holy grail in trading. Even the trades that end up with a profit will alter your ego and will make you doubt your decision.

Can you handle the pressure? Most people don’t.

Brokers Want Your Money

Not all brokers, but most of them have a trading department of their own. Market makers are the ones that mirror a market.

In other words, they mirror the actual quotes from the interbank market and offer them to their clients. Therefore, when a trader buys or sells a currency, the orders are not passed to a liquidity provider in the interbank market.

In fact, they remain “in house”. The broker takes the opposite side of the trade. To win, it will use all the tricks possible (increased spreads, high slippage, etc.)

High-Frequency Trading

Nowadays, traders follow robots. Super-computers buy and sell currencies every millisecond to profit from their volatility.

As such, retail traders can only adapt to these moves. Some robots have a simple task: to take the previous swing and then reverse. They execute thousands of trades per second, belong to highly-sophisticated financial entities, and don’t care if you lose money.

Still want to trade Forex for a living?

Conclusion

If the answer is still yes, here’s another reason to think twice. You’re your worst enemy in trading. Knowing yourself is the only way to succeed.

Knowledge can be learned. Technical and fundamental analysis can be taught. But, no one will tell you how to handle the pressure. The market heat.

You must handle your worse fears in the market. Moreover, greed will make you exit too early from a good trade.

Robots don’t care about these two aspects. But hey, they run the Forex market, remember?


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