Lots Of Money Can Be Made In Forex Trading, But First-Time Investors Should Be Careful
Forex trading is done on a much greater scale than any other kind of market in the world. Some 1.9 trillion dollars are exchanged every single day. About 73 percent of all forex trading is done by 10 international banks with names you’re familiar with: Merrill Lynch, Citigroup, and so forth. Local banks and other financial institutions account for another chunk of forex trading, and trades by “day traders” — regular individuals, people like you and me — account for only 2 percent of the total.
Nevertheless, many average traders do try their hand at forex trading, and there are many financials institutions who handle such contracts. It’s known as “retail forex,” and it’s handled much the same way that day trading of stocks is handled.
The downside is that unlike the stock market, the forex market is not particularly well regulated, and people inexpert with it can be taken advantage of. The U.S. Commodity Futures Trading Commission (CFTC) gives a number of bits of advice for amateur forex traders. Among the CFTC’s tips:
- Avoid businesses that predict or guarantee large profits, or that assure little or no financial risk. There is ALWAYS a financial risk in currency trading, and no one can assure profits when it comes to speculative transactions.
- If someone is not providing background information on themselves or their company, just avoid them. As well, always check out a company’s track record before doing any trading with them.
- The Internet is a haven for dubious types. Be wary of anyone wanting you to send cash.
- Above all, remember that if an opportunity sounds too good to be true, it probably is!
There are a lot of trustworthy and reliable forex trading firms out there, including ones that operate online. But even if the trading company is legitimate, there are still risks intrinsic in trading. Because currency rates can fluctuate for such a variety of reasons, it’s difficult to predict what investments to make. Even veteran professionals get blindsided from time to time.
In short, forex trading can be lucrative, but only if you know what you’re doing. Before embarking on any trading, study the particulars of how the market works, what generates fluctuations, how to interpret economic indicators, and all the other ins and outs of the market. Currency trading isn’t something to be entered into without due consideration. There is much potential for profit, but there is even bigger potential for loss, both at the hands of unscrupulous trading firms, and of your own lack of experience.
Don’t spend any money to learn forex before you take some time to learn about the many forex course out there.