Is Forex Trading Safe?

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written byThe Second Wallet
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Investing in financial markets is a trade that has a following and participation from all over the world. initially a preserve for multinational corporations and investors with deep pockets, the forex market has recently opened up to the average investors, allowing trade in small amounts of money at a time.

Due to its high liquidity, 24/7 schedule, and being readily accessible, forex trading is now a popular career, especially for people who have a financial background as it means you’ll be your own boss.

 

The Pros of forex trading

Here are some of the reasons why investing in forex trading is a good idea:

a)     Accessibility

Did you know you can easily sign up for a trading account from your laptop at home? All you require to start trading is to go through the registration process, submit your documents, and deposit money into your trading account. In fact, most forex traders are online based. The forex market is very readily accessible and what’s more, you can start trading from as low as $100. You don’t need to have a huge deposit to start trading; you can start with a small amount and grow slowly. It is also worth noting that you can create a free demo account to gain experience as an amateur trader before you start paper forex trading.

b)     Liquidity

Due to the largeness of the market, forex trading is hugely liquid. Nearly $2 trillion is traded every day. This means an investor can easily get into or exit a position without having to be afraid of the price jumping too far before their trade falls through. In one click, you can buy or sell and ensure you are not ‘held’ by a sale. With a good trading plan, you can program your trading platform to exit your trading position whenever you reach the intended profit amount, i.e. a limit order. In the same way, you can have a stop loss order where the platform will close the trade if the tide is moving against you.

c)     Flexibility

The trading market involves 28 major currency pairs from across the world to trade in, operating 24 hours a day and almost seven days weekly, meaning you can trade just about any time. I addition, you can enter and exit a trade whenever you want or even trade part-time.

d)     Equality

The Forex trading market is very large making everyone an equal at trading. By this, I mean that the small retail trader will also trade on the same level as a rich investor, banks and other financial institutions. An equal platform for everyone makes the game fair, and any analysis you make regarding supply and demand will most probably be accurate.

e)     No Central Exchange or Regulator

In the simplest terms, forex trading is an over-the-counter platform operating across the world, meaning there is no existing central exchange or regulator for the forex market. Granted, there is interference from individual countries’ central banks, but this is on rare and very extreme situations, in which case they are anticipated and priced into the market. With such a decentralized and deregulated market, chances of sudden surprises are very slim, keeping overall costs real low.

f)      Profitability

With the right timing and trading plan, the Forex market is potentially profitable, and you can go as far as multiplying your initial investment ten-fold overnight.

As opposed to the stock market where you only make a profit when a share’s worth goes up, Forex trading allows you to make a lot of money even when your currency is going down. Ideally, if you notice a currency going up, you buy it, and vice versa. This is because the Forex market you work with pairs where one currency decreases if the other is increases and vice versa.

 

Cons of a Forex Trading Career

For every good thing, there is also a bad side to it. Forex trading is no exception and does come with some cons that are worth noting especially if you intend to get into it soon:

a)     Lack of Transparency

We already know that the forex market is largely deregulated, and this makes it a perfect playground for brokers; and also pits novices against professionals. This situation means that the platform is not fully transparent. When trading, you will most likely have no control on how your trade order gets fulfilled, get limited views on trading quotes as provided only by your choice broker or even end up not getting the best price. To curb this, I’d suggest that you only deal with regulated brokers because in as much as the market may be unregulated, the activities of brokers are definitely regulated.

b)     The sin of ignorance

When engaging in foreign exchange, you are mostly left to your own devices and judgement with little to no assistance. This calls for continuous learning and growth for someone to not only survive but thrive while trading in forex, without which losses can easily be suffered. Forex trading can turn into a loss-making nightmare in a split second, unless one has a beefed up their knowledge on leverage, has an efficient capital allocation scheme, and also bears control over their emotions especially if needed to cut losses.

c)     Complex Price Determination Process

Forex trading may be easy to start and possible to begin operating even with a low deposit, but getting the timing right is what does many people in. the trading rates are influenced by multiple factors; primarily global politics or economics. For some people, these factors are not easy to analyze well enough to draw reliable conclusions to trade on. These indicators are actually what feeds the high volatility in forex markets, and any wrong judgement could potentially result in a huge loss.

d)     High Volatility

It is so easy to end up with heavy losses due to the high volatility of the forex market along with the little to no control over macroeconomic and geopolitical developments. You really cannot do anything if the tide of a currency you are trading in goes south. In addition, the market operates 247 meaning it is very difficult to monitor prices effectively. However, you can mitigate heavy losses by maintaining strict stop losses for all forex trades and sticking to your trading plan all through.

 

Conclusion

Forex trading will reward you greatly if you take your time to learn well before starting consistent trading. As much as it is a good investment, forex trading is also risky and if you don’t play right, you could lose your money in no time. Best approach would be to leverage on the professional team with proven results. Always examine the trading plan and stick to it. Profitable trading in forex heavily relies on your ability to be consistent in results. Check out our offer in opportunity section and start earning 😊