Forex For Dummies - 7 Things You Should Know Before You Start
1. Only a few succeed.
Most sales pages promoting forex information, training and brokerages will tell you that 95 per cent of all new traders lose their money, while only 5 per cent go on to success. This is correct, but what they then go on to do is to try and convince you that the only way you can make it into the elite who succeed is through buying their course, DVD set, ebook or brokerage services, as the case may be.
But most of the 95 per cent who fail undoubtedly did some level of research and training before going into the market with real money. So how come so many still fail? Everyone's saying their particular product will save you, but they can't all be right.
2. Most sellers of forex information, training and ebooks don't trade
themselves.
This is not generally realised, especially by newcomers to forex. The sellers of phoney information cleverly deflect attention to this point by focusing your attention solely on the benefits you'll get when you're successful, such as a lavish lifestyle, freedom from debt, fast cars, exotic holidays, and so on.
Why do they not trade themselves? Generally because their systems are phoney and don't work. They make plenty of money selling it to people who want to learn how to trade in forex. Why blow it on actual trading?
3. Anyone can dress themselves up as a forex "expert" on the internet.
There's plenty of free information about forex available online. Some of it is good, and some of it is very bad. If you look around long enough you'll find ebooks, texts, videos and reports that you can cobble together into a unique "product". You can then pay someone to produce a compelling sales letter, web site, and fancy graphics, and you're in business selling your phoney information. I'm not suggesting you do this for one moment, but I'm telling you what a lot of other people do, so beware.
4. About those "back tested results".
A number of sellers of phoney currency trading information refer to "back tested results" to "prove" their product works. This means going back through the charts of various currency pairings until they find a pattern that matches what they've been looking for, and then present it as "proof" that their system works. All it proves, though, is that it can work in some situations. Whether it will work in real time and all the situations that forex throws up is another matter.
5. Day trading forex on a spread betting account.
Unbelievably, this is very often the method these phoney forex systems would have you do. It is almost impossible to make regular profits doing this. You may have the occasional winning trade, but overall you will gradually lose all your money. That's how the huge forex market works - it's made for the big players who can have massive stop loss levels and who often leave their trades open for days or weeks at a time in order to make their huge profits.
6. Claims of the profitability of forex are greatly exaggerated.
A common claim of phoney forex sites is that you can take an initial investment of a few hundred dollars or pounds and within weeks be making profits of thousands a week. This simply isn't true. Even the successful professional traders in forex only manage an annual return averaging around 30 per cent. This, of course, is a fantastic return, especially compared to current deposit account rates of around one per cent, and when you're trading with millions then it means millions in profits. But these are the big traders, who can protect themselves from the volatility of the forex market with big stop loss levels.
7. There is an alternative to forex.
You're not restricted to forex, much as all the sellers of phoney forex "information" would like you to believe you are. You can trade stocks and shares, bonds, indices, commodities and futures much more profitably and with only a fraction of the risk. These markets don't have the allure and excitement of the forex market, it's true, but they are much easier for the small trader to trade for profit. Start now by finding a successful financial trader who is prepared to teach you how to do this, and leave forex to the big guys.
Philip Gegan is a retired UK lawyer who has studied the financial markets since 1991, and actually trades them for profit. You too can make profits such as 70% in less than a week on gold at www.onlinefinancialtrading.com
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