Although forex trading is complex, it doesn’t have to be. By monitoring their risk levels, adhering to tight money management guidelines, and developing a set of trading rules in a written trading plan, many traders have succeeded and turned a consistent profit in the foreign exchange market.
What is Forex Trading?
The marketplace for all currencies is known as the Forex market, or simply FX. Trillions of dollars, pounds, euros, yen, and everything in between exchange hands daily on the forex market, making it the largest financial market in the world. The forex market is so large, it dwarfs all other financial markets combined, even the stock and bond markets.
All other financial markets put together, including the stock and bond markets, are dwarfed by the size of the FX market. There is no centralized exchange for currencies, in contrast to the stock market, where stocks are exchanged on exchanges like the New York Stock Exchange.
A transaction occurs in the foreign exchange market whenever a buyer and a seller agree on a specific exchange rate. Big banks, hedge funds, pension funds, governments, and central banks are frequently these buyers and sellers. However, during the past 20 years, retail forex traders have become a more significant component in the overall volume of daily trading.
Is forex trading difficult?
As a general rule, forex traders that regularly generate profits would respond in a particular way, which you are already aware of. Compare this to those who are still new to the markets, the newbies, and you get a different response.
Forex trading is comparable to how learning to drive a car might be challenging at first. The distinction between the two is that you must adhere to the rules when operating a motor vehicle. For a long time ….
This is because trading involves a ton of emotions generated by greed and fear. Because these emotions rule, you frequently take on unnecessary danger.
Looking at various statistics, over 90% of retail traders lose money in the forex markets. This is partly because forex trading has fewer regulations than trading stocks. Additionally, less capital is required than in the trading of stocks or futures.
As a result, traders frequently leverage their positions and lose all of their money in a short period. Traders open positions without having a thorough understanding of how the markets function and the factors that influence their behavior. More often than not, the losses pile up rather quickly, to the point that their trading capital is completely gone.
Is it hard to learn forex trading? Why?
There may be several causes, but the main one is that traders tend to be impatient. The desire to profit from the currency markets overrides reason, leading retail traders to believe that trading is simple. This can be partially attributed to the deceptive marketing videos that are available on YouTube on how to make money with forex.
In fact, retail traders fail because they don’t give themselves time to understand forex trading and how the markets move. Many traders think they are ready just a month or two after making some profits on a demo account!
Most forex brokers offer the opening of a demo trading account for free. In most circumstances, you will be able to obtain a demo trading account and begin practicing. The greedy ones might not, though.
However, using free access to a trading account is not just the only benefit. That won’t necessarily put you on the winning path. It also deals with the fresh feelings that come over you when you first start to think about how much money you can make when trading forex. Usually, after making a few returns on a demo trading account, traders fall into the trap that they are prepared for the real markets. And that is dead wrong!
Learning about forex trading is necessary, but it’s also important to comprehend the underlying causes of market movements. Many traders try to learn about the technical indicators quickly and believe that this is all that matters. There is a lot more to it than just using moving averages and an RSI.
If price action moves due to technical buy and sell signals, trading will be very simple. As with any financial market, that’s the market sentiment or the other institutional players in the market which influence the price.
This influence on price comes from several factors, from assessing the economy’s health to understanding what a central bank will do on interest rates.
The answer to this question is as simple as asking yourself what you did when you were learning to ride that bicycle. As you might know, riding a bicycle is about learning how the brakes and the gears work and also learning how to balance yourself.
Similar to other financial markets, forex trading is all about becoming proficient with the tools (technical indicators) at your disposal. You also need to become proficient at using fundamental analysis to read the markets. And of course, balancing your emotions!
Unfortunately for many traders, they tend to remove the training wheels rather too quickly. You must have realistic expectations and give yourself enough time to learn how to trade to be successful in forex trading.
There is a good likelihood that no two days will be the same in the currency markets. Similarly to this, trading for only one month while believing you are an expert is a surefire way to lose money fast. Naturally, the length of time required to learn how to trade forex might vary, which is why patience is a crucial component in this.
Conclusion
In this article, we explained why is forex trading so difficult, and also stated that, if you take the right approach, chances are that you will be able to slowly but consistently learn how to turn a profit and start pocketing some buck. You can also trade in FX investment more safely and profitably by creating an account or buying with Epo.
