Forex trading today has become one of the most successful, profitable and lucrative business for anybody who wants to become a broker. Yes, you heard me right. Forex trading is the most lucrative business for anybody who wants to become a broker but not so for someone who wants to join the markets as a trader. This is primarily because of a number of factors, some of which are detailed below.
Randomness - The forex markets are one of the most liquid markets in the world and hence enjoy a greater number of participants i.e. Banks, Institutions, Hedge Funds, Organizations, Central Banks, Dealers etc. All these participants transact in the market based on their needs and not necessarily for trading purposes. Hence, their actions cannot be associated with a trend, patterns or some sort of a technical study. They are more or less random and can cause a movement in the currency in any direction at any given point of time.
Psychology - Statistics have proved that 95% of the people lose money in the markets allowing the other 5% to make truck loads of money. Forex Trading is more in the head and it involves a great deal of practice if one likes to train him or her in order to generate profits from the market consistently. The amount of hard work which markets require is immense with very limited to no success at the start. This is one phase which most of us are not able to overcome since we are slaves to our own thought process. Our emotions cloud our judgement and therefore do not allow us to think rationally and in a calculative fashion which is one of the most important ingredients in any trader's success recipe i.e. the Ability to Take Calculated Risks. Most of us think we do this really well, but trust me we are no where even near to how we should think and believe.
Liquidity - Picking up from our previous point. Some of these participants including the hedge funds and banks prefer trading in the forex markets in order to generate trading profits. These players do realize that the forex markets are one of the most liquid in the world and hence their large multibillion dollar transactions can get absorbed easily. This encourages these players to dig deeper and come out with algorithms and black boxes which can easily help them achieve this aim. Unfortunately some of these algorithms do make money but only for a short duration of time. Thus, we are left with no option but to follow the trading style of these large players if we would like to remain profitable. And trust me this might sound easy but is very difficult to accomplish.
Extremely Competitive - The markets especially the forex markets are extremely smart considering the amount of intellectual capital which is invested in these markets primarily because of the sheer volume traded and the potential to make a large amount of money sooner than anyone can anticipate. A smart trader is one who can outdo his competition and is able to successfully anticipate turning points. Now this is something which is particularly interesting even to me because how do you push yourself and make yourself better than your competition. Reading a forum, blog or some self help books will only help so much. But if you have to succeed you have master certain topics and have your own perspective and thought on how the market behaves and why.
Randomness - The forex markets are one of the most liquid markets in the world and hence enjoy a greater number of participants i.e. Banks, Institutions, Hedge Funds, Organizations, Central Banks, Dealers etc. All these participants transact in the market based on their needs and not necessarily for trading purposes. Hence, their actions cannot be associated with a trend, patterns or some sort of a technical study. They are more or less random and can cause a movement in the currency in any direction at any given point of time.
Psychology - Statistics have proved that 95% of the people lose money in the markets allowing the other 5% to make truck loads of money. Forex Trading is more in the head and it involves a great deal of practice if one likes to train him or her in order to generate profits from the market consistently. The amount of hard work which markets require is immense with very limited to no success at the start. This is one phase which most of us are not able to overcome since we are slaves to our own thought process. Our emotions cloud our judgement and therefore do not allow us to think rationally and in a calculative fashion which is one of the most important ingredients in any trader's success recipe i.e. the Ability to Take Calculated Risks. Most of us think we do this really well, but trust me we are no where even near to how we should think and believe.
Liquidity - Picking up from our previous point. Some of these participants including the hedge funds and banks prefer trading in the forex markets in order to generate trading profits. These players do realize that the forex markets are one of the most liquid in the world and hence their large multibillion dollar transactions can get absorbed easily. This encourages these players to dig deeper and come out with algorithms and black boxes which can easily help them achieve this aim. Unfortunately some of these algorithms do make money but only for a short duration of time. Thus, we are left with no option but to follow the trading style of these large players if we would like to remain profitable. And trust me this might sound easy but is very difficult to accomplish.
Extremely Competitive - The markets especially the forex markets are extremely smart considering the amount of intellectual capital which is invested in these markets primarily because of the sheer volume traded and the potential to make a large amount of money sooner than anyone can anticipate. A smart trader is one who can outdo his competition and is able to successfully anticipate turning points. Now this is something which is particularly interesting even to me because how do you push yourself and make yourself better than your competition. Reading a forum, blog or some self help books will only help so much. But if you have to succeed you have master certain topics and have your own perspective and thought on how the market behaves and why.