Can trading Forex make me rich?
Many people are attracted to the idea of trading forex (or other financial instruments such as CFDs, shares, or spread betting) because they think it is an easy way to make money.
In theory it is very easy. All you have to do is to predict whether a price is going to go up or down. If you are right then you get make money. The degree to which you are right or wrong will determine how much money you make or lose.
It can seem all too easy when the papers or the TV news are running stories day after day about how a currency or a stock is going up or a currency or stock is going down. You may look at these stories and think that if only you had placed a bet a few days ago you’d be ‘in the money’.
Forex in particular seems to have a certain mystique about it. The major currencies are highly liquid, there is often a good amount of volatility, and the retail brokers will let you trade with large amounts of leverage.
It can also be enticing because rather than having to look at boring company reports and exotic financial ratios, you can read about how the economy is doing and make guesses on where economic policy is going to go.
So do people get rich from trading Forex?
Of course they do. People can get rich from anything. People can get rich from winning the lottery or from betting on horse racing. That doesn’t however mean that *you* can get rich from doing these though.
Some people make a very good living from Forex and win consistently week in, week out.
Some people trade Forex for a few months and double or triple their money. Does this mean that they will become rich? Not necessarily. In fact if they are making money very quickly then it is extremely likely that they will lose it all even quicker.
Trying to become rich from doing a few trades in Forex over a short period of time will not make you successful as pretty much the only way you can achieve very high percentage wins is by taking unmanageable risks. If you are taking unmanageable risks then the one thing which is almost certain is that you will get burnt – and probably badly. There is even a big chance that you will lose a lot more than you put in.
If you look at the Forex bulletin boards then you can find many sorry accounts from people who make a large amount of money very quickly but then lost it all in a fraction of the time. Did they become rich? Even thought their account may for a few days have had $20,000 of winnings in it, they never got to enjoy the money as it was all lost too soon.
The odds are stacked against you from the start
Remember that as Forex is a game of currency pairs, for one currency to go up, the opposing currency must go down. This means that where people are making money, others are losing money.
This is very different to trading in stocks and shares where it is possible for all the shares to go up in value at the same time if the economy is doing great, and for them all to go down at the same time if some major economic upset occurs.
Unfortunately the split of winners to losers is not an even 50:50. For starters for every trade that is made the broker is taking a small commission. This means that there is less money to win, than has been put into the ‘Forex pot’.
On top of that professional Forex traders, banks and other financial institutions will be taking an uneven percentage of the winnings.
This means that you as a beginner Forex trader have the odds very much stacked against you.
As some people get rich from trading Forex, can’t I?
I hope you can see that most people won’t be getting rich from forex. But some do – so could you be one of them?
Let’s think about this another way.
Private dentists can make lots of money. However it isn’t easy. You need to study for many years, practice all the various techniques, pass exams, and have the time and money to be able to go through all of this.
You can’t just become rich overnight by starting a dentist practice.
So why do you think it is any different for trading?
I think the reason for this perception is due to how easy it is to trade. No one (who is sane anyway) would think about having a go at doing a root canal procedure. Where would you even start! However anyone can trade Forex. You just have to open an account, press a few buttons, and you are making a trade!
The fact that it is easy to make a trade does not mean it is easy to consistently make winning trades every day, year after year.
To be a winning trader you will need to do large amounts of study, practice regularly, and have the right attributes to place and manage your forex trades.
Forex can indeed make you rich. It just probably won’t.