Friday, September 24, 2010, PM | Leave Comment
In the last 5 years, internet marketing for trading currency in the foreign-exchange market has exploded. A quick Google search of “forex trading” will reveal an endless number of sales pitches promising anything from “Earn thousands of dollars a week working from home!” to “Turn $10k into over $1 million in a year!”
Unfortunately, these fraudulent claims hook people every day.
The foreign-exchange market is where currencies are exchanged for one another. The forex market is enormous. Average daily turnover is a staggering $4 trillion per day.
If you were to add up the daily turnover in the New York Stock Exchange with the daily turnover of every major stock exchange throughout the world, it will still pale in comparison to the $4 trillion that changes hands every day in the Forex market.
Thus, the Forex market itself is not a scam. It is the largest and most robust financial market in the world. Unfortunately a huge percentage of what is presented online as “Forex trading” is somehow fraudulent.
In this article, we will discuss the question “Is Forex a legitimate way to earn extra income?”
First of all, let us examine why Forex trading is attractive to many people looking for a new business opportunity.
Work From Home
Unless you are trading at a financial institution or bank, Forex trading is essentially a stay-at-home business.
Low Start-Up Costs
You can open a Forex trading account with as little as $100 as some brokers. Of course, you will be trading positions that are worth $1 or less, so there is not a huge potential for money, but the reality is that start-up costs are minimal. The only supplies needed are a computer that has fast internet connection.
A 24 Hour Work Day
The Forex market is not centralized in one location like the stock market in New York. Instead, it is a loosely connected network of international banks around the world. One time zone is always operating, so traders can trade around the clock Sunday evening through Friday evening.
Traders are able to exercise leverage of 100:1 or more. That means that with only $1,000 in a trading account, a trader can trade a position of $100,000. This, of course, can lead to very fast profits, but also very fast losses. Leverage is a double-edged sword.
Are there benefits to operating a Forex trading business? Of course. But, in order to really understand the nature of this business, let us now examine the challenges of Forex trading.
Then, we will be able to more accurately answer the question that is the title of this article, “Is Forex a legitimate way to earn extra income?”
The Challenges of Forex Trading
Most Traders Lose
Industry legend says that 95% of traders lose money. Of course, these statistics can never be proven on a mass scale, but they are true. Very few traders make money consistently. Now, we all know that 95% of small business tend to fail within a few years as well, but still, it is a daunting statistic.
You Need Education
Most professional traders are educated in 1 of 2 ways. They either worked at a trading firm at one point before branching off on their own, or they were educated by a professional trader at some point. Trying to learn how to trade financial markets from the internet can be disastrous. If you are going to consider trading for a living, you need to educated.
The Journey To Profitability Is Long
Trading is a profession similar to engineering, architecture, or medicine. In each of these professions, you go through a period of several years, followed by a period of years of on-the-job training, and then you finally are released into the work force as a professional.
Most people interested in Forex trading want to start making money right away. That is not going to happen. It oftentimes takes several years of education and trading experience to become a professional trader.
Fortunately, most Forex brokers offer a Forex demo account. This is a simulated account with fake money, but you will be able to trade the market in real-time. Thus, you can experiment with this market and determine how much you like it.
Trading attracts many different types of personalities. The best way to find out if trading is for you is to open up a demo account with an online broker and begin getting educated. Begin trading on the demo account and see how you like it.
But remember, the path to profitable trading is not quick. Yes, the potential upside rewards of trading are huge, but the challenge of getting to that place is formidable.
If you approach Forex trading as a business, you will greatly increase your chances of success in this market.
This article was written by Michael Trinkle, a guest author.