Trading and forex from the outside can seem like a fantastic way to make money. In fact, those without a lot of money often see it as a way that they will be able to make a little bit extra on the side, or for some, the dream to become rich. Unfortunately, things aren’t quite as rosy once you get in and there are some hidden truths that you only really discover once you have a better understanding of what Forex trading actually is.
So let’s take a little look at some of the unfortunate truths about trading and what they actually mean.
There is No Single Best Strategy
When you look at the markets from the outside, they either go up or down, easy to predict right? Well no, there are thousands of factors that affect them, some far more obvious than others. This is why there are so many strategies out there. With there being so many, it makes it clear that there isn’t a single strategy that works for everyone or for every market condition, due to this there is so much that is needed to be learned. If you try to stick with a single strategy, it may work for a while, but eventually, the markets will go against you and you will suffer some losses.
You should note though, that just because there is not a single strategy that always works, it does not mean that you cannot be profitable, instead, you need to manage your risk and to learn elements of various other strategies, this way you can adapt and also protect your account from market changes.
You Need Money to Make Money
Many come into trading with a small amount, while it is possible to be profitable with a small amount, it will be a very slow process and there is a far greater risk that you could blow your account and lose your initial deposit. Like many things in life, you need money in order to make more money. The more that you have the more likely and also the easier it will be for you to make money. With a larger amount, you can use far better risk management techniques, and also each trade will ultimately bring in more profits.
You should also note that by having smaller amounts, it can cause other issues such as greed or may cause you to make additional mistakes in the pursuit of growing the small account as far as possible, this is more likely when focusing on the profit and loss on the account. You certainly can be successful off a small amount, but if you are depositing $10 and expecting to become rich, you may be disappointed.
You Will be Wrong at Times
We mentioned that there won’t be a single strategy that will work all the time, even the most successful ones. Due to this, it should be clear that you won’t actually be right all the time. In fact, there is a good chance, especially when starting out that you may be wrong far more than you are right. The good news is that you do not need to be if you are using proper risk management, then depending on your strategy, you can still be profitable with a win rate under 50% and even under 40% with many strategies. Due to this, it is important that you do not focus on winning, you need to focus on learning the markets and also making sure that you stick to your trading plan, this is the only way to be profitable in the long run.
You also need to be able to identify changes in the markets, when something changes, you also need to adjust your own strategy and plan in order to adapt to the changes, this is the only way that you will be profitable, but remember, you do not need to chase wins, stick to the plan and even with more losses than wins, you can still be profitable.
You Will Miss Out on Opportunities
The markets are a 24-hour opportunity, unfortunately, you are not. There will be a lot of times when there are some big movements in the markets that are perfect for your strategy, the only problem is that you are at work or asleep. It is important to understand that you won’t be able to get on every opportunity, it is important that you do not look at the things that you missed, they have already gone, you need to continue to focus on what is coming up. If you have just missed something, do not jump in anyway, the opportunity has gone so let it go, there will be plenty more for you to trade. If you are up and trading during the busier London or New York sessions then you will be able to sharpen your skills a lot quicker as the markets are often moving at a much faster pace.
It May Not be Suitable for You
Trading just is not for everyone, in fact, the majority of people will end up hating it, you need to be able to take in a lot of information, you also need a lot of time and dedication which can make it a lonely job to do. If you are not able to put in the time, effort, or have the patience to learn, then you will be on route to a loss. Many people just do not have the mindset for trading, which is absolutely fine, there are other things that would much better suit your style.
So those are a few of the things that people on the outside don’t necessarily see about the Forex and trading market, if Forex is for you then you will do great, but remember, it takes a lot of time, effort and patience, as well as money to become successful in the markets.