Forex Basics

Forex And The Importance Of Education

The Importance of Forex Trading Education

This is a growing market with an average daily turnover of US$5.3 trillion! That’s around £4 trillion. So who is taking advantage of this incredibly liquid market; the biggest traded business on the planet? Large companies and institutions including banks, HNW individuals, fund managers, firms that have overseas business activities all need to hedge their currency exposure, sovereign funds and central banks, and everyday people in their bedrooms are now trading Forex, thanks to the proliferation of the internet!

However, it is well known that 95% of new Forex traders will lose their money within 6 months. In fact, according to Reuters the China Banking Regulatory Commission banned banks from offering retail Forex on margin to their clients back in 2008. The writing was on the wall!


In 2014, the French regulator conducted a survey which concluded that the average % of losing clients was 89%, with clients who squandered €11K, on average, between 2009 and 2012. Over that 4 year period, 13,224 clients lost €175M.  The estimated number of losing retail traders across Europe during this period was €1 million.

In 2015 the US National Futures Association announced a reduction on limits that US brokers could offer their retail clients to a maximum of 50:1 in 10 listed major foreign currencies, and 20:1 on some others. Similarly, The European Securities and Markets Authority (ESMA) recently confirmed stricter changes to the way brokers are able to offer retail Forex clients leveraged trading. I expect we shall see a lot more of this type of intervention in years to come.

Yet none of this really addresses the real issue, which is why people, especially new traders, lose money trading Forex? It simply comes down to education. I wouldn’t strip a car engine down without first going to mechanic classes, or operate on a human without going to medical school, or fly a plane without lessons. And yet thousands of individuals think they can open an FX account and consistently make money. Sure, they might get lucky initially and think they are on a roll, before over leveraging themselves and wiping out their accounts.

In my opinion, if governments want to intervene, they need to address education. Of course, reducing leverage and insisting on larger margin requirement will slow down the rot. But it won’t stop it, whereas insisting that traders are qualified would have a much more positive impact in the long run. Just like any profession, people need to be fully educated and a basic level of Forex trading education should be the first thing undertaken before newbies are let loose ‘trading’, a term I use loosely, under the circumstances, they are gamblers, and we all know what happens to most gamblers!

So to all you people who are thinking about becoming a currency trader, invest in a professionally put together A-Z education course and at least give yourself a chance in this volatile arena, which is fraught with danger and will think nothing of absorbing your hard earned cash into its coffers!

Here at Forex.Academy we recognise this issue and feel passionately about it. What’s more, we offer all the educational tools you will need to trade effectively!


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