When you read about foreign exchange trading, you’re sooner or later likely to come over the supposed negatives associated with it. Of course, nothing worth doing is easy, or without its drawbacks – and that certainly goes for foreign exchange trading too. However, in this article we’ll not only explore some commonly spouted disadvantages of trading currency – but offer some solutions to turn those negatives into positives.
How To Turn The Negatives Of Trading Foreign Exchange To Your Advantage
1. “Foreign Exchange Trading Is Risky” – Any investor or trader through the asset classes should raise a curious eyebrow when this is mentioned. Of course foreign exchange trading entails some risk. There is risk with every single type of trading and investment. When you buy a Stock, there is risk attached. Same for options, or bonds or futures. Despite this accusation being somewhat flawed as a disadvantage, lets offer a solution in any case. That solution comes in two forms. First is the application of strict, no nonsense risk control and money management. The second is to understand risk against reward probabilities that are attached with every single position. Do these things and you totally negate the issue of foreign exchange trading being too risky.
2. “The High Leverage Available With Currency Trading Is Dangerous”. In a bid to attract customers from all ends of the equity spectrum, currency brokers often offer highly leverage accounts. The long and short of leverage is that a small amount of equity can control very large positions. Leverage has been given the “dangerous” label because, unless carefully managed, it is possible to magnify trading losses significantly. This is certainly true – the more leveraged an account, the more magnified any series of losses will be. Thing is, the same is true of profits – so the flip side to the leverage being dangerous is that a successful trader can quickly grow their equity through leverage too. The solution to leverage? Consider techniques such as scalping – scalpers are in the markets for a very short timeframe, so leveraged accounts just enable them to open multiple positions and weave in and out nimbly. Also, make sure that position sizes and stop losses are carefully managed – high leverage accounts can get depleted off their equity fiercely when multiple positions turn negative at the same time. Swing traders, beware!
3. “There Are Too Many Forex Trading Scams”. Hard to argue with this one, because its true. Everywhere you look there are souped up sales pages offering everything from the next infallible trading system to some smarmy infant of a robot that thinks it can beat the market. Of course many traders have fallen foul of these shiny gimmicks which promise pips but inevitably leave the buyers account in critical condition. Is there a solution? Yes – don’t fall for it. Good trading is an amalgamation of potent education and actual market experience. This takes time and effort to clock up, and unfortunately there is no magic system or cute little robot that can do it all for you. The truth is there are scams and marketing licence in each and every industry out there. There are fads in the world of weight loss, finance, home improvement and more – it doesn’t make the actual industries nefarious.