9 years ago investing413Jake

10 Reasons Not To Trade Forex

Do you trade forex? Do you consider trading forex? Do you consider learning how to trade forex? Don’t do it. I like the profit opportunities that currency trading carries. I like also the risks involved, it wouldn’t be fun otherwise. But I don’t like the idea to trade myself. Where is why:

Forex Trading
Photo by amalthya at Flickr

1. Trading forex is work

If you want to make your money work for you, trading forex is not an option. You will have to work for your money. Day trading may look exciting for someone who never tried it, but once the initial excitement is gone you’ll realize it’s just a computer based work like any other.

2. Trading forex is too risky

This sounds paradoxical from the keyboard of a high risk investor but I really think forex is too risky. There are thousands of websites offering forex trading strategies. Have you heard for any super-successful one? Sure, some make it for a while, but no strategy guarantees long term success. This is because forex is unpredictable. There is too much probability and too much volatility in it. That’s why you are unlikely to see serious hedge fund to invest in forex ever.

3. Trading forex does not add wealth to the world

If you want to make money, you need to create wealth. What exactly is the wealth that a forex trader creates? What is the value he adds to the world? I can’t think of any.

Forex trading is a zero-sum game. If you make money, this is because someone else is losing it. If the intellectual energy put into currency speculation was put into something else, this could make the world a better place.

4. You don’t grow

I am sure many professional forex traders will be mad to hear this, but seriously, how exactly does day trading helps your personal or professional development? Sure, you’ll learn some strategies, maybe build some self-discipline and… what else?

5. You need money to make money

Let’s imagine after few years of investing your time, money and hard work you finally become a highly successful forex trader who achieves consistent 5% monthly ROI. This is quite unlikely considering that probably 95% of the new forex traders fail miserably, but I know you are smart, so let’s hope it will happen.

Since forex trading is work, like explained in point 1, you will probably do it all the day and will rely entirely on it for your income. So if you want to earn $5,000 monthly you’ll need $100,000 startup capital. Uh.

6. Trading forex is addictive

Just like gambling, day trading is highly addictive activity. Each small success leads you to believe that you can do better and better trades. Each bad trade forces you to trade more so you can make up for the loss.

Gamblers and forex traders often sell or bet their homes to feed their passion and hopes. If you lack self discipline, forex trading is one of the worst professions you could ever take.

7. Day trading is stressful

Do you really want to watch the computer screen all the day, to worry about your open positions when you go out for lunch and to wake up in the night because an important even happens on the other side of the globe and you can not miss the currency fluctuations produced by it? Think seriously about this because this is what the life of a professional forex trader is.

If you dream about lifestyle of freedom and leisure and are picturing yourself with a laptop on the beach, trading forex is most probably not for you. It’s an activity for people who like to live in stress and risk.

8. The forex trading knowledge is useless in other professions

Seriously, do you think the years you spend in studying forex can be useful if one day you decide to do something else? It won’t help you even for similar activity like stock trading because the systems and strategies are completely different.

In most professions whatever you learn during your experience can be extremely useful if you switch to a related (and sometimes totally unrelated) field. This is not the case with forex trading knowledge and experience.

9. There is too much fraud

Not all Forex brokers are as honest as we would like. Every professional trader has heard about big Forex brokers scamming away. See for example how several brokers were shut down in 2007.

When trading Forex you don’t have full control over your money. A dishonest broker can close down and run away or just deny you to withdraw your money.

10. You can have others trade for you at almost no costs

Why trade forex yourself, when you can get professionals trade your money? The managed forex accounts give you access to expert’s knowledge for a share of the profits. You don’t have to pay anything upfront. Isn’t that cool?

Yes, most managed forex account suck in performance and that is because of the reasons given in points 2, 6 and 7. Chances are if you trade yourself you’ll also achieve the same pathetic results but will lose not only money, but time and intellectual power too. Besides that, some managed trading accounts do well and actually make money.

Regardless of anything, I think forex investing is something to be considered. But if you plan to trade yourself, you must be very sure that you want it. The life of the forex trader is not romantic or carefree. At least this is not the life of most forex traders.

Jake