There are plenty of ways to make money, but few of them are as risky as currency trading. Unfortunately some people see it as a fast way to make a potentially large return on their cash. Perhaps this is because there are stories around of people doing just that. The only problem is the success stories are usually pretty easy to find. They hit the headlines in that area of interest precisely because those people have made a decent amount of money. You don’t tend to hear about the many people who lose their stake money on currency trades that go badly wrong.
Is currency trading that dangerous to try?
Many people who have knowledge and/or experience of the industry think it is. Forex traders, as they’re called, can get started easily and the size of the market they can get involved in is huge. It’s not uncommon for someone to become experienced in stocks and shares and then to see Forex trading as the next logical step. This is where many go wrong.
If you do dive in, make sure you only play with cash you can afford to lose
Many people who know something about the industry think the risk element here is above average. It’s easy to understand why. Currencies can change in value by the second, and even if you think you’re in a good position things can change remarkably – and worryingly – quickly. Even people with lots of knowledge about the currency markets lose money, which should be a red flag to those who are inexperienced.
Get a regulated broker
You can go online, look around and choose a Forex broker within minutes. But do you know if they are regulated or not? Choosing a regulated broker doesn’t guarantee you will make money of course, but it does put you in a stronger position. If you’re in the US you should make sure they are regulated with either the CFTC or the NFA. The CTFC is the Commodity Futures Trading Commission while the NFA is the National Futures Association.
The size of the Forex market
The US Forex market is massive when compared to the other financial markets in operation on a daily basis. Perhaps it is this that attracts the attention of other traders, but it is vitally important to make sure you don’t forget about the risks. If you value your money you should almost certainly invest it elsewhere. Going into the Forex markets with the hope of making lots of money is foolhardy. You may well end up losing a lot of cash. Many experts think currency trading is akin to gambling. There is certainly a lot of risk here but because this is a proper trading marketplace many do not realize the extent of the risk.
When you realize even the experts lose a lot of cash – and can and have lost it all – you realize just how dangerous the currency trading marketplace can be.