For decades, people have known that if they put their money safely into the stock market, they can walk away with a sweet return in about 10 years or so – pretty much guaranteed. The reason that people think this is because it is true. On average, even with stock market crashes and ups and downs in the markets and the economy, stock market investors come out better off if they do diversify their portfolios and invest for the long term.
The same cannot be said for the foreign-exchange markets. In fact, as you saw from the title of this article, only 5% of foreign-exchange traders actually make money on a regular basis – at levels enabling them to sustain an average lifestyle, without any other sources of income.
If you’re looking for more statistics, a further 15% of traders end up losing money that they cannot afford to lose and hence are negatively affected at the end of the day because of the movements in foreign exchange.
There is no getting away from the fact that foreign-exchange investments can be incredibly lucrative if you get it right. Due to the fact that leverage and margin requirements for Forex trading are some of the most lenient that you can find in any market, you are able to turn a very small amount of money into a huge lump-sum, if you choose the right direction.
Unfortunately, whilst the decision is 50-50, it is often very difficult to get it right and stick with it.
Early Profits, Late Losses
One of the biggest mistakes that people make in the foreign-exchange industry is that they take their profits too early, and allow their losses to run for too long.
Currencies are known to trend wildly for long periods of time. They can trick investors, and are able to easily mislead a novice investor who is waiting for the market to turn. There are some well-documented stories of people who have been severely burnt by trading foreign-exchange markets.
If there is one thing that you should take away from this article with you, it is that fear and greed have no place in the foreign-exchange market. Trading needs to be emotionless and based on facts only.