Can you realllly make money in forex ? Or is it all a big ol’ scam? Well, considering the fact that almost 90% of forex traders LOSE money in this market, it is pretty easy assume that the forex industry is indeed a scam.
As someone who has lived and breathed forex for the past decade, I would say that there is more into it. However, before getting all political over it, let me tell you a little bit about myself, and my experience in forex.
Money in Forex – Currency Pairs Dancing on the Forex Dance Floor
I made money in forex first time I traded
In the 2008 market crash, I took advantage of the falling USD/JPY and doubled my initial investment of $10,000 in around 2 months. Beginners luck? I would argue that it was less “luck” than it was “being in the right place, at the right time.”
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You see, when I first traded, I was NOT planning on becoming a trader. Heck, I wasn’t even planning on doubling my investment. I was a college student living Japan, who had a bunch of Japanese Yen in the bank. When I heard that the US dollar value is dropping like a hot rock because of “some sort of financial crisis”, I thought to myself:
“Maybe it’s a good time to buy US dollar!”
And it sure was. It wasn’t until after this incident that I began to look into finance as a career.
I moved to New York City within two year in pursuit of Wall Street glory. Sure enough, I found a job within two week at the heart of Wall Street at a [drum rolls please] … Forex Broker!
Since then, I have worked in the back-end and front-end of many more brokers. I have learned, I have taught, and of course, I have been trading on my own.
The Money-Losing Machine; The Lies in Forex
It is quite fascinating to see SO many missed opportunities in SUCH a large market. It is THE largest market in the world for God’s sake. Then how come so many people lose money in forex?
Here are some conclusions that I have made over the years, and I hope you can find them helpful.
- Being the world’s largest market has nothing to do with the amount of money you can make in it.
- Most brokers want their traders to focus on short-term trades in forex. The more the traders trade, the more the brokers make money. Because, commission fees.
- I strongly believe this whole “stop-loss” thing is a complete and utter BS. Brokers make money when you exit a trade at a loss. So there is a good chance they educate you in a very “logical manner” that you should get out ASAP if the trade goes against you. However, if you look at the big picture of ANY major currency pair, you would realize than almost all of them move in cycles. So if you remain in your trades long enough and keep on hedging, chances are you won’t need a stop-loss after all.
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The important thing to understand is that investing in forex is no different than investing in other financial markets such as stocks, ETFs or even real estate. As Warren Buffet puts it, “Our favorite holding period is forever.” This is buy-and-hold investing, pure and simple. And forex should not be any different.
How to NOT Lose Money in Forex
Here is a quote from Ichimoku Secrets that one of our investing group members, Calvin, says is his favorite, and that it has helped him finally start making money in forex:
“… This is precisely why short-term trading is only recommended to traders with ULTRA high risk-tolerance who basically really don’t give a damn about their money.”
Another quote from an Invest Diva group member, Margaret, that never gets old:
“… A wise woman (Kiana) once told me patience is a profitable virtue. I am carrying that into the new year.”
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So to answer the question “Is Forex a Scam?”
I would say that for the most part it could be. Especially if you are getting in with low funds, high expectations, and low patience.
Making money in forex really does come down to knowing exactly where you stand with your trading account, not being greedy, and setting feasible profit targets. The profit then gets nailed-in, with patience.