Is Forex Trading a Myth or True

Forex trading is an abbreviation for foreign exchange trading, which is the exchange of two different currencies, buying currency A and selling currency B at the same time. As the world's largest and most liquid investment market, the daily trading volume of the FX market exceeds 7.5 trillion dollars.

Understanding Forex Trading

People basically buy foreign exchange for two reasons, one is to buy, and the other is to profit.

Foreign exchange has a practical function, whether an individual outbound consumption or enterprises and overseas partners for payment and settlement, which will use the foreign exchange. As increasingly close to the whole world, individuals and businesses are inseparable from foreign exchange. People who do not engage in investment may think Forex is far away from them. In fact, people who travel abroad will exchange the currency used in the travel destination and re-exchange the rest to the national currency after the travel. Due to volatility in exchange rates, one may notice a price change, and forex investors use this to their advantage.

Forex trading, as we often call it, is the use of foreign exchange to make a profit. Specifically, by observing and forseeing the volatility in exchange rates and buying/selling currency pairs at the right time, in order to earn the spreads as profits.

The exchange rate is the rate at which one currency is exchanged for another, and what is often referred to as a currency pair is the two currencies that are "paired."

Take EUR/USD, one of the major currency pairs. The EUR is the base currency, and the USD is the counter currency. The EUR/USD is a new currency pair compared to other major currency pairs, but it is the most traded and popular currency pair in the world. Investors who buy the EUR/USD need to predict whether the price of the Euro relative to the US Dollar (i.e., the exchange rate) will go up or down. If the traders think it will go up, they buy the pair, and if they think it will go down, they sell it.

If the investor makes an accurate prediction of whether it will rise or fall and buy or sell the currencies, he or she can make a profit, while conversely, he or she may lose money.

There are many factors that affect the exchange rate, which makes the Forex market even more volatile. Traders may face sudden heavy losses, or make huge profits in a short time, which is why the Forex market is particularly attractive for short-term traders.

Unlike the stock market, forex traders do not trade centrally on exchanges but through a global network of banks. Retail traders generally invest through a broker who offers forex trading services.

Traders are usually provided with leverage, so if a trader deposits $100 while provided with 10:1 leverage, the trader can use the leverage to trade up to $1,000 in actual operations. If the leverage is utilized properly, the trader's profit can be substantial. However, if the broker does not provide negative balance protection, the trader's loss may exceed the original $100 principal.

Forex can be traded 24 hours a day, so traders need to be aware of the factors that can affect the price of a currency.

Arguments for Forex Trading as Legitimate

As the largest market in the world, the Forex market is one of the most liquid, with a daily trading volume of more than $750 million. Because of this, it is considered one of the most promising markets where all investors have the opportunity to profit. Well-known Forex traders such as George Soros, Stanley Druckenmille, Michael Marcus, Joe Lewis, and many others are proving the potential of the market to the world with their successes.

Forex has many features not found in other financial instruments, such as practicality. From travel to international trade, no one can leave without foreign exchange, which is related to everyone in the world.

Unlike other financial instruments, profit from Forex does not require buying cheap and selling expensive., as long as you choose the right direction, buy down can also be profitable.

Trading FX is not centralized on the exchange, it can be traded 24 hours during the working day, and can be bought and sold at any time as long as there is a network device (computer, cell phone, or tablet).

Traded through advanced network technology, the FX market is the fairest and most transparent investment market, and everyone in the world gets the same price at the same time.

Compared to other markets, the threshold of the foreign exchange market is not high, some dealers only require retail investors to deposit 100 U.S. dollars to start trading, and a 0.01 lot trading unit is not rare to see. Many beginners value this and use this feature to build up their investment experience and reduce learning costs.

Utilizing the leverage provided by the Forex brokers, traders can also trade larger amounts than their principal, allowing them to make a huge profit with little cost. Deposits of only $100 can also be leveraged to trade more than $100. In addition, stop-losses allow traders to reduce lose.

Arguments Against Forex Trading as Legitimate

Although the Forex market is popular among many people, and let a part of the people have accumulated a lot of wealth. But some people think that the Forex investment is vain while only seeing the advantages of foreign exchange may make people feel that this market is too good to be true.

Forex trading can make money or make people lose money; it can make people get rich overnight or make them lose their money. Forex is not as easy as it seems. The volatility of the FX market gives people the opportunity to get rich quickly, but in reality, not everyone has the opportunity. It is reported that 95% of people in the forex market have losses. Often people see the potential of this market and join the investment, only to lose a lot of money in the dust.

Foreign exchange trading time is very flexible since the use of advanced network technology allows people to invest at home at the click of a mouse. However, people may need to day and night to observe the market situation due to the time difference. Things that could have a huge impact on exchange rates can happen while traders are asleep.

The 24-hour opening hours may also make traders exhausted at times. Michael Marcus, a famous forex trader, could only get a little sleep each day while observing the market because he has to keep an eye on it as closely as possible to avoid losses or create more profits. And this also became one of the main reasons for the failure of his marriage.

From national policies to the strength of the economy issuing the currency and to the trading conditions offered by the brokers, the influences on the price of foreign exchange are multifaceted and comprehensive. All of which can have an impact on the outcome of an investment. Some of these factors are complicated and almost impossible to predict, and forex trading may seem like gambling to some traders, whether or not the profit depends on the will of God. Even the most experienced traders cannot always accurately predict all possible scenarios.

The profitability of Forex investments also depends on the trader's trading preferences. A currency pair may not be profitable in the short term, but it can be very rewarding in the long term. In this case, a short-term trader may consider forex trading to be unreliable.

Trading strategy and analysis is also one of the most important reasons why forex investing can be profitable. But can you make money only by understanding all the Forex trading strategies? Of course not, because forex investing requires a lot of experience.

Some people choose to invest in this market because, compared to other markets, investment in foreign exchange requires a lower deposit. After all, even $100 is acceptable. However, this does not mean you can invest as long as you have $100. There is risk in any investment, and even more so in the volatile forex market. Retail forex traders who do not understand leverage or negative balance protection may end up losing much more than $100.

Where there is money to be made, there are scammers. There are far more financial scammers on the market than the legitimate brokers overseen by financial regulators. It can be difficult for the average investor to tell if a broker is legitimate or not. And even if you choose a legitimate broker, there is no way to avoid the risk of investment.

Assessing the Veracity of Forex Trading

Forex trading has its share of losers and winners, which is the consensus of all mature investors, yet not only a characteristic of forex trading. The fact is that any investment carries risk. Trying to avoid risk is all the market is an everlasting lesson for everyone in the market.

What is certain is that those who can make a profit, in the long run, tend to have a great deal of investment experience and a deep understanding of the forex market.

Leverage must be a double-edged sword for retail investors. It is both a tool and a weapon, but the most important thing is how well the trader utilizes leverage.

The same goes for 24-hour trading hours. For the average retail investor, however, being open 24 hours a day is not the same as requiring the investor to keep a close eye on the market at all times. Today's brokers offer stop-losses and sometimes automated trade management functions. Different time periods have different levels of liquidity, and through study and experience, traders will eventually find the periods that are most volatile and price sensitive for them.

While trading strategies and analysis are not the deciding factor in profitability, they are definitely an important reference for traders to predict market prices.

Overall, any investment carries risk, and Forex is no exception. Traders should consider their finance, the risk they can bear, and their own trading experience and knowledge. Most importantly, choose a broker that is supervised by a financial regulator to trade and avoid risks to the greatest extent possible.