Bad News About Forex Trading

With the spread of worldwide easy access to the Internet and broadband services forex trading has become a popular online enterprise. Many investors have been attracted to the possibility of making fast money from trading forex. The bad news is that most of them end up losing their investment. Perhaps up to 95% of novice forex traders lose money trading forex.

It is a fair question to ask why. Here are six good reasons.

1. Many traders are fooled by the descriptions of forex trading on forex dealers websites into thinking that trading forex is easy and that anyone with a little extra money can do it. While that may be true trading forex and trading forex at a profit are two different things.

2. Since they are mislead into thinking that trading forex is easy many traders do not prepare themselves very well for what is actually an activity that requires a lot of skill sets and a disciplined approach to trading.

3. Investors try to trade with too little capital. While you are able to open online forex trading accounts for a little as $250 dollars you will have to be really lucky and make money on your first few trades if you actually start trading even mini contracts at that capitalization level.

4. While it is the amount of leverage offered by dealing firms that makes forex trading exciting, the use of all of the leverage offered means that even a small mistake will wipe out your account. At even 100 x 1 leverage a market move of only 1% against your position will completely empty your account.

5. Most novice traders over trade. While it is true that most forex dealers do not charge commissions on trades they make their money on the difference between the bid and asked price. While that difference may only be two or three pips it means that every trade starts out as a losing trade as the spread incurred must be overcome in order to move into profit.

6. The 24 hour a day Sunday evening (in the US time zone) until late Friday afternoon constant trading activity in the forex market is touted as a big benefit. If you never have to sleep this may be true. However, for most traders the always open market leads to a lot of stress and over trading.

However, the bad news about forex trading is cast aside by many traders who imagine themselves to be the next George Soros. A smart and gutsy trader, Soros once made over a billion dollars in just a few days time by shorting the British Pound just before it collapsed and then increasing the size of his position all the way down. Forex trading is one of the few legal speculative activities that offers the opportunity to quickly turn a small amount of money into a fortune by traders who learn to trade well.

Who knows? The good news about forex trading is that you might be able to master the necessary trading skills and go on to make your fortune.

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