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Home Financial Literacy Investment Tips

7 major reasons forex trading is not suitable for everyone

Olumide Adesina by Olumide Adesina
July 12, 2022
in Investment Tips, New to Investing
Forex trading
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The majority of newbie Forex traders fail and give up after losing money in excess of 90% of the time.

In simple terms, currency trading involves the process where traders, in order to profit from the disparity between the two currencies, trade FX pairs.

Despite the recent rise in the popularity of currency trading in Nigeria, many people still have a horrible experience trading currency.

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This is mostly because of the (overstated) hazards associated with forex trading. A sizable portion of traders continue to beam as they repeatedly cash out.

Ever questioned why some people get it right while others completely miss the mark?

Lack of commitment to financial planning

Forex traders can also lose money in many ways. Well, having a bad attitude and not being ready for the current market conditions definitely contributes. It is strongly advised to approach financial trading as a type of business.

A business strategy is required for each major commercial undertaking. Similar to this, a serious trader must devote time and energy to creating a comprehensive trading plan.

A trading strategy should at the very least take into account ideal entry and exit points for transactions, risk/reward ratios, and money management guidelines.

Fearful of risk and turbulence

It takes a strong-willed person and someone with a significant appetite for risk to engage in forex trading. The risks are enormous in this market, particularly with leveraging, where it is feasible to borrow money for higher profits and losses.

It is best to turn their backs on currency if the stock exchange bothers them. Choose investments that are less risky and variable, such as bonds.

Allow feelings to drive your actions

Investors who let their emotions rule them may make a number of poor decisions, such as selling at the first sign of a decline and waiting for the market to recover.

Little or no knowledge of currency trading

Currency trading ideally doesn’t operate exactly the same way as mutual funds do, where investors deposit money and then give a finance manager control to manage and grow the deposit. You will have to study how various markets, technical and fundamental analysis of currencies, and the type of trading apps you must use.

Lack of enough time

The forex market is always active since transactions take place there. Investors are unlikely to have enough opportunities to learn how to trade if they don’t have enough exchange opportunities.

Not financially capitalized

Make sure your capital is in order prior to making any purchases, including those involving foreign exchange and other assets. Make sure to keep a reserve set aside for emergencies and those investors have settled all unsecured debt. The ideal scenario is to store funds for a long time in order to reap and maximize the benefits of investing.

Having unrealistic expectations

Despite what some people may suggest, forex trading is not a quick-money scam. It takes a long time to become proficient enough to earn money; it’s not a sprint.

The tactics involved must be mastered repeatedly for success. Trading with more capital at risk than the potential rewards is frequently the result of swinging for the fences or trying to drive the market to deliver extraordinary returns.

To sum up

Although the majority of currency traders experience financial losses, this does not guarantee that you will as well. Work on addressing those areas of weakness, creating a trading plan that is effective, and enhancing risk management.

You won’t be able to succeed in forex trading till then.


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Tags: Forex trading
Olumide Adesina

Olumide Adesina

Olumide Adesina is a financial market writer, analyst and investment trader. Message Olumide on Twitter @Olumidecapital

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Comments 4

  1. Stanley says:
    July 12, 2022 at 9:28 am

    Well said. Forex trading is not a sprint, but a marathon and it is far from being a quick way to make money like most people think. In fact, anyone who becomes good at forex trading does not need huge investments from the masses to become successful as he/she can trade his/her way to reasonable profit with time. I always consider anyone soliciting investments from people for forex trading, as either fraudulent or grossly naive with respect to the huge risks involved in staking such huge amounts from people into such a highly leveraged business.

    Reply
    • Topguru11 says:
      July 15, 2022 at 10:49 am

      NYC FUTURES FUND which is a US licensed hedge fund takes money from people, trade forex with it and credit great returns to their investors. So your point is not based on sound knowledge.

      Reply
      • Stanley says:
        July 18, 2022 at 3:35 am

        Going by the practice of most Hedge funds, I am almost sure the company has a portfolio of investment instruments they use, of which Forex trading may be one. Hence, a loss in one investment vehicle can be cushioned by gains from others. But as far as I am concerned, trading just forex with people’s money has up to 90% risk of failure based on success rate of most forex day traders, irrespective of whether the trader is licensed by US government or not.

        Reply
  2. Mejabi Babatunde says:
    July 12, 2022 at 9:30 am

    Going into the Forex Trading is more than the battle of David and Goliath in the Christiandom. If it’s only the money that is away, couldn’t it better, what about that wasted time. Well, psychologically it seems the time worth it, like the baby learning to walk. Forex capitalization the biggest so far now and to cut the cake by individual it takes so much opportunity. I still believe in new guys, move ahead. Thank you.

    Reply

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