Is forex trading a scam?

The foreign exchange market which most call forex in itself is not a scam. However, like almost every business out there, you’ll find the bad guys. Being the biggest market on the planet with a daily turnover of $4 trillion (as of 2014), you can tell this is a huge maret. This makes it even more attractive to con artists because there, of course, are many new traders who have heard about the potential of trading forex, and so these scammers sure would like to take advantage of them.

This has made it seem like trading forex is a scam. In fact, there are more bad guys than good in this market and when it comes to losers, about 90% of traders lose their investments. But if one makes informed decisions, the foreign exchange market can be really good. People are making thousands of dollars trading forex. Forex is almost a zero-sum game (if you don’t count spreads, which is the commission you pay to a broker). While you’re losing, someone else is winning. Being on the winning side is the tough part but it’s possible to be there if time is taken to know how to tread these waters.

forex-zero-sum-game
Another thing to note is the fact that Forex has little (if any) supervisory entity regulating its actions. Most brokers are not regulated and can do what they like with your money. But still there are a couple of decent brokers around that you can safely bet that they won’t mess you up. Now at this stage, people might call the whole game a scam because chances are that most traders will lose their money. And this happens because we as individual traders are actually betting against very high profiled, professional traders in big banks that the value of some currency may go up or down). And you know what the average outcome of this will be for an inexperienced trader, they lose, they go home weeping and conclude; “Forex is a scam”.

My common advice usually is not to trade any amount of money you’re not willing to lose. That doesn’t mean starting a trading account with $100. Don’t waste your time, you’ll lose it and even if you don’t lose and play very well, with aggressive risk management strategies, your profits will be insignificant.

To be on the winning side, wise traders project a monthly profit of 5% while the foolish ones expect returns of 50% in one week. Now these people will for sure call forex trading a scam. And there are lots of them! Your reading this post is influenced by them.

Get some education, practice a lot and start something that could probably be a profession for you.


5 Ways to Spot an immature Forex trader

You have probably heard this that about 90% of all traders lose their capital. That’s true. Well you know why? Because there are too many trader-wanna-bes who just can’t take the time to learn the trade (pun intended). Many traders place orders without having clear insights on what they are doing. Hopefully you’re not one of them, or at least you’ll transform from that kind of trader to a smarter forex trader.

Immature traders can’t control their emotions. Staying neutral in this business is crucial to succeeding as a forex trader. For professional traders there’s nothing like “excited” or “down”. You have to have the balls to take the punches when you lose. After all, it doesn’t make sense if you start trading some capital that you can’t afford to lose. Well it’s bad to lose but you have to be able to stay cool and make informed decisions when trading. The same applies when you make some pips. Mature traders don’t go running around and screaming over profits made.

Unwarranted arrogance is not uncommon to new traders. Making a streak of wins (often with luck) doesn’t mean a trader has become elite. I don’t see myself bragging about the fact that I made 10 wins in a row, and I don’t expect the same of you. It’s all for the good of the game and staying humble, and trying to understand why a streak of wins happened and then finding ways to improve that winning strategy.

Forex greenhorns mostly are in the foreign exchange market for the wrong reason: To get rich (quick). I’m not surprised. Forex trading is like any other profession out there (at least for those who treat is as one, than as a hobby or gambling). If you’re part time in forex, that’s OK but if making quick gains is anyone’s motive, then that’s not going to work. People often come to me and say, “I hear you trade forex, you must be rich!”. I look at them and smile and then I tell them: “I’m not rich, I just get paid well enough when I do my work well”.

The word “discipline” is new to more forex newbies. New traders hardly develop a strategy to follow, and even if somehow, they are advised by someone to find a strategy, they almost always don’t follow it and get carried away when some fluke wins come in. We don’t want to be these kind of traders. Staying disciplined pays off very well when we’re wise enough to follow and actually stick to a plan no matter what.

There’s no way a pro forex trader will make unrealistic expectations about how much pips they are going to make. In fact very good traders make about 5-10% ROI per month and they keep this consistency throughout the year and this is what make a successful trader. But I’ve met some folks who project about 50% profit and and end up losing everything.

It’s essential to learn about this market everyday and I hope you don’t make these mistakes. If you do, then I think you should advise yourself and be a winner!

Do you think there are other factors in spotting newbies that I failed to mention? Please share them in the comments.


When to Move From Demo to Live Forex Trading

Often times people judge themselves wrongly and rush into trading real money in forex. I had this naive assumption that, making some few pips on a demo account was enough to start trading on a live account. I was dead wrong and I crashed really hard. You, at one point in time had the same issue like most traders do.

So when is the right moment to actually put some real, hard-earned cash onto the table. Well, it’s definitely not when you’ve traded a demo account less than half a year. Yeah, this sounds boring. But too much adrenaline can kill you. When I started learning to trade forex, I knew I had to practice and practice and practice on a demo account but I had had enough after about 2 months. I had made lots of profits on my demo account within the first couple of months so I foolishly thought, “Oh, now I think I’m ready”. There’s one name for this – inexperience. And it costs a lot of money.

When you start new in the forex game, it’s good to have enough practice on a demo account. How much is enough? I would say 6-8 months of regular trading, everyday, till you start making consistent profits. Through these months, save all your cash for the game later when you’ve mastered a strategy or two. Half a year sounds like a long time staring at screens for no profit but will pay off later when you have taken time to test and learn about most indicators and picked out a few that suit your style and earns you money.

Knowing how to manage risks can’t go unmentioned here. I would say not to risk more than 2% of your total margin for each single order. Learn to use stop losses, know to take a break from trading after a losing streak then come back again. If you get to know and abide by simple risk management rules, then for sure you’re on your way to becoming a good winner.

Managing yourself emotionally also counts as a factor to reaching maturity in forex trading. In forex, it’s best to stay neutral emotionally. When you win, keep your cool, count it as if it’s nothing big and repeat the strategy again, being more careful each time you repeat the same thing. Likewise when you lose. If it affects you so bad, just take a break and bounce back. Forex is not for the faint-hearted and that’s why I always advise not to trade with more than you can afford to lose.

You should be able to tell if you’re happy with your broker and their services, how they respond to clients and if you’re comfortable at all with their trading platform. I trade on MT4 and I know it very well. You should make sure you’re happy with and understand your platform.

It takes some time and dedication, humility, passion and austerity to be a good trader. Don’t call yourself a mature trader if you lack any of the above points. It’s after these that you can tell you’re ready to go pro.


5 Reasons to Start Trading Forex Now

We all have our usual jobs and stuff we spend our full time on. But I must mention that in 2015, if you’re not trading forex already, you’re missing big time! Well maybe not big time but who wouldn’t use a few more hundreds of dollars or even thousands.

Forex trading is not for everybody, and I repeat, Forex trading is NOT for everybody. It can be a bad experience for some, and it can be something that your future could even be built upon if you do study it carefully. In this post, I am not going to try to convince you to trade forex, but I will give you very good reasons why you should already start trading the market now.

Forex Market Liquidity
Liquidity. Liquidity is a market’s ability to facilitate an asset being sold quickly without having to reduce its price very much (or even at all). What does this mean to us. Well simply put, your assets (money) in forex can be sold instantly when you speculate a price change. If you made the right decision, chances are that you’re making a profit because you don’t even have to reduce the price of your asset (assuming you’re going to sell it) considering the price at which you bought your asset is envisioned to go down.

The forex market has the biggest market cap in the world. There’s a daily turnover of US$4 trillion and this is fast increasing! This is big money and winning the smallest percentage of this share for most people will be like winning a fortune. And almost everyone can take part in this market without having to sacrifice so much apart from some time to really study the trends and algorithms.

This lucrative business nowadays is run solely online. You don’t have to move from home and there’s no paperwork involved. It couldn’t be easier. All you need is an internet connection, a good broker and maybe an hour or 2 a day (depending on how busy your schedule is). Exness and Tallinex are among the best brokers and I highly recommend them.

Low starting capital. You can start trading with as little as $100 or even $50 and trade very small lots to get your feet wet or learn the bits and pieces before starting to trade big lots. The sweet side is that you don’t even have to start straight off with trading real money. You can trade virtual currencies with real market conditions just to get the feel of how things move and practice or develop a strategy.

And last but not the least, there are free learning materials available, and I mean very good stuff out there. My first choice, is BabyPips. You can check them out before you make any move into the market especially if you’re a beginner.

As it stands now, there’s no real excuse not to enter this beautiful market this year for some passive cash. Happy New Year!


How Forex Trading Algorithms Work

Algorithmic trading is simply automated trading. This involves the use of electronic platforms such as the popular MT4 that most traders use. This system of trading takes into account factors as timing and prices to make trading decisions to place a buy or sell order. Most EAs are programmed algorithmically to use several strategies to execute trades.

Among these strategies are arbitrage, trend following and scalping. Since we mentioned “automated”, it is worth knowing that anybody at all can write these trading algorithms if they know the MQL4 language. But as to whether these expert advisors will be winners or losers, is solely up to the trader and how experienced they are.

Arbitrage trading involves taking advantage of the disparity in the pricing between two assets. For example, at the time of this writing the pricing between the EUR/USD pair at Tallinex and Exness is 1.21585  and 1.21575 respectively. It’s clear there’s a difference of 10 pips of which we can take advantage! Assuming the feeds from Tallinex is faster, we’d want to place a buy order at Exness and bingo, we’re 10 pips richer.

Trending following is speculating that the market, if going up, will continue to climb uphill or if falling will continue to fall for an extended period of time or even in a medium-term and hence buying or selling. Most forex traders play by this strategy and I for one do this a lot. Traders who  use this strategy usually use moving averages and channel breakouts to determine the general direction of the market. They close the order when the trend seems to have ended without being sure whether the trend has actually ended, in most cases.

Another common trading algorithm is Scalping. Now I know most brokers prohibit this strategy but some do allow it. Brokers who don’t allow this kind of trading style will usually try to stop traders buy pushing a lot of re-quotes to discourage traders. Exness and Tallinex allow scalping and all EAs that trade using this system. Scalping involves establishing a position and liquidating it as quickly as possible in a minute or seconds time frame. It’s actually a form of arbitrage trading for market makers usually.

There are still lots of trading algorithms that I wouldn’t have enough time to mention but the ones mentioned above are commonly used by traders.

One thing to know before using these strategies, as I will advise, is to use and test them for an extended period of time on demo accounts manually, and then when you have mastered one particular or two strategies, you can outsource a programmer to get this into MQL4 code for an EA to trade so you don’t have to stare at screens all the time. However, this is a matter of personal preference. You can open free demo accounts with Exness and start practicing. Once you get comfortable you can actually trade on a real account and make some profits.


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