Is Forex Trading a profitable or Risky Business?

By: Damian Okonkwo

There is a rife saying amongst experts that the forex market is the device whereby money is taken away from the very anxious and undisciplined traders and distributed among the smart traders. And further data available show that there are less than 10% population of these smart traders existing in the market today while the rest constituting the highest population of over 90% loose their investment daily to these smart few. To this end, many have classified forex trading as a very risky business rather than a profitable one. The major question here is: how true is this later assertion？ Why do people loose money in Forex trading？ Can the risks be avoided and profits maximized？

We shall try briefly to provide an answer to these three questions below.

Is Forex Trading a Profitable or Risky Business？

Forex trading is both a profitable and risky business with each returns depending on the trader. The major reason for this is because the market always gives back to the trader whatever returns he places into the market and the volume in which he has placed such orders. Thus the market could be very risky when selfish traders place exceeding volumes of orders into the market without proper risk management (which entails the use of Stop loss) and the market goes eventually in an opposite direction of their orders. Of course we naturally expect liquation of such accounts and to such traders as these, forex trading could be considered a risky business.

On the other hand, forex trading could be considered a profitable business for the few smart traders who know when it is the right moment to enter the market and uses correct risk management should the market go against them. Of course only a few percentage of this category of traders exist today. Only a few traders are willing to wait for the right time to enter the market without being too anxious and undisciplined as to neglect use proper risk management.

Why do people loose money in Forex trading？

Of course with what we have explained above, the answer to this question is very easy to surmise. People loose money easily to forex trading when they over-leverage their capital and choose an exceedingly big lotsize such that their account size is not able to withstand the risk whenever the is a sudden pullback in the market in the opposite direction. Thus lack of proper risk management and over-leveraging through choosing big lotsize is the major reason why people loose money in Forex trading today.

Can the risks be avoided and profits maximized？

Definitely the answer to this question is in the affirmative. Many risks taken by traders today could be avoided by always choosing the correct lotsize for once capital and always using stoploss while trading in case the market goes against the trades position.

Above all, profits could be maximized by developing the correct trading strategy. This is simply the secret to remaining profitable in the Forex Market today.