Forex trading is not for the faint of heart. The industry is rife with scams and manipulations. Just because online brokers make forex trading accessible to almost anyone doesn’t mean everyone has what it takes to be a successful forex trader. Many influencers promote forex as an easy, stress-free way to earn money online and solve all your problems. Sure, it’s not labor-intensive work, but that doesn’t mean it’s easy. Forex trading is far from easy. This article explores who should and should not trade forex and explains why not everyone is suited for trading forex and the everyday challenges traders face.
Forex trading is psychologically and mentally demanding, and most traders fail, and many get scammed. The primary reason most traders fail isn’t because of market volatility but their shortcomings. It’s hard.
Who should not trade forex?
Sadly, most forex traders lose money, and countless studies prove this. In 2018, the UK’s Financial Conduct Authority estimated 78% of active retail client forex and CFD accounts were loss-making, with a total loss estimated at £1.07 billion for the year. Considering how many traders give up before achieving profitability, it implies forex trading isn’t for everyone.
Don’t trade if you’re not committed to devoting years to practice.
Although everyone is different, most experienced traders claim it takes four to six years to be consistently profitable. Various tools, techniques, and strategies can be used to trade forex. Only some methods work for everyone, so there is a lot of trial and error involved in trading forex, and it can take time to find one that suits your personality.
Don’t trade if you can’t afford to lose it all.
Many traders get their interest in the forex market from the opportunity to earn a lot of money. If you’re already in a tight spot financially, trading forex won’t get you out of it; it will probably make it much worse. As mentioned, it can take years to become a consistently profitable trader, meaning losses should be a typical feature of any forex trader’s journey.
If you want to know if you can afford to start trading forex, the table below shows the average losses of traders between 2016 and 2017, published by the Australian Securities and Exchange Commission in an August 2019 consultation paper.
| Country | Average account loss | % of accounts that lost money |
| Ireland | €2,700 ($3,060) | 74% |
| UK | £400 ($530) | 81% |
| Cyprus | €1,600 ($1,810) | 76% |
| Spain | €4,700 ($5,320) | 82% |
| Poland | PLN12,156 ($2,970) | 80% |
| Italy | €590 ($670) | 74% |
Don’t trade if you don’t like taking risks
If you’re not comfortable taking risks, you stick to a more passive form of investing or avoid risking your money altogether. The moment you enter a position, you’re risking money. It’s unlikely the moment you open a trade, it gravitates towards profitability and remains there.
Risk-averse people start to feel uncomfortable when they see their trades are pulling back into an unprofitable territory and close them prematurely, realizing their losses. If you can’t handle risk, you can’t handle trading. It’s stressful and hard.
Don’t trade if you have an appetite for gambling.
While you need to be comfortable with taking risks, speculating on the forex market is not suitable for anyone prone to gambling. Being able to win or lose money by making certain decisions makes trading similar to gambling in some ways. Although trading isn’t gambling, gamblers can turn trading into gambling. Gamblers are predisposed to several cognitive biases, which makes them ineffective traders. If you’ve had issues with gambling, you should avoid the forex market.
Who should trade forex?
Some of the most successful forex day traders are former athletes. The qualities you need to be a successful athlete are like those you need to be a successful trader. For example, you need discipline, patience, mental resilience, and stamina.
Stamina is essential because developing and testing a trading plan is a marathon. Discipline is required because you need to stick to your plan and maintain a high level of consistency. Having tough mental resilience helps you maintain optimism while facing inevitable unprofitable trades. Patience is critical because there isn’t a trading opportunity at any given time. You have to sit on the sidelines and wait for a good opportunity to present while fighting the urge to go with good enough trades.
Know this before you start trading forex.
Regardless of whether you have the same qualities as other successful traders, there is an incredibly high chance you’ll lose money before making money. Many traders see their losses as an investment in their personal development. If you’re not prepared to see it through, then it’s a pointless investment.
Forex trading doesn’t require any professional or educational background; it’s a unique skill that’s self-taught. If you’re determined to give forex trading a try, you’ll be pleased to know there are dozens of reputable blogs and education resources available online, and one of the best places to start is BabyPips.com.
This post was written by Winston_Thesis on Fiverr; I hire Fiverr writers to convey expertise on various topics. Forex posts: Where does Forex Liquidity Come from, Why More Forex Brokers are Moving Offshore, and Five Tips to Increase Your Forex Trading Profit. Subscribe for more investing posts. Have a lovely day.
Disclaimer
The content on this website is provided for educational and informational purposes only. It is not intended as financial advice or a recommendation to invest in Forex or any other financial market. We do not provide investment, legal, or financial advice, and we are not financial advisors.
Forex Trading is High-Risk: Forex trading carries a high level of risk and may not be suitable for all individuals. Understanding that trading in the foreign exchange market involves substantial risk, and you may lose more than your initial investment. Before engaging in Forex trading, consider your financial situation and risk tolerance carefully.
Be Cautious of Scams: The Forex market is known for its potential for scams and fraudulent activities. Be vigilant and exercise caution when exploring opportunities in the Forex market. Always verify the credibility and legitimacy of any service providers, brokers, or trading platforms. Do your research and look up any websites you will use for trading with the words scam in your search engine bar. This will help you find examples of scams and make your own opinion.
We are committed to providing educational content to help readers understand the complexities of the Forex market, its risks, and how to protect ourselves from potential scams. However, we are not responsible for any actions taken based on the information provided on this website. Conducting your research and consulting with qualified financial professionals before making any investment decisions is essential.
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