Forex Trading Frequently Asked Questions
If you are new to forex trading, firstly and foremost, we would like to tell you that forex trading is NOT easy!
Ask any experienced forex traders and all will agree everyone needs to find a method unique to your personality. Having overnight success in forex requires years of experience, patience and effort. If you want to make money in forex, learn from the expert, check out their reviews and FOLLOW them instead of spending months or even years losing money! Most traders lose their deposit and give up before finding success. To all the newcomers out there, there are many scams and fake information regarding forex trading and we hope the forex frequently asked questions (FAQs) below will help you.
What is forex trading?
Forex refers to “foreign exchange” and forex trading refers to the buying and selling of currencies in the foreign exchange market at pre-determined prices. Currency trading or forex trading has the largest trading volume compared to any other capital market (for e.g. stock market) in the world! It is important to note that during forex trading, there is no delivery of actual money – when investors like you and me trade forex, we are trading the spot forex. For those of you new to forex trading, this means actual buying and selling of the different currencies is not present, we are merely making money (or losing money) through the differences in the prices between different currencies. Money is made or lost by betting on the direction of the price movement and price differences.
How do I know forex trading is suitable for me?
Like any other form of investments, forex trading carries risks. The question to ask isn’t if forex trading is suitable for you or not, but if you have a desire for more money (who doesn’t?). Just like any businesses, you need to learn the ropes, put in effort to master the in-and-outs of any industry and put in some capital to get things going. Most importantly, you must have discipline and persevere. Like any other money making activites (business or investing), you must understand the risks involved and stay determined to achieve financial independence and freedom as soon as possible. You have to be realistic and grounded about the potential of forex trading (making a lot of money with very little capital overnight is not a realistic expectation). While there are people who made a lot of money in forex, there are also many others who lost all their money in their forex trading account.
Do I need to spend a lot of time on forex trading?
Different people will give you different answers. There are people who stick to their trading screen all day every minute, this is known as a scalping trading style where you have to sit in front of the monitor intensively. There are those who trade a few times a day or even a month. This really depends on your trading style. For us, we prefer to spend a few minutes a few times in the day to trade (this allows people who have full time jobs to make use of forex trading as a side income).
The amount of experience you have also affect the amount of time you trade – for example, analyzing charts. More experienced forex traders spend relatively lesser time in analyzing charts as compared to newbies. If you are new, consider learning and following someone who is successful to achieve better results in forex trading.
Is trading forex simple and easy?
The answer is NO!
While it is easy to key in your buy / sell orders into the forex trading system, it is NOT easy to make money from forex. In fact 95% of traders lose money in forex trading.
The question to ask here is, how does the 5% make money and how can you be part of this 5% profitable traders? There are many different ways to trade forex. To simply things, the most important aspect of forex trading is self-discipline.
What is forex trading so popular?
Compared to any other markets, the foreign exchange market is very unique and accessible to small investors like you and me. Some of the reasons why forex trading is so popular are:
You can trade 24 hours a day
Being opened 24 hours a day means you never miss a chance to trade. There are always opportunities to make money from trading.
High Liquidity and Huge trading volume
Buy and sell at ease and there is no fear or concern of not being able to exit or enter a position. There is also no fear of a single big player that corners or manipulate the market
Low Startup Capital Required
With less requirement for margin and higher leverage, anyone can start trading in forex for as little as $200. You might want to note that you should have a strategy with regards to your startup capital.
Forex Offers High Leverage
With a leverage of 1:100, every $1 you deposit into your account allows you to trade $100 (1:100). This means that you can start trading a larger amount of currencies with a much smaller capital.
Will I lose money in forex trading?
Yes! You can lose money (just like any investment and the key is to learn to be profitable!). Almost all forex traders lose money and honestly just like any money making opportunities or activities, it is fine to lose money. Learn to accept losses in forex trading because the most important thing is to make more money than what you lose! Word of advice to forex traders (or if you are looking to trade in forex), never ever hold on to your losses. While it may be painful to take losses, it is important to note that to make BIG money in forex trading, you must learn how to cut your losses first.
How much money can I lose from forex trading?
You can potentially lose every dollar you deposited in your account and in some extreme cases, you can lose more than what you funded into your forex account.
Compare forex trading to running a business, you stand to lose whatever you have decided to put in as your capital. As a recommendation, we suggest you divide your trade capital into 3 portions, 1 portion to deposit with forex brokers as your forex capital and keep the remaining 2 portions in your bank. If you deplete the first portion of the capital you deposited with the broker, transfer the remaining 1 portion (of the 2 portions) to fund your forex account again. If you lose all the money again another time, it is time to sound the alarm and review what you are doing.
How much money can I expect to make from forex trading?
This really depends on how much you trade in terms of your trading size (or position size). For example, if you trade a standard lot in forex (100,000), every pip move is worth $10. In other words, if your trade makes you 100 pips, you will get $1000 (100 pips x $10) in profits.
On the other hand, if you trade 1,000 (also known as a micro lot), every pip move is $0.10 so the same 100 pips gain you make is equal to $100 (100 pips x $0.10) in profit.