Log in or Sign up. Over the past few weeks, I have seen many postings referring forex as a scam or as an equivalent to a casino game.
I do have some difficult time trading forex myself, but I don't consider forex a scam, but then, I have been wondering why people mentioned that forex is difficult and now I have found out why. It is definitely not the leverage, because with proper risk management, leverage could enhance profitability.
It is not the broker, because one could switch to a better and more reputable broker. However, I have finally understood that the reason why forex is so difficult is because of the spread.
The spread is the revenue for the broker and it also protect the broker from price volatility. The higher the volatility for that particular instrument, the higher the spread. The higher the spread, the harder it is for intraday traders to profit from the volatility. If you look at the ATR of a particular instrument and look at the spread, you will see the spread occupy a significant portion of the trading range.
However, it doesn't mean that traders can't profit from forex. It just means that traders need to trade in a longer time frame with a well planned position-sizing strategy and patience to wait for the right opportunity. I hope this will help other struggling forex traders. I think it depends what you trade. The spread is just way too far and movement is not enough during the day.
Even if you plan to hold for a week or so, you get killed with the rollover rates which equates to about 1. Gold on the other hand doesnt have that huge spread like silver. I dont even bother with other currencies anymore. I only focus on gold, Euro, Yen and i do pretty well with those.
I find its a good idea not to clutter your mind with too many different currencies and even if there are no opportunities in those 3, I dont mind not being a trade until something happens. Personally, I think Forex is a lot easier and faster than trading stocks.
I disagree that spread has anything to do with why Forex is so commonly referred to as a "Scam" My opinion on why Forex is viewed as a scam more often than other markets is the fact that it is not regulated like any other market out there and therefore there is no central exchange that orders must be filled through. Any time you are daytrading markets looking for very small profits, the cost of making a transaction ie. With all that being said i know of a few traders who are very profitable scalping Forex but many more who trade longer TF's.
Bottom line is if you have a good system spreads are simply the cost of doing business. The spread is definitely not the reason why most people think it is a scam, but it does make forex relatively harder to trade. With the large spread, your trading strategies may be limited. All I am saying is that the spread is large in forex relatively to its daily ATR. It comes down to the many, many bad firms that get closed down for illegal practices.
There are certainly enough bad apples, for me, to ruin the bunch. I would rather trade CL and bond futures People lose it all trading the ES as well, but i think for different reasons. The cost of trading forex is TINY in comparison to other instruments. You need to find a broker with decent spreads. Forex is difficult because it's a 24 hour market and doesn't follow zero-thought process TA. It does however have a tendency to follow certain other patterns though which relate to a different axis on the chart.
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