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10 Reasons Not To Trade Forex

Do you trade forex? Do you consider trading forex? Do you consider learning how to trade forex? Don’t do it. I like the profit opportunities that currency trading carries. I like also the risks involved, it wouldn’t be fun otherwise. But I don’t like the idea to trade myself. Where is why:

Forex Trading
Photo by amalthya at Flickr

1. Trading forex is work

If you want to make your money work for you, trading forex is not an option. You will have to work for your money. Day trading may look exciting for someone who never tried it, but once the initial excitement is gone you’ll realize it’s just a computer based work like any other.

2. Trading forex is too risky

This sounds paradoxical from the keyboard of a high risk investor but I really think forex is too risky. There are thousands of websites offering forex trading strategies. Have you heard for any super-successful one? Sure, some make it for a while, but no strategy guarantees long term success. This is because forex is unpredictable. There is too much probability and too much volatility in it. That’s why you are unlikely to see serious hedge fund to invest in forex ever.

3. Trading forex does not add wealth to the world

If you want to make money, you need to create wealth. What exactly is the wealth that a forex trader creates? What is the value he adds to the world? I can’t think of any.

Forex trading is a zero-sum game. If you make money, this is because someone else is losing it. If the intellectual energy put into currency speculation was put into something else, this could make the world a better place.

4. You don’t grow

I am sure many professional forex traders will be mad to hear this, but seriously, how exactly does day trading helps your personal or professional development? Sure, you’ll learn some strategies, maybe build some self-discipline and… what else?

5. You need money to make money

Let’s imagine after few years of investing your time, money and hard work you finally become a highly successful forex trader who achieves consistent 5% monthly ROI. This is quite unlikely considering that probably 95% of the new forex traders fail miserably, but I know you are smart, so let’s hope it will happen.

Since forex trading is work, like explained in point 1, you will probably do it all the day and will rely entirely on it for your income. So if you want to earn $5,000 monthly you’ll need $100,000 startup capital. Uh.

6. Trading forex is addictive

Just like gambling, day trading is highly addictive activity. Each small success leads you to believe that you can do better and better trades. Each bad trade forces you to trade more so you can make up for the loss.

Gamblers and forex traders often sell or bet their homes to feed their passion and hopes. If you lack self discipline, forex trading is one of the worst professions you could ever take.

7. Day trading is stressful

Do you really want to watch the computer screen all the day, to worry about your open positions when you go out for lunch and to wake up in the night because an important even happens on the other side of the globe and you can not miss the currency fluctuations produced by it? Think seriously about this because this is what the life of a professional forex trader is.

If you dream about lifestyle of freedom and leisure and are picturing yourself with a laptop on the beach, trading forex is most probably not for you. It’s an activity for people who like to live in stress and risk.

8. The forex trading knowledge is useless in other professions

Seriously, do you think the years you spend in studying forex can be useful if one day you decide to do something else? It won’t help you even for similar activity like stock trading because the systems and strategies are completely different.

In most professions whatever you learn during your experience can be extremely useful if you switch to a related (and sometimes totally unrelated) field. This is not the case with forex trading knowledge and experience.

9. There is too much fraud

Not all Forex brokers are as honest as we would like. Every professional trader has heard about big Forex brokers scamming away. See for example how several brokers were shut down in 2007.

When trading Forex you don’t have full control over your money. A dishonest broker can close down and run away or just deny you to withdraw your money.

10. You can have others trade for you at almost no costs

Why trade forex yourself, when you can get professionals trade your money? The managed forex accounts give you access to expert’s knowledge for a share of the profits. You don’t have to pay anything upfront. Isn’t that cool?

Yes, most managed forex account suck in performance and that is because of the reasons given in points 2, 6 and 7. Chances are if you trade yourself you’ll also achieve the same pathetic results but will lose not only money, but time and intellectual power too. Besides that, some managed trading accounts do well and actually make money.

Regardless of anything, I think forex investing is something to be considered. But if you plan to trade yourself, you must be very sure that you want it. The life of the forex trader is not romantic or carefree. At least this is not the life of most forex traders.

31 Responses to “10 Reasons Not To Trade Forex”

  1. Jerome Says:

    Following your advices, I should look for a good long term managed forex account. Which one would you recommend ? Thank you.

  2. 10 Reasons Not To Trade Forex (1) at Forex News & Tools Says:

    [...] post by admin These icons link to social bookmarking sites where readers can share and discover new web [...]

  3. admin Says:

    Hi Jerome, until recently I was vouching for GalleonFX, but right now not sure. You should probably check the “Shark Investor Picks” category, it has several short reviews of managed accounts. Some may look good for you

  4. Enyioma Says:

    All the reasons given about why we should not trade forex is completely true. I give my support to it. It’s like playing the casino game. When you are losing someone is gaining and the opposite is the case. I think we should really find a better means of creating wealth from the environment and the immediate resources we have rather than consuming the one we have.
    All the same thank you for this wonderful pix.
    I am a trader too but seeks a business i dea i can develop now and leave forex alone. It consumes my time and money.

  5. Jonah Says:

    can you advice me where i can invest as little as $10 in my e-bullion account

  6. Pinyo Says:

    You nailed it. That’s why I would never intentionally trade Forex (although I do deal with two currencies and feel the affect)

  7. Curt Says:

    I couldn’t agree with you anymore. Currency trading is dangerous, addicting and adds no value of the worth. It’s a dead end career.

    But, the weakening dollar is forcing me to take part in this world. I don’t like to by foreign currencies, but I also don’t like to see the value of my dollars depreciate.

  8. UHNW Says:

    FX trading (and in fact I would argue any form of leveraged trading) meets the criteria you mentioned. Sure, some people are lucky – but unless you are a professional at it, having learned the trade at a bank or a hedge fund, then you are, eventually, going to be slaughtered financially.

    It has been shown by numerous academics (sorry, I don’t have a link) that higher trading = high costs = lower returns.

    If FX trading was so easy to make a buck, why aren’t I rich?

  9. DebtKid Says:

    Stay far away from FOREX trading. I will never “trade” forex again! I do disagree slightly with #8 though, I think some principles of money management that good traders use in FOREX could be applied to stock trading as well. Also, risk and loss management techniques in FOREX can apply to other disciplines. I lost over 100K in 2006 stupidly trading forex and would not recommend it to any but the most advanced (and rich) investors.

  10. admin Says:

    Thanks for the great comments everyone. I was expecting some arguments from forex traders, but seems they are not around *grin*

    BTW, The article is included in Finance Fiesta:
    http://wideopenwallet.com/2008/06/finance-fiesta-the-margarita-edition/

  11. Weekend Reading: June 15, 2008 | Moolanomy Says:

    [...] 10 Reasons Not To Trade Forex at The Shark Investor — I am not a big fan of forex and Shark Investor gives us 10 good reasons why forex trading is not for everyone. [...]

  12. Forex Day Trading Strategy News » Blog Archive » 10 Reasons Not To Trade Forex Says:

    [...] I am sure many professional forex traders will be mad to hear this, but seriously, how exactly does day trading helps your personal or professional development? Sure, you’ll learn some strategies, maybe build some self-discipline and… … More here: 10 Reasons Not To Trade Forex [...]

  13. Marcel Says:

    Thanks for the heads up…

    #3. Trading forex does not add wealth to the world

    That’s the clincher for me

  14. Carnival of Financial Planning - June 14 2008 Edition [The Skilled Investor's PERSONAL FINANCE BLOG] | Financial Resource Says:

    [...] Shark Investor presents 10 Reasons Not To Trade Forex posted at The Shark Investor, saying, “See why forex trading is not real [...]

  15. » Investor Profile: Jim at Blueprint For Financial Prosperity # The Shark Investor Says:

    [...] Note: oh, well, bye bye Bahamas! Wait, I just got a better idea, I’ll sell the house and trade forex with the money. Then take the profits and go to [...]

  16. 10 Reasons Not To Trade Forex at Nobullshit Network Forum Says:

    [...] Re: 10 Reasons Not To Trade Forex Thanks for the article. Just like to note that the link is here:

  17. ForexFriend Says:

    And trading what does add wealth to the world? gold? indicies?

  18. Migo Says:

    I love reading an article from the other 95%. Good words!

  19. Casper T. Corndoodle Says:

    FOREX is the world’s largest market. If people did not make money it would not be as large as it is.

  20. Jerome Says:

    Hello,
    I agree with you Casper that the Forex market is huge and a big money maker for some traders. But, up until today, after hours of research, I still have not found any reliable Trading Forex courses, Forex Signals services or Forex Managed accounts with proven long term results.
    Where should we look ? I am open to any suggestions !

  21. » Investing In Yourself # The Shark Investor Says:

    [...] Patrick). If you have not realized yet that you are your greatest asset and are still hunting for the big money in forex, maybe you’ll prefer to skip reading [...]

  22. Marco Says:

    A brief answer to #3 What is the value he adds to the world?

    FOREX traders offer a service to the market, they provide liquidity for currency exchange trades requested by institutional operators, without any investment related intent.

    If Toyota sells its cars to USA citizens earning USD and has to pay wages to its workers in Japan in JPY, it will have to sell USD and buy JPY. This is not an investment, Toyota simply has to get JPY and tries to buy them with USD at whatever (reasonable) rate the exchange happens.

    Forex traders provide liquidity for this trade to happen, hoping to get their profit closing the trade with an opposite transaction

  23. » Best of 2008 & December Link Love # The Shark Investor Says:

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  24. Ryan Says:

    Interesting article. Were did you got all the information from… :)

  25. bill Says:

    Forex vs. Stocks/Bonds/Mutual Funds. Why are investors now waking up to the fact that FX has outperformed the S&P for the past 8 years?

  26. bill Says:

    # 1 Forex Trader= George Soros

  27. bill Says:

    Average daily turnover= 6 Trillion Dollars…this is 5x bigger than all stock and futures markets IN THE WORLD COMBINED!

  28. tish Says:

    ur obviously trying to sell us some managed forex accounts. we r not stupid

  29. Dillon Says:

    I dont usually comment, but after reading through so much info I had to say thanks

  30. thai bar Says:

    Great stuff! Robot trading is definitely the way to go in my opinion.

  31. The Geared Investor Says:

    I have to say that this is one of the most ridiculous, opinionated post I have ever seen on any financial site.

    Doesn’t add worth to the world? What the hell are you talking about? If you purchase 100 shares of Apple, do you really think it makes that company worth more? There are plenty of shorts on the other end that are losing, just like swapping sides in forex.

    Forex is risky because people don’t know how to handle leverage, and the majority of people get in it to become rich quick because they are lazy.

    And you’re right, trading takes time. But that’s why those who aren’t lazy get rewarded. If you were to buy and hold stocks over the last decade, where did that get you? You’re probably nervous about your retirement, that’s where it got you.

    And there are tons of idiots out there trying to sell some holy grail system that won’t work in forex, I understand that. It’s just ignorant of you to push readers away from this type of trading with your false accusations like you have to be a day trader to be successful. I can point you in the direction of several traders who don’t look at their charts for more than 30 minutes a day and can make a great living.









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