why forex is so risky? | Forex Factory

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why forex is so risky?

  • #1
  • First Post: Sep 8, 2011 6:24pm Sep 8, 2011 6:24pm
this thread is only for fun

forex is very risky because it engages the trader in three wars :

1- Buyers against seller (Bulls against Bears)

http://eliteglobaltrader.com/wp-cont...s-vs-bears.jpg


2- Trader VS central banks :
http://images1.cpcache.com/product/8...x150_Front.jpg http://t1.gstatic.com/images?q=tbn:A...MpIt4jl-HD0y9A

3- Trader vs the broker ( in case of market maker ) :

https://sites.google.com/a/sentosatr...-3/requote.png

http://www.lottofactor.com/images/no-scams.gif


that's all

hope you enjoyed it
  • #2
  • Sep 9, 2011 7:48am Sep 9, 2011 7:48am
you've not mentioned the biggest battle of them all. What about ones self!
Love your bull/bear piccy. Look great in my "trading room"!.......well spare bedroom.
  • #3
  • Sep 11, 2011 1:22pm Sep 11, 2011 1:22pm
Leverage is your friend/enemy. Brokers make it way too high for new traders. Deliberately, imo. Fastest way to blow you positions is to have too many trades open for the size of your account. Once they go against you, (and if you're doing this, they will,) your trades are dead.

But the only way to learn this is to have it happen to you...

Hopefully, once is enough to learn the lesson. Only then will you appreciate it when the guys say you should be using a leverage of 10 or 20 instead of 400.
  • #4
  • Edited 5:46pm Sep 11, 2011 5:22pm | Edited 5:46pm
Hi All,

I'm very new to the Forex scene but it appears to me that noobs fail because there are many "gotchas," seen and unseen.

(1) To begin with the most basic gotcha is what broker you use and what is his policy? Does he have a trading desk that will trade against you when you least expect it? Does he skewer the results against you via his trading desk? Is he/she in general of an untrustworthy reputation and out to stick it to you for his own advantage at every turn?
The solution: Investigate your broker before you get onboard.

(2) The next item on the list is the quality of your internet connection to the broker's server. Are you using your home internet connection and home computer to trade Forex? Have you measured the average latency between your computer and your broker's transaction servers? This could be a critical item if you are scalping as a day trader, since only a little latency will cost you those few pips you had intended to pick up.
The solution: Rent a VPS server as close as what you can to your broker's location and run your trading platform(s) from there.

(3) Have a trading plan and stick to it! Don't just pull the trigger because you "think" it's the right move! Analyze the currency pair you are trading and put your game plan in motion depending on the price action's support/resistance levels, if the currency is trending or ranging, or about to experience a possible breakout.
The solution: Do this every day and have your trading plan ready. Once you take the time to analyze what you are doing it will make you a more seasoned trader.
A tip: Forget what you hear on the news and only trade what you see on your chart!

(4) Capital Preservation and Growth: Leverage and risk management should be fundamental parts of your philosophy. Trade your Forex account for the long-term and resist the "get rich quick" frame of mind. Many experienced traders are producing profits in the double digits each month while managing exposure quite well. Do you have any idea of how well that compounds? Let's say that after all is said and done you "only" manage to gain a return of 5% per month...do you know what yearly return that translates to? A full 60% !!! Do you have any idea how many folks would die for that kind of yearly return? Heck, even getting a return as little as 1.5% per month translates to 18% per year !!!
The solution: Remember that capital preservation and growth is your sacred duty and primary trading objective.

(5) Be true to your own self! What kind of trader are you? Are you the cool, calm, collected type or the "nervous Nelly" type that will double down after a bad trade, only to greatly compound a loss? Think about this: All traders have a bad day. The object of good trading is to accentuate your wins and minimize your loses.

If you don't know how to close a bad trade - and think the market is going to go your way, eventually - you are in for a rude awakening and a blown account balance. The point of trading is to manage the losses and live to trade another day.
The solution: Think of the worst case scenario and what are you going to do about it? What is your plan to outlive a stunning series of small but multiple losses? Good days are easy, the bad days will show the quality of your trading plan, not to mention your intestinal fortitude!

(6) Volatility, stay away from it. The times when important financial news is released to the public, such as when the Chairman of the Board of Governors of the Federal Reserve System delivers his monthly report is a bad time to trade. The wild gyrations of the market and the increased order slippage, together with very wide spreads, makes for very tough trading conditions.
The solution: Be kind to yourself and your account and sit out of the markets 'till they settle down some.


mysterypips

  • #5
  • Sep 11, 2011 8:08pm Sep 11, 2011 8:08pm
haha nice one. the third one is the worst!
  • #6
  • Sep 13, 2011 4:13pm Sep 13, 2011 4:13pm
Quoting hamad00
this thread is only for fun

forex is very risky because it engages the trader in three wars :

1- Buyers against seller (Bulls against Bears)

http://eliteglobaltrader.com/wp-cont...s-vs-bears.jpg


2- Trader VS central banks :
http://images1.cpcache.com/product/8...x150_Front.jpg http://t1.gstatic.com/images?q=tbn:A...MpIt4jl-HD0y9A

3- Trader vs the broker ( in case of market maker ) :

https://sites.google.com/a/sentosatr...-3/requote.png...
I would add another wars .. leverage, bad money management and yourself, when you don't keep your rules
  • #7
  • Sep 14, 2011 2:59am Sep 14, 2011 2:59am
It all depends leverage and your level of knowledge. Otherwise FOREX is not any riskier than other types of trades. Plus, definition of risk is really hard to understand.
  • #8
  • Sep 14, 2011 3:27pm Sep 14, 2011 3:27pm
Quoting kisiadam
It all depends leverage and your level of knowledge. Otherwise FOREX is not any riskier than other types of trades. Plus, definition of risk is really hard to understand.
Well, in this case I disagree. Risky means one can lose something. In case of Forex trading we risk our money. In some cases if a trader always loses if he becomes dependable on the Forex trading he can lose even more, not only funds.

hamad00, sorry, you meant this thread only for fun
  • #9
  • Sep 14, 2011 7:32pm Sep 14, 2011 7:32pm
Quoting EasyGoer
Well, in this case I disagree. Risky means one can lose something. In case of Forex trading we risk our money. In some cases if a trader always loses if he becomes dependable on the Forex trading he can lose even more, not only funds.

hamad00, sorry, you meant this thread only for fun
They're only wars because you don't use it to your advantage.

Once you know what is winning and what isn't you'll know the true war.

Your mind, your emotional intelligence, and the market. Its you and market. Thats it.
Have I got something on my face, SOLDIER?
  • #10
  • Sep 14, 2011 9:54pm Sep 14, 2011 9:54pm
it is interesting to see all these ideas coming up from you guys
  • #11
  • Sep 14, 2011 10:00pm Sep 14, 2011 10:00pm
Quoting richyrich
you've not mentioned the biggest battle of them all. What about ones self!
Love your bull/bear piccy. Look great in my "trading room"!.......well spare bedroom.
Absolutely agree with you!!!

I think anyone can learn to be successful in the FX market...but those that are successful have mastered the battle within.
  • #12
  • Sep 15, 2011 8:03am Sep 15, 2011 8:03am
Quoting IntradayFX
I would add another wars .. leverage, bad money management and yourself, when you don't keep your rules
All you listed is actually one war - the last one - against yourself

Quoting EasyGoer
Well, in this case I disagree. Risky means one can lose something. In case of Forex trading we risk our money. In some cases if a trader always loses if he becomes dependable on the Forex trading he can lose even more, not only funds.
In Forex you can lose a lot if you do not know what you're doing and cannot control yourself.
But is that any different in any business venture? You can blow up all your savings and fall into debt up to your ears mismanaging a hot-dog cart.

On the other hand if you have what it takes and you learn the market properly, I think you can easily and without risking much make 50% profit a year. What other business (other than drug dealing, pimping and smuggling garlic into EU) will pay you that much?
  • #13
  • Sep 15, 2011 11:27am Sep 15, 2011 11:27am
Because WE always take stupid risks.
  • #14
  • Sep 17, 2011 6:06am Sep 17, 2011 6:06am
Hi Guys,

I always get the "ooh very risky" when i tell someone about Forex for the first time. A colleague of mine even said he would prefer to play the pokie machines as they had better odds... After reading Reminiscences of a Stock Operator, i can understand why people think this way, but with good MM, you can go a long way to being successful.

Cheers,
Capt Kiwi
  • #15
  • Oct 7, 2011 10:43am Oct 7, 2011 10:43am
There are so many people trading the same markets on both sides when your are trading, each with different reasoning as to why this pair is doing that, and with those assumptions, speculations of the millions of people involved comes and imeasurable amount of variations that are impossible to predict. So that is one reason. Not being able to control ones greed is another. A natural human emotion.

Cheers
  • #16
  • Oct 7, 2011 11:50am Oct 7, 2011 11:50am
I believe most activities involving money are risky unless you understand them. But for the most part it is the perception of risk not the reality of risk. Once you learn the basics of risk management, the risk is controlled and you can take as much as you can handle. But try to explain that to an outsider and the response is most likely to be "that seems so risky" or "somebody told me that is risky".

But personally I can't see the risk if you can afford to lose the amount that is put at risk and take reasonable steps to get a commensurate reward. Its no different at a casino - understanding that most games favour the house.
  • #17
  • Oct 7, 2011 5:37pm Oct 7, 2011 5:37pm
The simple answer as to why forex is so risky, is because it's the most volatile, liquid and unpredictable market in the world.
  • #18
  • Oct 11, 2011 10:25am Oct 11, 2011 10:25am
Quoting hamad00
this thread is only for fun

forex is very risky because it engages the trader in three wars :

1- Buyers against seller (Bulls against Bears)

http://eliteglobaltrader.com/wp-cont...s-vs-bears.jpg


2- Trader VS central banks :
http://images1.cpcache.com/product/8...x150_Front.jpg http://t1.gstatic.com/images?q=tbn:A...MpIt4jl-HD0y9A

3- Trader vs the broker ( in case of market maker ) :

https://sites.google.com/a/sentosatr...-3/requote.png...
Main reason is very high leverage .
Otherwise forex with less leverage is far safer than most things that open with gaps almost each day and shorting and holding long time aint possible with many other things .
BEING PROFESSIONAL IS ALL ABOUT HOW YOU CONTROL FASTEST THING--UR MIND!
  • #19
  • Oct 11, 2011 10:35am Oct 11, 2011 10:35am
Uve got

1. Stop hunting if youre not careful and ur broker is not honest or regulated.
2. Over-leveraging.
3. It is not get-rich quick most people have terrible emotional intelligence, leading them to loss, and even more loss.
4. You need that emotional intelligence.
5. Its easier to demolish a house than build one.
6. Slippage by brokers. Stop loss dont always work.
7. Execution is sucky when too much volatility. silver and gold for example.
8. U can lose more than u deposit.
9. Take ur time, my friend, learn more, and more, hunt more knowledge, be open to it, and u will be fine
Have I got something on my face, SOLDIER?
  • #20
  • Oct 21, 2011 12:03am Oct 21, 2011 12:03am
can some one explain this, I have heard a bit of this on a webaniary and have little understanding? "Trader vs the broker ( in case of market maker "

so the broker stands against you at times?
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