March 30, 2011
Forex Trading - Why It Is Not A Get Rich Quick Scheme
In recent years forex trading has really taken off and many people from all different backgrounds have started trading currencies. I think one of the reasons for that is because the stock markets fell sharply a few years ago during the banking crisis, and many people will have inevitably lost a lot of money and looked for alternative ways of making money.
I think another main reason is because people who sell forex trading products are increasingly giving the impression that forex trading is a get rich quick scheme. However this is most definitely not the case.
It may well be a get rich scheme for the product vendors because they can generate thousands of dollars in a matter of a few days through big product launches and an army of affiliates promoting their products for them. However it is a different story for the currency traders who actually buy these products.
On the sales pages of many of the forex robots and trading systems, you will often see some very grand claims. For example they may promise gains of 100% per month or show back-tested results showing how they turned $10,000 into $300,000 in just a couple of months.
However the reality is that once you get suckered into buying one of these products, you will nearly always find that you never achieve anywhere near the same kind of results. That's hardly surprising when you think about it because if they were all as profitable as they make out to be, then there would be thousands and thousands of millionaires out there lying on a beach on a tropical island somewhere.
There are some big profits to be made from forex trading, but you have to be realistic about the kind of gains you can make. There are some people who have got rich (at least temporarily) through taking big risks and using high amounts of leverage. However most of the wealthy forex traders became successful by using sensible trading strategies and staking plans, and accumulating long term gains slowly and steadily.
I'm not a hugely wealthy trader myself (and certainly not a millionaire) but I make more than the average UK wage just through my forex trading alone. However if you read my weekly trading updates every week you will see that I don't take any huge risks, whichever strategy I use. Most losses, when they do occur, are in the 30-40 point range, and most of the time the profits more than compensate for these losses and I end up making steady and consistent profits every week.
So the point is that I think you are a lot better off using conservative trading strategies that generate profits slowly and steadily. If you are risking say 3% of your capital per trade, then you can still make some excellent returns in the long run, and you don't have to take huge risks in the process.
That's why I like the Forex Morning Trade system so much. This system only trades one position per day on the GBP/USD pair and uses a simple 40 point profit target and stop loss to trade early morning breakouts. The system uses just a few simple indicators to stack the odds of success in your favour and generally makes in the region of 40 or 80 points profit every single week.
(So far this week it is up 40 points with 2 winning trades out of 3).
It is a simple straight-forward system, and it certainly won't help you to 'get rich quick'. However it is a consistently profitable system because it has only had one losing week since I first starting using it back in September 2010, and continues to generate profits week after week.
So this just goes to prove that you don't need to take excessive risks in order to generate big returns. You can do just as well with one or two conservative strategies in the long run.
Forex trading is all about making solid long term gains in my opinion, and it is definitely not a get rich scheme, as many product vendors will have you believe.