| You will often read about the advantages of | | | | Traders are in many instances so concerned about |
| currency trading but you will rarely see the risk of | | | | reducing risk they actually create a scenario where |
| currency trading mentioned, yet 90% of currency | | | | they can't win. |
| traders lose. | | | | Add Leverage |
| This article will look at the risks of currency trading | | | | Leverage and volatility is a combination that makes |
| and why this creates a vast majority of losing | | | | risk management hard for even the most seasoned |
| traders who wipe out their equity. | | | | traders. |
| Let's look at the advantages first. | | | | With leverage you need to study volatility and make |
| 1. Profit opportunities all the time | | | | sure your stops are not to close and that they are |
| As one currency is rising another must be falling | | | | not trailed to quickly if you really want to make the |
| creating constant opportunities for profit. | | | | big profits from the big moves. |
| 2. Liquidity & 24 hour trading | | | | Currency trends are easy to see in hindsight on a |
| The markets are very liquid and trade 24 hours a | | | | chart. |
| day with literally trillions of dollars | | | | It's a fact that most traders are good at picking |
| 3. The markets trend well | | | | market direction, but they keep getting stopped out. |
| As currencies reflect economic conditions around the | | | | The main reasons for this are poor entry methods, |
| world they exhibit good long term trends | | | | trading to short term, or not having an understanding |
| 4. Leverage | | | | of volatility and risk. |
| You can trade on leverage and trade many times | | | | Currency trading looks easy but few succeed. |
| over the funds you have in your account | | | | If you are a new trader avoid day or intra day |
| So with these great advantages why do traders | | | | trading and trade longer term and get an |
| lose? | | | | understanding of volatility and how to place stops |
| The answer is traders cannot handle points 3 and 4, | | | | correctly and manage risk, so you can stay in the |
| they see these as easy to deal with and these are | | | | long term trends. |
| not. Let's take a look why. | | | | 90% fail why should you succeed? |
| Currency markets trend well | | | | Ask yourself the above question. |
| Yes they do, but they only show reliable trends in | | | | If you don't know the answer, then brush up on |
| longer time frames. | | | | dealing with leverage and volatility quickly or lose your |
| Most traders opt for short term day trading | | | | money. |
| methods. | | | | You cant avoid risk and you will only win in currency |
| As moves within a day are random they get stopped | | | | trading if you know how to manage it correctly and |
| out continuously and never run their profits. | | | | take calculated risks at the right time. |
| Furthermore, even long term traders have no idea of | | | | Leveraged currency trading can give you big profits, |
| how to deal with volatility and stop placement and | | | | but it is very risky, don't let anyone else tell you |
| continually get stopped out or bank profits early by | | | | otherwise. |
| not taking enough risk. | | | | |