Over the last few years, especially with the popularity on social media and increase in desire for side hustles, forex trading has grown massively in the retail sector. Millions of first time investors are looking at forex trading as a great potential way to increase their yearly salaries or just give them a bit of extra money to save every month. Forex is typically marketed as a very easy market to trade – but is that true?
Forex trading is extremely simple, but not easy. Humans are fundamentally not great at trading the financial markets as emotions often get in the way and ruin objective trading plans. In principle, forex trading is very easy but we see around 90% of traders losing money in the markets which highlights how tricky the markets can be. Let’s find out more…
Forex Is Easy To Get Started With
One of the main reasons forex has grown in popularity is because it’s very easy to get started. Out of all of the different markets you can trade, forex is typically marketed the most and has the lowest barrier of entry. This means we see a huge amount of new investors with no real background of investing, trying to dabble with forex. Although this is great news, it can also lead to more inflated statistics as a lot of the traders losing money have absolutely no idea what they’re doing. How is forex easy to get started with?
1. Huge Amounts Of Education
One of the reasons forex appears easier than other markets is the huge amount of educational content provided online. There are thousands of YouTube videos, Instagram breakdowns, websites and courses providing everything you need to know to start trading forex. Although most courses are useless, there are definitely some good ones out there. I have a list of the best forex trading courses here, if you’re interested.
2. Low Deposits And Leverage In Forex
When you’re trading stocks, typically the best brokers are going to require minimum deposits of over $5000. However, in forex, most brokers like IC Markets are going to require a minimum deposit of around $200. There are even offshore brokers like Hugosway that will let you start trading with just $10 (although I wouldn’t recommend this). This low barrier of entry makes forex much easier to get started with, than other markets.
Brokers are also offering traders a huge amount of leverage. Depending on which brokers you trade with and where you’re based in the world, you can have access to leverage ranging from 1:1, all the way to 1:500. 1:500 leverage is absolutely huge and can allow traders to actually take large positions in the markets with just a few hundred dollars in their accounts. This is a blessing and a curse because it’s much easier to blow through your trading capital with high leverage, but also much easier to grow it.
3. Prop Firms Funding Traders
The expansion of the retail forex trading industry has made forex MUCH easier for new traders. Previously, I’m talking many years ago, you would have needed a huge amount of capital or even investors to make serious money trading forex. You couldn’t even consider trading for a living without having at least £100,000 to invest in the markets. This has now completely changed…
Trading prop firms are now funding traders a huge amount of capital. These prop firms are completely online, risk free and require no contracts to get started. For instance, DT4X Trader offer instant funding of $50,000 to traders. MyForexFunds offers instant funding of over $200,000 to traders!
I have a list of the best forex prop firms, with my withdrawals in there too, if you’re interested in getting funded.
4. You Don’t Need To Be Too Smart To Trade Successfully
You certainly don’t need a degree or background in finance to trade forex successfully. In fact, most successful retail traders don’t have a financial background at all. Forex trading, done properly, is about following a simple set of rules to execute and manage positions. The rest is all about managing your risk properly and compounding your profits.
Although creating a trading strategy and risk management plan will take time, you don’t necessarily need to be a genius to do so. As long as your strategy is consistently profitable over the long term, you just need to execute that like a robot for as long as you can do – no Mensa level intelligence needed! Forex trading done properly should be extremely boring and repetitive.
Why Is Forex So Difficult?
The sad reality is that around 90% of forex traders lose money within the markets. This statistic can be shown in more detail in this article. The fact that so many traders lose money trading forex can lead to traders thinking that forex is just impossible, or a big scam. Although the markets are tough and unforgiving to traders, it’s certainly not impossible to gain a small edge over time. With that being said, why is forex trading so hard?
1. It’s Only Possible To Have A Small Edge
The number one reason forex isn’t easy is due to the fact forex is a very balanced market. It’s completely decentralised and has high liquidity, meaning there isn’t many inefficiencies that you’re able to exploit. Due to this, there’s only a very small edge possible.
To show this, you can take 100 trades with a 10 pip stop loss and a 10 pip take profit. Take the trades completely randomly, with no trading strategy and see what happens. You will end up with around a 50% win rate and be in a negative due to spreads and commissions placed on the pairs. This is how most uneducated traders are trying to trade the markets and losing money.
2. Humans Are Generally Terrible At Trading
The best trading results are typically generated by either fully or partially automated trading systems. It’s definitely possible to make money trading manually and a lot of traders do but this is mainly done by trading a system, not discretionarily. What do I mean by this?
Humans are impulsive and emotional, especially when money is at stake. Humans can choose the wrong option in a high pressure scenario, like taking a fairly large trade. Robots would not be influenced by stress or greed, or even fear, making them much better traders. It’s very important to try to follow a trading strategy and not get caught up in taking random trades or letting emotions influence decisions. This takes years to master.
3. Wrong Information About Forex Is Everywhere
The spread of misinformation about forex over the last few years has been huge. There are now thousands of traders claiming to be real, professional traders when in reality most of them are just marketers trying to get money out of you. People are trading forex for 2 months then trying to put out a trading course to help beginners, when they’re still a beginner themselves!
The false information does slow traders growth and make the market much harder. If everyone was taught the fundamentals of risk management and how to build a comprehensive trading system, I do believe that forex trading would be easy.
How To Make Forex Trading Easier
Although forex trading isn’t easy, at all, there are some things we can do to make it as easy as possible. These steps won’t guarantee you success but they will put you on the right track to succeed.
1. Dedicate Years To Learning, Not Weeks
Rome wasn’t build in a day and forex cannot be learned in a few weeks. The technical aspects (Drawing things on the charts) can be learned in a few months, that I will say. The hardest bit of trading is creating a trading plan, sticking to that plan and having a risk management strategy. The risk management and psychology aspect takes years to learn.
Beginners are typically extremely impatient and want to get started on a live account straight away. Although I admire the urgency, this is a sure fire way to blow your capital. As a beginner you really don’t know what you don’t know, so it’s easy to feel like you’ve cracked forex – I promise you haven’t.
2. Create A Trading Plan And Stick To It
Discretionary trading is near enough impossible. This means, taking random trades whenever you see them without really having a plan. Although you can do this, you won’t be able to consistently do this profitably over the long term. This is why it’s so important to have a trading plan.
If done properly, your forex trading should be extremely boring and repetitive. Your only job should be to execute the plan that has already been created. This is simple to do and easier on your psychology as you don’t have to blame yourself for losses – you know the success rate of the systems you trade and you’re just executing them over the long term.
If you haven’t got a trading plan I’d recommend this Investopedia article breaking down how to create a trading plan.
3. Don’t Over-leverage, Use A Prop Firm
Forex trading becomes a lot harder when you’re over leveraging your funds. This means risking a huge amount per trade because you want larger profits. The general advise is to risk 1% per trade on your trading accounts, anything above this greatly increases your risk of blowing through your trading accounts and having more issues with psychology.
Instead of risking higher percentages because you’re chasing profits, use online prop firm accounts instead. I have a whole list of firms that will give you capital here! I personally use FTMO, MyForexFunds and DT4X Trader. Just take DT4X for example, they will let you trade $50,000 of their capital TODAY, risk free, for a 70% profit split!
4. Work In Percentages, Not Money
When trading is just focused around money, you’re going to find it much harder to successfully compound your trading accounts. Drawdown becomes much more real when you’re looking at -£450, rather than -0.45%. In order to keep your psychology in check it’s much better practice to look at the percentages on the account. This also makes it much easier to backtest your trading systems to check that they’re actually objectively profitable over the long term.
My Experience Forex Trading – Is Trading Easy?
If you haven’t read any of my other articles, you may not know my own trading experience. I won’t bore you with all of the details but I have been in the forex space for over 5 years now. I traded full time for a few of those years and there’s a huge amount of things I would say I did wrong, in hindsight.
I quit my job early into forex trading because I had a short run of success. I thought forex trading was easy, very easy and I had cracked it. After a few months I was quickly humbled and realised that forex trading was actually very hard. I had inconsistent results, I was insanely stressed as I wasn’t taking regular withdrawals and I ended up spending about 16 hours a day studying, testing systems and worrying about money.
Long story short I ended up getting prop firm funded and it all worked out. With that being said, anyone coming into the industry thinking forex is easy has another thing coming. It’s by far the hardest thing I’ve ever tried to do in my life and I’m not even sure I recommend forex trading to traders, let alone claim it can be done easily.
Conclusion – Is Forex Trading Easy?
In summary, forex trading is simple but not easy. Around 90% of traders lose money when attempting to trade forex and it takes traders years of constant studying to reach a great level of consistency and profitability within the markets. There are definitely ways to make forex trading easier for yourself, but nothing will ever make this market ‘easy’.
If you have anything to add please do leave a comment down below, I’d love to hear your opinion on this subject.