If you are new to the world of forex trading, you must be wondering whether or not it is profitable to become a full-time forex trader and actually make a living out of it. If you look at the statistics, you will see that most aspiring forex traders tend to lose a lot of money.
The underlying reason is that leverage is a double-edged sword, which means that you can make massive profits but also enormous losses. With that said, while it is perfectly doable to make a living out of forex trading, you must keep in mind the contemporary risks that are linked with the world of forex trading.
Read on to learn more.
Unexpected Events and Other Risks
To better understand whether or not forex trading is profitable and how you can make a living out of it, you must fully understand what is forex trading and its potential risks. That said, unexpected events, such as great losses by the central bank, can impact forex traders as well as big investors and banks. Apart from unexpected events, there are also other risk factors that forex traders might have to deal with.
Immoderate Leverage
If you want to make a living from forex trading, you must use leverage moderately, as excessive leverage can amplify not only your potential for profits but also losses. It would not be wrong to state that excessive leverage is an unnecessarily high-risk endeavor. You might even have to close your trading position to cover your potential loss, which can lead to the depletion of your trading account. Also, while leverage can enhance your gains, it can also cause missed opportunities due to margin calls.
Fraud and System Malfunction
Another potential risk factor linked with forex trading comes down to the malfunctioning of the system or trading platform. A malfunction can be caused by a sudden power outage or Internet overload during an exceptionally volatile market; your “stop-loss” might not work. You might be surprised to know that the Forex market has seen its occasional cases of fraud and market manipulation, too.
You must get educated about fraudulent manipulation tactics such as the strategy of stop-loss-hunting, where the bigger organizations drop or raise the prices in the anticipation that traders will have set their stop-loss orders.
Best Tips to Make A Living from Forex Trading
Once you have familiarized yourself with the risks that are associated with forex trading, you can integrate the best strategies to win at forex trading and make a comfortable living. For instance, you must pay close attention to the daily pivot points, especially if you are a day trader. Pivot trading is nearly something like a self-fulfilling prophecy.
However, pivot trading shouldn’t be your sole focus of trading strategy, as you will be analyzing the pivot points every day to gauge potential market reverses or continuations.
If you want to make a living from forex trading, it’s important for you to follow the golden rule of avoiding bigger losses rather than making big profits. In other words, you must understand the art of preserving your capital. How can you continue trading if you run out of money? So, it is in your best interest to preserve your account so you are ready when the time is right to enter a profitable trade.
