Over the past few weeks, I have seen many postings referring forex as a scam or as an equivalent to a casino game. I do have some difficult time trading forex myself, but I don't consider forex a scam, but then, I have been wondering why people mentioned that forex is difficult and now I have found out why. It is definitely not the leverage, because with proper risk management, leverage could enhance profitability. It is not the broker, because one could switch to a better and more reputable broker. However, I have finally understood that the reason why forex is so difficult is because of the spread. The spread is the revenue for the broker and it also protect the broker from price volatility. The higher the volatility for that particular instrument, the higher the spread. The higher the spread, the harder it is for intraday traders to profit from the volatility. If you look at the ATR of a particular instrument and look at the spread, you will see the spread occupy a significant portion of the trading range. To daytrade that is like trying to daytrade stocks with a $30/trade commission. However, it doesn't mean that traders can't profit from forex. It just means that traders need to trade in a longer time frame with a well planned position-sizing strategy and patience to wait for the right opportunity. I hope this will help other struggling forex traders. PA PS: It would be <b>relatively</b> easier to trade stocks.
I think it depends what you trade. For instance...i have found that silver is near impossible to trade on FX. The spread is just way too far and movement is not enough during the day. Even if you plan to hold for a week or so, you get killed with the rollover rates which equates to about 1.4 pips per day if i remember right. Gold on the other hand doesnt have that huge spread like silver. I also trade the USD/JPY and EUR/USD which the spreads are always nice and small. I dont even bother with other currencies anymore. I only focus on gold, Euro, Yen and i do pretty well with those. I find its a good idea not to clutter your mind with too many different currencies and even if there are no opportunities in those 3, I dont mind not being a trade until something happens. Personally, I think Forex is a lot easier and faster than trading stocks.
I disagree that spread has anything to do with why Forex is so commonly referred to as a "Scam" My opinion on why Forex is viewed as a scam more often than other markets is the fact that it is not regulated like any other market out there and therefore there is no central exchange that orders must be filled through. Any time you are daytrading markets looking for very small profits, the cost of making a transaction ie. spreads or commissions on a trade is going to greatly cut into your bottom line. With all that being said i know of a few traders who are very profitable scalping Forex but many more who trade longer TF's. Bottom line is if you have a good system spreads are simply the cost of doing business.
The spread is definitely not the reason why most people think it is a scam, but it does make forex relatively harder to trade. With the large spread, your trading strategies may be limited. PA
I did not imply that there was no bid/ask in other instruments. All I am saying is that the spread is large in forex relatively to its daily ATR. PA
I've never found scalping to be a problem, as craig mentioned the spread is just the cost of doing business and needs to be factored in. As for retail forex being a scam, well that's a different debate which has been going on for years!
i think it's a scam. It comes down to the many, many bad firms that get closed down for illegal practices. There are certainly enough bad apples, for me, to ruin the bunch. I would rather trade CL and bond futures.....just my opinion. if i had a monster account, or worked for a big firm, sure i might have a different mindset over currencies.....but at the retail level i've simply heard way too many stories of monies not returned, stops at ridiculous levels, and accounts blown up. People lose it all trading the ES as well, but i think for different reasons. trading is hard enough, who wants to deal with all the added complexities of an unregulated industry....
The cost of trading forex is TINY in comparison to other instruments. You need to find a broker with decent spreads. Forex is difficult because it's a 24 hour market and doesn't follow zero-thought process TA. (It does however have a tendency to follow certain other patterns though which relate to a different axis on the chart.) Lastly and most important Forex is difficult because people are trading at times when they SHOULDN'T..........
if you know how to read a chart and follow the very simple rule of small stops and larger winners then you can trade anything that moves i personally think forex is a far easier market to trade