Caution - Forex ahead

I remember when I first heard of Forex; I had no idea what Forex was all about, what traps or rewards it had to offer. My head was filled with confusion, worry and excitement, all at the same time.

Confusion because there was so much information about it all around the net, from strategies, datafeeds, trading platforms and backtested system etc, that the sheer volume of information was overwhelming. Then there were all the jargons, candlesticks and high and lows and trends and sideway movements, inside and outside days. I had no idea what it all meant.

Then I was also worried, too. Forex did not exactly have a 'good' reputation in the circles I was frequenting, not in the investment fraternity and definitely not in the public arena. As I looked further in to Forex and tried to figure out what it was all about, I got confusing messages from all over the place. Some people said it was a great way to make money and yet others said it was a great way to go bankrupt...

And I was also very excited about Forex as well. Before jumping on the Forex bandwagon, I'd dabbled in Stock Options. I found Options a reasonably safe way of 'playing' the market and make some money without ruining myself. But I also found it a bit boring and slow. For one thing, because I live in New Zealand, I was limited to certain times of the day where I could make profitable trades and of course the market is not open all week, either. This meant I was taking time away from my family and friends, not a good idea.

With Forex on the other hand, I'd have an opportunity to trade almost anytime that was convenient to me and I've also found that the software that you normally get for free when you open a Forex account is much better then the ones you normally have to buy to trade on the stock market. Not only that, but when you trade the stock market, you still have to pay for your own datafeed, which can be a substantial amount of money and the data is usually delayed unless you pay some extraordinary amount for your datafeed.

So you can see that even before you've made a single trade, you are already starting with a negative equity because of all the expenses you have to incur before you can actually start trading. And I haven't mentioned any of the other costs involved once you have made a trade. This includes brokerage fees and government charges that you have to pay every time you made a trade, even if you have lost on the trade!

Forex on the other hand offered an almost 'instant fix' of the 'just add water' variety, to the problems I had with Options. Better software, easy, 24 hour access to the market, almost all week, no government charges and very, very low commission rates. I did not have to pay extra for datafeeds and it also seemed like a very exciting, fun thing to do.

I think a lot of people have the same feeling about anything new. You buy a new car and it is the best thing...for a month. Things get even worse where money is involved. People seem to jump on any and all opportunities promising great returns and we seem to forget about common sense as we see the five letter word, money...

I must admit that I was the same when I'd first heard of Forex and all it's attractive 'features'. I thought Options are good, but Forex is better! I will make a million in no time at all. In fact I'd lost $7000.00 in the first week! But strangely enough, I made $1200.00 on my very first trade which lasted less than an hour and had made many trades that made anywhere between $120.00 to $4800.00! So what was going on?

I'd learnt a very obvious lesson in that week, I knew nothing about Forex! There is more to it than reading charts and having a 'gut-feel' about a trade. It's quite funny because I knew this lesson from my Options trading and yet I forgot it as quickly as I could say Forex. So, I had to do a quick reality check and 'compose' myself to see just what had happened and how I was going to prevent it from happening again.

The first thing I had to do was to go back to paper trading to make sure I'd still have a home to go to. Then I had to educate myself. I used to work as a software engineer and thinking back, I 'm quite amazed how much time I had spent on learning the ins and outs of writing programs. Why I thought being good at trading Forex would be any different I will never understand. Anything we do needs to be learnt and perfected and it requires time. Forex is no different. The one 'good' thing about Forex is that you quickly find out if you are right or wrong. With stocks and Options it could take weeks or even months, years to find out if you are on the right track or if you should go and beg on a street corner or sell your kids to slave traders, just kidding...

With Forex you know in a few short hours or even minutes, depending on your trading preference, what your next move should, celebrate or 'miserate', yeah, I know there is no such word...however, for a lot of people 'miserate' is unfortunately a real word! The statistics are really frightening not unlike those of gambling. But I think this is where the problem starts...

Most people don't treat Forex with the professionalism it deserves. You have to treat it like a business or trade. And as with any business or trade you have to learn the 'trade-secrets'. Is it difficult? No. Does it take time and effort? Yes, as does anything worth doing.

By Ference