There is money to be made in forex trading, but it can be risky for first-time investors
Forex trading is conducted on a much larger scale than any other market in the world, with a daily turnover of $1.9 trillion. Approximately 73% of all forex trading is carried out by 10 international banks, such as Merrill Lynch and Citigroup. National banks and financial institutions account for another portion of forex trading, while day traders, or regular individuals, make up only 2% of all trading.
However, many average investors still attempt forex trading, and there are numerous financial institutions that handle such transactions. This is known as "retail forex," and it is handled similarly to the day trading of stocks.
The downside is that, unlike the stock market, the forex market is not particularly well-regulated, and inexperienced individuals can be taken advantage of. The U.S. The Commodity Futures Trading Commission (CFTC) provides several tips for amateur forex traders, including avoiding companies that predict or guarantee large profits or promise little or no financial risk. The CFTC also advises checking a company's track record before trading with them and being cautious of anyone wanting you to send cash.
There are plenty of honest and reliable forex trading firms, including those that operate online. However, even if the trading company is legitimate, there are still risks involved in trading. Because currency rates can fluctuate for various reasons, it is difficult to predict which investments to make. Even seasoned professionals can get blindsided at times.
In summary, forex trading can be profitable, but only if you know what you're doing. Before investing, it is essential to study the market's workings, what causes fluctuations, how to interpret financial indicators and other details. Forex trading should not be entered into lightly, as there is much potential for profit, but also a greater potential for loss due to unscrupulous trading firms or one's own inexperience.