Theory Of Economic Cycle

Is Forex Trading Profitable

Let us understand the term “Trading”.

Trading can be defined as buying and selling of commodities with the intention on making surplus.Trading activity, i.e. ,buying and selling, is usually for a shorter span. If the commodity is held for a longer period , the activity would be considered as Investment.Period cannot be defined in absolute terms, as it varies from commodities to commodities.

Ratio of successful Forex traders is low. There are no definite statistics, but approximately various surveys show that 95% of forex traders are unsuccessful.Why is Forex trading so difficult? What does it take to be in the 5% slot of successful Forex traders?

Forex trading is buying or selling of currency with the intention of making surplus and usually is for a very short period of time. It could be a few minutes to a few weeks, depending upon the trader. One of the main characteristics in Forex trading is that the leverage available for margin money is highest amongst all industries. That’s what makes Forex trading risky.In almost all trading activities, there is a thin line between trading and speculation. When trader takes up the position by applying systematic, logistical or scientific techniques like technical analysis or fundamental analysis or statistical methods, either-or combination of these techniques, where result can be explained, is Trading Activity.

In speculation, usually traders take a guess, based on gut feelings and results cannot be justified or explained. When trader takes a decision based only on gut feelings and ignoring any logical model or scientific techniques, the trader’s activity becomes speculative.There are certain qualities that the trader needs to develop in order to be a SUCCESSFUL Trader.

* Trading is a skill which needs to be cultivated and has to be systematically developed.
* Trading requires adequate knowledge about the commodity. In case of Forex, trader needs to understand fundaments of currency and its movements.
* Trader needs to evaluate various techniques and use the one which suits their nature the best.
* Trader needs to be emotionally stable and should be able to withstand pressure and strain, as any emotional decision against the logic of his own technique could make the trading activity speculative.
* Trader must take calculative risk only and should never trade more than their capacity to take losses, i.e., the trader must stick to Risk-Reward ratio.
* Trading is a combination of skill, knowledge and to a certain extent art.
* Trading requires patience, tolerance and time.Conclusion: Trading is a profession and to be a successful trader, it requires combination of skill, knowledge and art. One of the main quality which a trader must have is DISCIPLINE and the second main quality being, Guts.

Trader should be able follow his developed model, any emotional interference will make trading a speculative activity. Trading is a full time activity and requires patience, tolerance and time. What if you are interested in trading and do not have all the requirements?