Don't get fooled on Forex! The most important things to know when approaching Forex through Social Trading platforms.
The Forex, is the largest, most active, and most exciting financial market in the world. Largest, because of the volume of transactions (from 1 to 4 trillion dollars per day!) Most active, because of its 24 hours per 5 days of market activities. This market has been around for decades, but only financial investors and few other wealthy individuals had access to it.
The advances in online trading technologies and appearance of communities of experts have now made it available to the individuals on a scale unimaginable few years ago. This phenomenon goes directly under the Social Trading cutting edge wave.
Traders can share, in real time, their trades with potentially anyone who has an Internet connection :
· On one hand, expert traders can leverage Internet to share ideas, detailed and proven results, and statistics on their trading system with everyone.
· On the other hand, any new trade can be shared in real time, allowing anyone to automatically copy the same trade in real time and to benefit from it.
Social Trading is revolutionizing the concept of investing. Anyone, independently from his or her level of experience, can benefit from it.
That seems all good stuff, few clicks away from earning, is it really like this ?
Well, with Gamification of Social Trading Platforms and guerilla advertising attracting lot of rookies all around the world what is often missing is one fundamental aspect :
- Play with Forex is an Investment ! With all risk related to it !
As the professional trader Rimantas Petrauskas correctly states:
“90% of those who are selling anything related to Forex are fraudulent individuals and spammers”.
And that really is the truth. Here is the most common trick to lure people in:
You can always find thousands of examples to support whatever strategy/forex automatic-robot/indicator is being sold -But what they do not tell you is that: You can always find thousands of examples where their strategy/forex robot/indicator failed as well. Statistically 85% of people lose money in the forex market and you can never predict exactly what type of market is developing on the right-hand side of a currency pairs chart !
Most of fraudulent sellers do not provide you with any verified trading records and when they do they are often fake ones created in manually. So if you find a website, a book, a course packed with successful examples where they do not tell you when the strategy fails, run away!
How can you approach safely Social Trading ? There are two golden roles two have in mind :
1. Never invest what you cannot afford to lose,
2. It is not the investment that is risky, it is your lack of knowledge about an investment that is risky
The Second rule is what you can work on your own to understand all details that allow you to safely invest with Forex. For example, a strategy/forex robot/indicator works well only under specific market condition. Fundamentals of the market do matters, always look at Expert reward model to understand if they’re forced by platforms to trade in a bad behavior, always think that there is no long-term killer Strategy sold. Every choose need to be correctly supported by deep analysis and risk management.
We strongly suggest you to develop this part looking at some good books like the one below :
*The writer blogs at http://www.tradingmates.com
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.