I got this awesome question from someone today and I wanted to share it with you:
“Nearly everyone I read seems to do Forex trading exclusively. Huge liquid market, institutions can’t manipulate, trends persist better, yada, yada. I don’t get the fascination. Just wondering what your take is?”
Here is my response…
To be honest it is total crap.
The reason Forex is so big at the moment is that educators and brokers make an absolute killing on every single retail client they get. The average lifespan of a retail forex account is ~3 months (before they have lost everything or given up with losses)…this info came from a broker!
Guess who gets all the money?
The Broker gets it in the form of spreads!
Yep – That is pretty much how they feel when you open a new Forex account!!!
The margins are so high so they can afford to spend a shitload of money marketing it. One of the biggest ways to get new clients is to incentivize trading educators to introduce new retail clients. The educator introduces the client to the broker and then gets a share of the spread that client earns for the broker (like up to 60% of the spread!)
The trouble with this model is that it drives the educator to teach clients to use high leverage and trade very frequently because that generates the biggest commissions and kickbacks to the educator (never mind this will cause the retail trader to blow up their account). Thus every man and their dog who has a forex website is also an introducer to FX brokers and talks about short term trading and the advantages of leverage.
It is a sess-pool!!! (that is Australian for a stinky stagnant pond of filth)
Also – it is just not as cheap as they make out. just 3 pips spread they say…what they don’t say is that 3 pips leveraged 200:1 actually ends up being more expensive than stock trading!!!!!
I like stocks and I only trade instruments that are traded on a regulated exchange
Comment below…what do you think? Did you realize this was happening in the market?
PS. You can (of course) make money trading forex…but you won’t make money unless you trade with a profitable mechanical trading system and sensible risk control…Perhaps that sounds familiar???
PPS. I don’t act as an introducer for any broker because I think as a trading educator I have a moral obligation to help traders become independent rather than to take the easy route to making money off their account.
PPS. Want to learn more – Join my FREE Enlightened Stock Trading Community Group on Facebook