Business Case Studies

Can Trading online Make You Rich?

How many times have you seen a movie where you see a tidy tall man in a neat suit with a brief case enter or exit the screen and you wished it was you? How many times, again, have you actually predicted accurately what the man actually does? Of course the most common guesses would include, a entrepreneur or a someone working in the Foreign Exchange Trade.

The Forex Market:

You see, we have come to look at the people in the Foreign Exchange as someone so successful and wealthy that now, if anyone ever asks us the easiest way to get rich, we just blurt out Foreign Exchange, or just Forex trading – a relatively new term like there is no doubt about the matter whatsoever. In fact, I could tell you that when compared with GDP of the entire world, Forex trading revenue exceeds it by more than 400%. That is a huge number, isn’t it?

So, then everyone wants to know the secret of this trade and want to get access to it. However, the truth is that the market is not really a secret. In fact, the FX market is a huge market spread across the world and does  not really need to exist in a physical market. These type of markets are called Over the Counter Market and is a very common type of market. It then has no restrictions on any member around the world.

Can it Make You Rich?

The real question, however, stems from the fact that when the market is an international one, how do you participate in it. More importantly, when the market is such a huge one with a plethora of different types of agents, how do you make your mark? Can the online trading really make you rich? Well, statistics show that 1 in every 3 traders tends to understand and do good in the market, but there really is no definite answer to this answer because the aptitude and ability of every trader is different.

How Does the Market Even Work?

But, more than anything that determines whether the market will make you rich or not, will depend on whether you understand how the market works. You must know that trading was once limited to only to wealthy institutions with around $40 to $70 million dollars in funds, but now people with much smaller amounts can engage in this trade all around the world. Where most people tend to believe that the forex online is just another stock exchange, the truth is very different. The forex market trades more than $5 trillion a day and this is much more than what some of the biggest stock exchanges get.

The forex market, as the name suggests is a form of market that deals in foreign currencies. With the dollar being the most common currency, showing up in around 80% of all transactions, the market comprises of bulls – those who expect the market to rise – and bears – those who expect the market to fall. Traders make profits on their aptitude to guess how the market will behave – around 90% of the trading is based on speculation – and then buying and selling currencies to make a profit.

What to Take Care Of:

Since, the real question that we want to answer is whether the forex trade can make you rich or not, it will bring a lot of benefit to know what not to do if you want to get rich. Since this is an attempt at making the process as objective as possible (without any consideration of the speculation strategy you employ), you must always keep these factors in mind:

·        Portfolios:

Just like a business that gets too big finds it great to invest in a variety of business in order to diversify its order of business and minimize risks, traders in the forex are also always advised to diversify. They do this by creating portfolios of different currencies, which when bought in different combinations helps to minimize the risks. In addition, using portfolios helps to dilute the effect of seasonal and periodic fluctuations in prices of different currencies which can really be the best or worst times for trading.

·        Formalized Settings:

You should realize, when trading in the forex market, that it is not a formal system. What I mean by that is that it does not exist in a physical place with government officials looking to see whether traders are honest in their dealings or not. In fact, this means that the government cannot even see what lies inside the market and how the money is changing hands, i.e. there is no transparency in the market. So, when you do engage in the market, take special care of the fact that the government cannot help you and how you should not get involved in questionable methods of trade.

·        The Internet:

In addition to the market holding huge potential risks to your hard earned money, there is a lot more that adds to the risks with very little keeping it down. The fact that the internet is often involved in the process of trading makes things very difficult. You see trading online means that you are susceptible to not only technological malfunction that is often unpredictable but also to a fraud risk which is always unpredictable. If you have ever witnessed such a case of fraud you will realize that more than your investment is at a risk in the case of the internet. Your information is something that matters more than anything and can really be a difference in whether you want to keep doing this sort of trading or not.

·        Leverage:

Although leverage is a very difficult concept to grasp for laymen, you would do well to understand that greater the risk, greater the reward. So, if you ever have to invest in a considerably risky form of security, you should make sure that you demand a considerably high return for your investment. Why else would anyone risk their investment when they could invest in better yielding currencies that help them stay in the market longer.