The illusion of easy money
Thanks to marketers, forex trading is often put in the category of ‘quick way to make money online’. If you are a beginner in forex you may have watched some videos with trading strategies where gurus make lots of cash. Those ‘experts’ usually sell education through live chats and teach people price action.
The reality is that these forex gurus make much more money from selling online lessons than from actual forex trading. They will try to convince you that the price is moving totally randomly without any logic behind, and you just need to learn some easy candlestick patterns to make profit.
You are missing the point
Unfortunately, by learning only chart patterns, you will soon realize you are missing something: the big picture. By focusing on technical indicators and candlesticks, you are missing the point. It might sound strange, but often there is a reason behind price movements.
It doesn’t really matter who is moving the prices. What matters is why they are doing it. Your focus should be on the fundamentals behind the prices, whether it is an interest rate decision or political event.
The higher the interest rate, the higher the value of the currency. For higher inflation, the central bank may decide to increase deposit rates. Thus, people will see more value in the currency and will not spend it like crazy.
The investment banks will always want to make more money and will switch currencies into more valuable ones. Each day, these banks and hedge funds analyze many currencies, such as U.S. dollars, euros and pounds. The idea is to sell less valuable currencies and buy the currency that will increase in value.
Your task as a forex trader is to closely follow the markets and build knowledge about the market sentiment.
For example, if you are currently trading the British pound, you should know that it is sensitive to Brexit news. Instead of looking for shooting stars on the chart, you should follow the UK-EU discussions.
Most forex gurus show off some fancy lifestyle, trading currencies from villas in Bali and giving interviews from towers in Singapore. The reality is that you never know if all these luxury hotels are paid for with forex trading profit. There is a high probability that traders, who pay for monthly subscriptions, actually sponsor the gurus’ lavish lifestyle.
These people are smart, and they know how the human brain works. They are trying to build an image of successful, rich people who know everything about the foreign exchange. Of course, if you pay them good money, they will openly share the secret of success, and you will have the same fancy lifestyle. Is that possible?
So everyone who pays a $500 subscription will learn everything about forex and will start making tons of money. But where does that money come from? The governments will constantly print money, the banks will borrow it and the smart forex traders will put it in their pockets. Is that how it works?
In reality, 80% of retail forex traders lose their money to brokers. The forex brokers claim to give you access to interbank liquidity, but they actually are taking the other side of your trade. Thus, when you lose a trade, the broker profits. Next time, when some YouTube guru speaks about the evil banks who are chasing your pocket money, think again.
Let’s say you are working at McDonald’s, and they pay you a salary that is never enough. Your brain is constantly looking for more of everything, and what you do? You are a smart guy! Of course you will invest your salary, and you will triple it. This is where it all starts for many forex beginners.
In the end, the forex brokers and the forex gurus collect most of the McDonald’s salaries. Most people think they are smart creatures but ask Elon Musk about that.
You are lazy
Your brain is set by default to save energy and look for short cuts. Most people worship the rich guys who do nothing and make tons of money. Forex trading is advertised as a way to achieve this. You just need to spend two hours per day, and you will make $10,000 a month from your desk at home.
Unfortunately, many people believe this mantra, and if you are one of them, you will never make such profit consistently every month. To make real profit, you have to take your job as a trader seriously and train your brain to work. The best talent is hard work, as Alex Ferguson once said.
Your job is to understand money: where the money comes from and how the money is created. You have to ask the right question to receive a proper answer. You should not follow gurus but your own path.