I spend a good deal of time reading about what’s happening in the currency markets. Whether it’s the eurozone crisis, the US debt ceiling or individual countries and currencies, I am always curious as to what’s happening in the world and how it might affect particular currency pairs and my investments. In full disclosure, I’m not a professional currency trader. I have dabbled in the foreign exchange market as a trader, but quickly realized that my real skill lies less in being a great trader and more in being able to recognize the folks who are.
That’s why when I read a blog post this week in Reuters called “Do you have the heart for foreign exchange trading?” I was annoyed and disagreed with some of the premise of the post.
The blog made two assertions. First, that autotrading is something that only the professionals should undertake and that few firms know what they’re doing. Next, that if you don’t have the stomach for this market – or the heart as the author puts it – you should steer clear.
I’ll tackle the second part first because both points are intertwined. Right off the bat, it’s not my heart…or any savvy investor’s heart, that keeps them balanced and in the markets. It’s their brain. Semantics? Hardly. If you allow emotions to drive your investment decision in any industry, fund, exchange or financial area, you’re starting from a position of weakness.
As with practically anything in life, education is the key to a deeper understanding. I’m an avid boater. Part of being a good boater is knowing what you’re doing on a detailed level, whether it’s docking, handling bad weather or understanding how to use your GPS and radar. You can’t just say ‘this feels right’ or you’ll run aground or end up in a major storm. A recipe for disaster.
In Forex, the dangers are similar. If you don’t embark on your investment journey with goals, strategy, the proper attitude and a sound game plan, you might not achieve the gains you’re shooting for and is why most traders end up losing. This is where the second point comes in.
Autotrading is exactly the type of process and technology – when correctly configured and presented – that can mitigate risk, provide investors with a sound strategy and provide the opportunity for a successful Forex investment experience without having to know all the ins and outs of the market and when to place the trade. It puts those decisions in the hands of the professional trader.
In fact, the best autotrading programs keep the individual investor from pulling the trigger on specific transactions and currency trades himself. Most investors and traders are unsuccessful with autotrading programs when they given systems to follow that are not proven. Professional traders have a method to their madness and deferring to their expertise is what makes investors successful when using an autotrading program.
So, step back and be rational about any trading decision. The foreign currency market is a growing asset class and with volume quadrupling since 2001, it might be an interesting and positive way for you to enter another market segment.
But when you do so, don’t do it on gut instinct alone. Put in some research and spend some time understanding any program you’re evaluating.
Ultimately, Forex can be a viable investment and it can be a great way to diversify any portfolio. This article, and others, underscore the reality that the general public still has a lot to learn about the opportunity to invest in Forex.
Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.