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Why do some see that the Forex market is not the perfect place to make profits

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Why do some see that the Forex market is not the perfect place to make profits

The currency market is the largest and most liquid financial market ever. However, a very limited proportion of traders are successful in this exciting world. While some blame the lack of self-discipline and poor trading strategy in the vast majority of losses, there are some inherent factors in the Forex market that make it a very dangerous place. In the next few lines, we will look at these factors that do not make the Forex market a perfect place to make profits.

Why do some see that the Forex market is not the perfect place to make profits
Why do some see that the Forex market is not the perfect place to make profits


Difficulty predicting
Economic data and geopolitical events affect the value of currencies either negatively or positively. However, interpreting these fundamental factors is not an easy task. Some positive economic reports may weaken the currency, not strengthen it as expected, because it is associated with a number of other factors. For example, there is an inverse relationship between the Japanese Yen and the Nikkei. When the Nikkei rises, the yen usually retreated even if economic indicators came in better than analysts' expectations. Therefore, if the trader opens a buyback based on the positive economic data, he will face a loss if the stop orders are placed at close levels.

One of the evidence supporting this argument is the dramatic events in the life of John Maynard Keynes, one of the most important and greatest economists in the history of mankind. Keynes was responsible for the founding of the World Bank and the International Monetary Fund. He also presented economics to one of his most important theories, which broke the myth that the free market was capable of achieving full employment automatically. At the end of the First World War, Keynes decided to enter the currency market and even raised money from his friends for that purpose. Of course, someone with such a powerful mentality was supposed to be able to achieve a breakthrough as his profusion of knowledge would have helped him predict major currency trends. However, contrary to all expectations, Keynes lost all his money. Many people quote this example to show how difficult it is to work in the Forex market, even for an economic mindset in John Keynes's position.

Lack of consistent expectations
It often happens that a trader fails to read the situation in currency markets correctly, which eventually leads to wrong conclusions. For example, a currency may go through weakness, but it is really just a consolidation stage before starting a new bullish trend supported by some macroeconomic factors. An example of this is what happened to the US dollar after the global financial crisis in 2008. The greenback during this period achieved the best performance among major currencies as soon as the financial crisis broke out. The prevailing expectation was that the US dollar would suffer heavy losses, but the opposite occurred because of the decrease in liquidity available from the dollar to liquefy the daily operations within the financial system. The Fed then had to raise money supply to meet tight liquidity. Ironically, the financial crisis itself started from the US after Lehman Brothers' bankruptcy, prompting many traders and even analysts to expect the greenback to depreciate. Unfortunately, only a limited number of traders who have knowledge of the mechanics of the banking system have been able to draw this conclusion, which has helped them to make some profits or at least protect themselves from the losses suffered by others. Certainly not all individual traders or even most of them have access to such important information.

China's rise as a superpower
The inclusion of the Chinese yuan in the IMF's reserve currencies has contributed to the increasing complexity of the Forex market. It is very difficult to know or even guess what is happening in China, so many fear that an unexpected crisis in real estate, equity or corporate credit will have serious consequences for global markets. Individual traders, of course, do not have the tools to deal with These challenges.

Great odds of losing the entire capital
It is common to find some forex brokers offering their clients a leverage of up to 1: 500 or more. Therefore, a trader who does not have the ability to manage risk will lose his capital sooner rather than later because of the failure to employ this high level of leverage. Forex brokers tend to offer higher levels of leverage to increase volumes, but unfortunately they encourage novice traders to lose money in a short period of time. In other words, the promotion of low margin requirements by forex brokers increases the risk of heavy losses for individual traders.

Forex Cultures Greed
In some cases, the trader achieves a 100% profit in just a few minutes thanks to the use of a large leverage such as 1: 100. This creates a feeling of overconfidence within the trader, who will soon dream of earning up to 400% or 500% in a week or even one day using the leverage. This ultimately puts the account balance at enormous risk, which in most cases ends up losing its money as a result of this greed.

Addiction to currency trading
The Forex market operates 24 hours a day, 5 days a week, making trading opportunities available at any time. This continuous flow of economic indicators and geopolitical news from around the world naturally leads to at least the creation of trends for a number of currency pairs at any time. These combined factors lead to the trader falling into the trap of over-trading by repeating purchases, selling

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