What is Forex Trading and How Does it Work
I was watching television at work the other day and an ad came on about a retirement strategy and I’m sad to say it was a captivating ad. I knew there had to be a catch (because I wasn’t born yesterday) but I was still intrigued. So I sacrificed an email address and signed up and got the information and this is what I found.
Firstly, the copywriting on this ebook was really, really good. It nearly convinced me that whatever this guy was selling I was buying. I’m definitely putting it into my swipe file. Usually when I feel like that I know I’m being played somehow even though I really, really want it. It wasn’t until I got to the very end and realised they were talking about FOREX trading and a million alarm bells went off.
Here’s why.
FOREX trading is the Foreign Exchange Currency market trading. In a nutshell you buy one currency and exchange it for another currency for a profit (or loss) as the currencies fluctuate against the Greenback or US dollar (mostly). But currencies can also fluctuate against other currencies the Euro against Australian Dollar, Chinese, Japan etc.
This trading is not for the feint hearted and small fluctuations in the underlying currency can cost you a LOT of money depending on what your position is.
If you like SPAM then you should really sign up to any of the FOREX companies or apps on the market and you will get as much as you can stand. Why is that?
They need your money. Pure and simple.
I wrote about the industry of retirement in this article and the FOREX market is an industry that always needs capital and needs ‘suckers’ to take the opposite position. In my view they are targeting (quite well actually) cashed up retirees and preying on their vulnerabilities.
It’s pretty much a guarantee that most people do not have enough retirement savings. It’s about 1 in 2 and many retirees are finding they need to supplement their income in some form just to survive. This trend is going to go up significantly over the next 20 years as more and more of us discover it’s going to be a challenge to eat, let alone healthcare and recreation.
So the FOREX industry is setting itself up as an ‘easy’ way to make ‘passive’ income and all you have to do is to do everything the well trusted guru is doing and you’ll be fine. Here’s the thing about that.
Firstly taking a photo in front of a television sign does not necessarily mean you’ve been a guest on any of the shows. Please Google anyone who sends you anything about appearing on any television program and is a trusted expert. I follow the financial press and I have never seen this guy – moving on.
In the FOREX market, like any market, a position is only as strong, or influential in the market, if the position is large. So let’s say I take a position against the Australian dollar and I’m a bit of a lone wolf on this and the Australian dollar is not moving. So, I get all of my subscribers to take the exact same position. Voila! The market sees the numbers and the position moves the way I want it to and I make my money. Now the subscribers may or may not get my notification to close the position. The currency markets move so quickly that if you’re even five minutes late, you’ve lost your position aka your money.
For every position held there are two sides, or two ‘bets’ one saying the currency will go up and the other saying the currency will go down. The market can moved to the favour of either side by large movements and having thousands of people following you and investing the same can push that position artificially.
It’s so alluring to think that just with a few clicks of a mouse and the right position that there is money to be made – and we all need it. But anything involving the stock market or foreign exchanges, options and warrants and all the other products that are being made up and sold to retirees, need to be approached with extreme caution.
Stock market investing is seen as a great investment vehicle and I actually do believe in that. I’m an index fund kind of investor at the moment (when I get some actual money to invest that is) but I also dabble in penny stocks and options. This is because I’ve been trading since my early 20’s and I did the stock exchange course on options and warrants which was a requirement back then, but I’m not sure that it still is today.
It’s really, really important to understand how quickly these positions can change and how you can go from profit to loss in a matter of minutes.
Definitely educate yourself on investing at this point in your life so you can help set yourself up for a better retirement. But if you’re already retired, don’t think for a minute that these people have your best interests at heart. They want your money because you are cashed up and vulnerable and they want the cash. You could easily and quickly find yourself in a way worse position than you are now.
If you still feel you have to do something, take a small amount of money say $1,000 that you are prepared to totally lose and learn stock trading. Practice on paper for a few months and then go live. Once you do go live you will find your emotions are now in the game and these will influence your decisions regardless of what the position is on paper. If you get a win, you will feel the addiction calling you. That was easy. I should do that again. If you don’t have the strong brain power to separate yourself from your emotional vulnerability, it’s not going to end well.
Read all offers and suggestions to make money in your retirement with caution and a critical eye and ask this one question – What is in it for them?
Stay In Touch
