Free Essay Example on Forex Trading

Forex trading involves the exchange of one currency to another to generate profit from such a transaction. Traders always believe that the money procured will escalate in value relative to the one they sold. Economists define the exchange rate as the ratio of the value of one currency to another currency. In essence, forex trading involves a combination of foreign exchange and currency worth (Scibetta, 2019). Forex trading, therefore, is a global market environment for transacting national currencies against one another.

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Forex markets enhance global trade, commerce, and financial transactions. Traders always factor in aspects such as geopolitical activities, diversity of portfolios, and interest risk portfolios, among other factors. This paper intends to examine the percentages of traders who are profitable within the first two years. The article further scrutinizes the reasons why such traders are successful, contrary to their counterparts.

Success of a Forex Trader

The forex market has no central market environment for foreign exchange. Transactions are carried out electronically via over-the-counter means across the globe. Computer networks enhance deals that are open twenty-four hours a day. The prices continuously change. Research indicates that about 96% of forex traders are unsuccessful (Scibetta, 2019). New traders struggle to be successful. The worlds' successful forex traders thrived in their endeavors by deploying archetypal investment expertise and risk control. Forex trade involves investment and risk-taking, for such, effective management of funds and risk management. The employment of finance and risk management is essential for any forex trader.

Economists suggest that the fundamental aspect of being a successful forex trader is to set feasible targets and strive to achieve them gradually. One of the most successful forex traders is George Soros, known for broking the bank of England. He worked for many financial institutions, rising from nobody to a respected fellow in the society (Bogurayev & Kozlovsky, 2017). He made one billion GBP Sterling in a single day by selling ten billion British Pound Sterling. His action caused the GBP to leave the European Foreign Exchange because the Sterling fell below the stipulated value (Bogurayev & Kozlovsky, 2017). Stanley Druckenmiller worked and brokered the Bank of England together with Soros.

Andrew Krieger studied at Wharton School of business. The Bankers Trust Inc., where he was employed, gave him capital in which he invested in forex trade, earning the colossal firm profits. His success was based on his ability to study and critically analyze market trends. Bruce Kovner acquired the knowledge of risk and financial management and started his firm called Caxton Associates. Caxton Associates trades in foreign exchange and diversified asset products. Bill Lipschutz in his college time, made $250,000 from a $12,000 inheritance money. The lesson was to risk the capital and make a profit (Bogurayev & Kozlovsky, 2017). He joined the Salomon Brothers, in which he was generating $300 million per annum for the company. There are many successful forex traders with similar backgrounds and achievements. They include Paul Tudor Jones, Urs Schwarzenbach, Justin Bennett, Michael Marcus, Joe Lewis, among others.

Successful Indications

Success in forex trade is based on the consistent profit made after transactions. Economists argue that successful forex traders do not believe in losing; rather, it is an inspiring experience that one needs to learn from to make appropriate decisions in the future. The strategical aspect is the use of price action, which details the psychology of other traders (Bogurayev & Kozlovsky, 2017). Another factor that ensures successful trading is the ability to define edges. A strategy that encompasses risk to profit ratio, price action, trading period, and critical levels is essential.

Successful traders have adopted the notion that it is the market that does the donkey work. The idea is to monitor the risks involved. Successful forex traders are long term investors who aim at being consistently profitable. Forex traders transact using capital that they are comfortable losing. Scholars suggest that it is necessary to take a break after a win or a loss since these events draw many emotions. Another approach by traders is little focus on the wins and losses. More seriously, is that successful traders never give up.

Conclusion

Forex trade involves a keen study of the market environment. Traders must know about risk management and financial management to identify the right moment to invest to be successful in the business. Forex market is a volatile and risky venture with low success, but huge profits over a short period, hence attracting many people.

References

Bogurayev, Y., & Kozlovsky, S. (2017). From lamb to wolf, or how to become a successful trader. https://lucky-trading.net/static/img/promo/lucky_trading/book/Book_eng_mobile_blue.pdf

Scibetta, C. C. (2019). Window Theory for Forex. Journal of Finance and Investment Analysis, 8(3), 1-2. http://www.scienpress.com/Upload/JFIA%2FVol%208_3_2.pdf