Level of forex trading losing money
Reporting from New York — Dorothy Ouma began trading foreign currencies after seeing a TV commercial touting it as a way to make extra money, something she could use as a single mother raising three children.
10 Ways To Avoid Losing Money In Forex
Ouma used her credit card to fund an account with an online currency broker. Ouma made two mistakes: But she has plenty of company. An estimated , Americans are dabbling in foreign currency trading, encouraged by advertising from the two biggest U.
At Gain, which operates through http: As if those statistics weren't scary enough, the rules of currency trading allow investors to leverage every dollar they bet on a to-1 ratio.
This allows them to bet money they don't have — a tactic that can boost profits but also losses.
What is the Number One Mistake Forex Traders Make?
The losses have triggered recent lawsuits and regulatory scrutiny — but haven't stopped the swift growth of the industry, which barely existed a decade ago. Gain and FXCM went public on the New York Stock Exchange last December.
Executives with both firms say that they simply provide a conduit for people who want to trade currency, and that customers are given full disclosure of the risk.
No, of course not. Trading experts, however, argue that the companies use aggressive advertising to lure inexperienced investors into an unusually opaque market. FXCM's own statistics show that its customer turnover is about four times higher than that of an ordinary retail stock broker.
Gain does not release turnover statistics, but its securities filings show that most of its customers at the end of last year were different from the ones it started with, also suggesting high turnover. Experts say the unusual structure of the currency market makes it hard for amateurs to beat the house.
Why Do Most Traders Lose Money Trading Forex? - ysygohajavin.web.fc2.com
With stocks, brokerages typically send customer orders out to be executed at an independent exchange and charge a set commission for each trade, no matter whether the customer wins or loses.
That's not the case in foreign currency markets.
Forex Trading Tips | FX Trading Secrets | Currency Trading Basics | OANDA
Because there is no centralized currency exchange, the brokers must fill customer orders themselves. This enables them to make money in two ways. The first is by buying a currency at one price and selling it at a higher price — netting the so-called spread between the two. Unlike the set commissions charged by stockbrokers, these spreads can be set at whatever level the currency broker chooses.
The second way the broker-dealers make money is by sitting on the opposite side of every customer trade, like a blackjack dealer sitting across from a gambler.
More commonly, however, it's the customers who lose out on these transactions, despite required disclosure statements that warn investors: Foreign currency trading is easy — an easy way to lose money.
More and more Americans are dabbling in currency trading and losing in spectacular fashion. Experts say the structure of the currency market makes it hard for amateurs to beat the house. April 03, By Nathaniel Popper, Los Angeles Times. Combined, FXCM and Gain have about , accounts, a third of them in the U. These customers are losing money in spectacular fashion.
Lots of leverage, lots of turnover As if those statistics weren't scary enough, the rules of currency trading allow investors to leverage every dollar they bet on a to-1 ratio. Seizure Led to FloJo's Death. His scores make his case. Brutal Murder by Teen-Age Girls Adds to Britons' Shock. Comaneci Confirms Suicide Attempt, Magazine Says.
Copyright Los Angeles Times.