➤ It is profitable to invest in the Forex Market?

➤ It is profitable to invest in the Stock Market?

Investing in forex is nothing new. Since its inception in the twentieth century, the foreign exchange market has not stopped growing. So much so that, at the moment, it is the market with the highest negotiated volume in the world. According to the International Bank of Payments (BIS), the forex market moves 5 trillion US dollars every day.

In other words, in the forex market, what is traded on the New York Stock Exchange (NYSE) in one month. With this data on the table, is it profitable to invest in forex? How can you earn money in forex?

The answer to the first question is not simple. Being profitable operating in the forex market is possible. Another thing is that it's easy. Everything that is trading in the markets involves a lot of time, dedication and knowledge. Like any discipline, it requires a methodology. Methodology that, among traders, is known as a trading system.

One of the reasons that indicate that investing in the stock market and, specifically, investing in forex, is not easy is the percentage of operators that lose money. Most serious studies conducted on the subject, claim that the percentage of losers exceeds 90%.

In the investment community, it is often said that 95% of operators lose money. We can not say that this information is false, but we can not say it is true either. Studies done so far by centers such as Yale University or the University of California, do not allow to sit on the subject.

Be 95%, 90%, or 70% the percentage of losing traders, is a very high failure rate. So much, as to raise several issues. Among these issues in Economipedia we have considered the most important the following:

Is it profitable to invest in forex?

As we said at the beginning, it can be profitable. Investing in forex is profitable if you know the forex market, the brokers, the operative and you are an experienced trader.

The currency market is characterized by a much more volatile market than other markets. Volatility offers many opportunities to generate larger profits, but also more bulky losses. All the serious traders that are dedicated to the currency market say the same thing:

"Investing in forex is like driving a car. Before driving a Ferrari you must learn to drive a car with less power. "

The phrase is too simplistic, since investing in forex successfully is much more complex than learning to drive. However, it makes the idea very clear. First the first, and the second the second. In other words, step by step.

In conclusion, investing in forex can be profitable if the operator knows what he is doing, why he is doing it and has a robust trading system.

Is it advisable to invest in forex?

That investing in forex is advisable will depend on the experience and knowledge of an operator. If the operator has several years of experience in the stock market, it could be a good option to create a trading system dedicated to forex. Now, if it is a person who has only been one or two years with little training and little experience operating in the stock market, it is not recommendable.

In line with the above, another reason why it is not recommended for novice traders, is the high leverage that brokers allow. During the first two years of a trader's operations it is very common to make big mistakes. One of them is trying to earn a lot of money in a short time. What produces that the trader uses a high degree of leverage and ends up losing even more money than he was investing.

In my experience, after seeing many cases of failure, I think it is better to start operating in the medium or long term in securities with less volatility. For example, stocks or bonds.

What do I need to earn money in forex?

investing in forex is the million dollar question. But the million dollars. Who has not asked, what is needed to make money investing in the currency market. And not only in the currency market, but also in the stock market.

The answer could take years to develop, but put to try, we will summarize the three key aspects to earn money in forex independently.

Among these aspects is the stock market analysis, monetary management and the psychology of trading.

Stock analysis

Each trader uses a different type of stock market analysis. Most traders that operate with reduced capital (less than $ 500,000) usually do so with technical analysis. It is the most popular type of analysis. Although the technical analysis, well used, can allow to obtain profits in forex it is convenient to know an important detail. The majority of traders that operate with large forex capitals use quantitative analysis.


That is, automatic algorithms. Concept, which should not be confused with high frequency trading. Within the automatic algorithms is a type of algorithm known as expert advisor, expert advisor or EA. In the same way, there are more sophisticated techniques such as the operation of cointegrated assets and financial arbitrage.

Monetary management

More important than the stock market analysis, is monetary management. Most beginning traders break their heads trying to find the holy grail. That is, an indicator or a system that always or almost always hits. That does not exist. What do exist are profitable long-term trading systems.

Given that the important thing is not the percentage of success, the monetary management can be the difference between being a successful trader and not being one. As George Soros would say, the important thing is how much you earn and how much you lose.

"It does not matter at all if you're right or not. What does matter is how much you win when you're right and how much you lose when you're wrong. "

Psychology of trading

It is useless to know the perfect theory if then the trader is not disciplined. We can have in our hands the best trading system in history, that if we do not comply with the rules we will end up losing all our money. The psychology of trading is the aspect that most gurus indicate as the key aspect.

However, the problem usually comes from not knowing what is being done. When you do not know the trading system perfectly, it is easy to fall into psychological errors. Therefore, dominating the first two aspects, the psychology of trading disappears to a great extent. In any case, being an aspect that worries many traders, in economipedia we have a guide on the most important aspects of the psychology of trading.

To finish, before investing in forex we must inform ourselves and train very well. There are many frauds on the internet. Many people who claim to be millionaires and are not. Many false traders that promise vertigo profitability to attract capital. And, unfortunately, there are more and more expert advisers who lose money but sell themselves as if they were the definitive solution.

Be careful and inform yourself. Any questions about investing in forex can comment and we will solve it in the best way possible.