10 Facts About Online Forex Trading

10 Facts About Online Forex Trading
10 Facts About Online Forex Trading

The currency trading market is the biggest financial market in the world. The market is not regulated highly and is largely controlled by global market forces of demand and supply.

Most of the retail currency exchange happens online rather than on exchange floors and this has led to the market being accessible to anyone in the world who has an internet connection.

This high number of market participants has led to many myths in the market. You can find them on online forums, in newspapers, or even when talking to friends at your local favorite hangout.

Here are the top ten truths and facts on online forex trading that will wipe away all those myths you have come across.

  • All brokers are not equal
  • The best strategies are simple strategies
  • Overtrading is a recipe for failure
  • 95% of forex traders lose their investments in the first 6 months
  • Successful traders compound small gains
  • Banks control the foreign exchange market
  • The highest profits are in the majors
  • Half of the global forex market is traded in two countries
  • Discipline is a trader’s most important attribute
  • Forex is the biggest market

1All Brokers Are Not Equal

Your broker is the vehicle that will drive you either into profitability or losses. So you have to make the choice of which broker to pick very carefully.

Unfortunately, even though you may find many brokers using similar trading platforms and offering many similar products and services, every broker is different.

They are different in how they operate, how they treat their customers, and how much they charge in terms of spreads.

Additionally, some brokers are more connected to the big market makers and these are the ones who can guide you to the best and highest profit levels.

Here is a review of some of the best brokers in the market: Top brokers.

2The Best Strategies for Trading Are Simple Strategies

You may want to know it all in forex trading including all the forex signals, all those currency pairs, and all those complex risk management ideas.

But if you cannot comfortably explain your currency trading strategy to an average junior high student, then that is a bad trading strategy.

If s/he cannot understand your strategy then you are over complicating it and that will be an almost impossible strategy to stick to.

The best trading strategies are simple, easy to understand, and easy to stick to.

3Overtrading Is a Recipe for Failure

One common blunder made by a majority of new traders is overtrading. Most of them feel that every single minute that they spend away from the forex market represents lost opportunities.

Other traders tend to enter into multiple positions thinking that this increases their profitability chances. Many other traders suffer losses on one trade and in an attempt to recoup losses enter into more trades without giving it much thought.

In some quarters, this is known as revenge trade. Another form of overtrading is where a trader holds a losing position too long in the hope that the tide will change in their favored direction. This only increases their losses.

495% Of Forex Traders Lose Their Investments In The First 6 Months

For many people, the forex market seems like a pot of gold just lying there at the end of the rainbow waiting to be picked.

The abounding stories of untold wealth, financial freedom, and a total lifestyle change coming from successful traders who started with nothing inspire these dreams.

However, for most people, these will only remain unfulfilled fantasies. The shocking forex market truth is that only about 5% of forex traders earn profits from their currency trading.

And of these, less than half can afford to live fully on their forex trading profits. The fact is that over 95% of traders lose their whole forex investment in the first six months.

This is mainly due to failure by newbies to first learn the market and adopt a winning strategy before investing their money.

5Successful Traders Compound Small Gains

This is one very simple truth. The most successful forex traders do not make instant profits; they analyze the markets, make trades, and make small gains on each trade.

These modest gains are then invested back into the currency trading online and used to earn even more small profits.

In this way, the trader ends up with a very profitable online forex trading account.

Such shrewd traders may start with a small micro account of even $50 and in a year or two you find they are comfortably living solely on their forex trading earnings.

In high contrast, forex market failures reach for high profits within a short period and end up failing miserably.

6Banks Control the Foreign Exchange Market

Banks are mandated by their clients to hold cash for them and buy foreign currency on their behalf.

At the same time, banks use customers’ deposits to make their own investments and increase their profits. Most of their investments are with overseas partners and clients.

That makes banking institutions some of the biggest players in the forex market. The fact of the matter is that 70% of all daily forex day trading is done by banks.

The table below shows the market share of the top 10 players in the global forex market with only about 20% of the market left for other participants.

The simple truth is that anyone who trades in a direction opposite to what the major players are trading will fail.

Rank Institution Market Share
1 Deutsche Bank 14.6%
2 Citi 12.3%
3 Barclays Investment Bank 11%
4 UBS AG 10.5%
5 HSBC 6.8%
6 JPMorgan 6.7%
7 Royal Bank of Scotland 5.9%
8 Credit Suisse 4.7%
9 Morgan Stanley 3.5%
10 Goldman Sachs 3.1%


7The Highest Profits Are In the Majors

Profiting in the forex market is all about trading on the price movements of currencies within a currency pair.

More than 85% of the global forex market’s price movement happens on only 7 currency pairs.


8Half of the Global Forex Market is traded in two countries

The forex market is a truly global market. Nevertheless, some players within certain geographical regions are more actively involved in the market than others.

Currently, over one-third (approximately 34.1%) of the world’s forex global trade is generated from the UK.

Market participants in the US account for approximately 16% of the total global forex trades.

That means the rest of the world shares out the remaining 50% of the market.

9Discipline Is a Trader’s Most Important Attribute

Chasing instant riches in the forex market is akin to chasing the wind. By approaching forex trading like some lottery or get rich quick scheme, a trader sets himself/herself up for inevitable failure.

Any trader who hopes to have a secure future should forget instant riches and adopt a strategy that will see small but constant profits throughout their trading career.

To achieve success, the trader should adopt effective money management strategies, risk management strategies, and a good strategy that allows him/her to profit from currency price movements.

Part of being disciplined includes keeping a trade journal and recording all trades you make in the fx exchange.

10Forex Is the Biggest Market

I know you have heard this said several times before and there is no bigger true than this: The forex market is the biggest market in the world.

The amount of currency traded per day amounts to over $4.0 trillion.

About 40% comes from forex swaps, 25% comes from spot trading transactions, 15% from dealer transactions, 10% s comes from forward transactions and 5% from gaps.