Is Forex Trading Worth it? Top 7 Questions About Online Forex Trading

Is investing in online forex trading worth it? This is one of the most common questions we get asked by fellow Kenyans who want to invest in the forex market, but they are not sure whether it is worth it or not.

There are a few other common questions that we get asked now and then. So, in addition to answering whether investing in forex is worth it, we will also be looking at the other 6 commonly asked questions.

But first things first:

Is Investing in Forex Trading Worth It?

When new traders are asking this question, they actually have a number of questions vested in one:

  1. Should I spend time learning how to trade the forex market?
  2. Is online forex trading a promising venture, or is it a waste of time and money?
  3. Can one become wealthy (read millionaire) by trading forex?

These are all worthy questions. You really need to know what you are getting into before you start trading. You need to know whether it is worth to spend your time and money learning how to trade forex or whether you should look for another means of investment.

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If you are asking this question, you probably fall into one of two categories of Kenyans:

  • You know that you can make money trading forex. You have seen your friends or family become rich by simply investing in forex. But you have doubts as to whether you can personally do it.

The short answer here is simple. If others can do it, you also can. You don’t have to be a genius or have high academic qualifications. You only need to be dedicated, disciplined, and serious.

  • The second category consists of those who have a slight clue that they can make money trading forex, but they don’t know just how much they can rake in. They probably don’t have anyone they can look up to who’s been trading forex successfully.

If you fall under this category, you probably have a few comparisons to make, and you are looking for an investment that will give you the highest return on investment in the shortest time possible.

I like to use the example of a doctor while explaining this. If you are to become a doctor, which is one of the highest paying jobs in Kenya, you’ll need to spend at least 7 years learning. After you’ve graduated, your starting salary would be around 500,000/=, and that is if you are highly specialized. To earn this much, you’ll also be required to put in at least 8 hours of work per day.

Average high school teachers in Kenya make about 60K per month. Bank tellers make about 30K per month, and a janitor will take in at most 20K at the end of the month.

Now, let us look at how much you can make as a forex trader.

The earnings of forex traders in Kenya vary greatly. Each trader’s earning will depend on factors such as their trading style and their account size. However, once one learns how to trade forex and starts trading profitably, there will be no limit to the amount of money they can make per month.

Say for instance, you open a forex trading account with a deposit of $2000 (200,000 KSh), and you consistently make a profit of 20% per month. After three years, this account will have grown to $1,417,603.75 (that’s more than 141 Million Kenya Shillings!)

If you start withdrawing your monthly profits after your account has grown this much, you’ll have yourself a month income of $283,520.75 (Ksh 28,352,075- yes, that is 28 million Kenya Shillings.)  A lot of forex traders in Kenya have been able to achieve this, and so can you.

But Can You Really Make 20% Per Month?

I am going to tell you something that I always avoid saying. The way most forex traders trade, making 20% per month is a piece of cake. I don’t usually say this, lest I be accused of misleading people. But the truth is, you can make more than 20% per month trading online forex.

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So, Is Forex Trading Worth It?

Compared to other jobs, an investment in forex trading is a worthy investment. It has less hassles, stress, and risk. Once you become a profitable forex trader, all you have to do is check a few charts per day. You’ll literally be spending less than 60 minutes on your computer per day, and making more than you’d have made on an 8-5 job.

Risk Disclaimer

It’d be imprudent for us to end this article without a risk disclaimer. Forex Trading is profitable, yes, but if you do not follow the right track, it is also the easiest and fastest way to burn your money. You can lose a lot of money in this business. You can even lose all that you have- I’ve seen this happen to a few fellow Kenya traders.

Don’t rush after wealth and riches. Aim to understand the ins and outs of the market first, and everything else shall follow. If you liked this article, kindly share and comment.

 

 

Can Robots Make Money?

The past few months have seen a spike in the number of international forexpreneurs who are holding workshops in Kenya. First there was Gregg, and then there is Edward, who is set to hold a free one-day forex training workshop on January 30, in Nairobi.

While some of these forex mentors have a genuine need to help emerging traders get off their feet, most are only looking to generate sales for their expensive forex trading software and robots, which brings me to the question, Can robots make money in the forex market?

What are Forex Robots?

We don’t want to run ahead of ourselves. If you are new to the forex market, you must wonder what forex robots are? Are they a set of cybernetic humanoids that you buy and place at your desk to monitor, analyze, and place trades for you?

No. They are not even close to that. A forex robot is a software. A software that has been programmed with instructions on what to do if certain conditions are met or are not met.

These software are designed to monitor, analyze, and actually open and close trades on your behalf.

Do they work?

Hundreds of forex robots aka Expert Advisors are released into the market every month, and as if that was not enough developers are at work creating more. Some are free. Others will cost you the price of opening a Standard Forex Trading account with one of the prime time forex brokers. Each one of the forex robots claim to be better than the others. It is a wild, wild world, if you ask me.

It is utterly confusing for a new forex trader to choose one over the other. Usually, newbies will end up buying more than one software, and hope to sit back, relax, and watch their trading accounts grow astronomically.

But they are usually disappointed.

The forex software does not perform as well as the vendor said it would perform. It is actually losing more trades than you’d lose trading manually!

It does not take long for the newbie to realize that they’ve been taken for a ride! If s/he is critical enough, they will realize that more money is made selling the forex robot than the robots are making. After a while, the trader starts wondering whether there are any forex robots that can actually make money, and if there is one, where do they find it?

What’s Our Stand?

We believe that some robots can make money in the forex market, some of the time. There are few critical factors to consider if you want to go the robots way.

Some robots will be released into the market with a lot of fanfare. However, their performance starts to dwindle as the market changes. Look for a software that is periodically updated. Don’t get shy to ask the vendor how often their fancy forex robots are updated.

However, regardless of how good a forex robot is, you cannot leave your trading station unmanned.

Have you had experience trading forex with EA’s? What’s your opinion about automated trading? Kindly leave a comment.

Understanding the Basics of Fundamental Analysis in Forex

Forex traders in Kenya, and elsewhere in the world, approach the forex market from two broad perspectives: either through technical analysis or through fundamental analysis. As a beginner, you may spend a lot of time trying to figure out which is the best approach to trading. The truth of the matter is that none is better than the other.

History is full of traders who have made bank by employing any of the above approaches.

In his book, Market Wizards, Jack Schwarger interviews two prominent traders, Ed Seykota and Jim Rogers. Rogers is a diehard fundamental trader who believes that no one can make a living trading forex using technical analysis. He goes ahead to say that he has, in fact, never met a rich technical trader.

Seykota shares the opposite view. According to Seykota, he had always been a poor trader when he relied in fundamental analysis. He insists that his fortune changed when he switched to technical trading.

As stated earlier, none is better than the other. You only need an approach that suits you, stick to it and make bank.

In this article, I am going to disect the basics of fundamental trading, just in case you decide that you decide you want to be a fundamental trader.

What is Fundamental Analysis?

Fundamental analysis is a way of studying a security in order to deternine its intrinsic value by analyzing a host of financial data.

In the forex exchange market, a security would be a currency. Fundamental analysts are always analyzing emerging financial data from a country in order to determine the value of the country’s currency.

There are several important economic indicators that every fundamental forex trader should understand. Fluctuations and variatons in these data will make the currecy value of a country to fall or rise.

Interest Rates

Interest rates are the most important driving force of the value of a country’s currency. Most central banks announce the interests rates every single month. Fundamental traders keenly watch these announcements to decide how a currency will be affected.

In general, Central Banks will manipulate the interest rates in order to control the amount of money in circulation. If the Central Bank wants to increase the amount of money in circulation, it lowers the interests, and conversely increases the interest rates when it wants to decrease the supply of its currency in the economy.

Gross Domestic Product (GDP)

GDP is the indicator of how fast a country’s economy is growing. Every country’s Central Bank has expectations of how much the economy is expected to grow every year. When the Gross Domestic Product falls below this expectation, currency values tend to sink while a growth that hits the expected growth rates or goes above raises the value of the currency.

Inflation

Inflation destroys the purchasing power of a country’s currency, and therefore tends to devalue the currency. It is generally expected that a currency will suffer inflation of 2-3% annually. However, if the inflation rises beyond the Central Bank’s expectations, the Central Bank will increase the interest rates on the currency.

Unemployment

Without people, we wouldn’t have any economic growth. Employment and unemployment are the backbone of every country’s economic growth. When the level of unemployment in a country rises, it tends to have a devastating effects on the economy. To minimize the effects of unemployment on the economy, the Central Banks will reduce the interest rates in an attempt to increase the supply of money in the economy and stimulate economic growth.

Consumer Demand

As we have already stated, people are the ones that drive economic growth. Healthy consumer demand lies at the center of economic growth. When consumers are able to demand goods and services, the economy tends to grow. When the consumers’ demanding power is decreased, the economy tends to stagnate.

Hey, I am a Beginner. How Do I Invest in Online Forex Trading in Kenya?

Have you ever come across a person who asks this question? Maybe you haven’t because you are also new to online forex trading. You are probably also looking for a person to guide you.

But if you were in my position, this type of questions has everything skewed up. I normally do not answer such questions, but if I could, I would have only one answer for such people: “What…? You mean you are a newbie? Well, go and invest your money elsewhere. You will never become a profitable forex trader!”

Asking questions like this one is utter nonsense.

You may call me rude, pessimistic or arrogant, but such a trader will lose. Yes, you will lose, if you are the kind of person who asks such questions.

It is obvious that such a person has not bothered him/herself to even push a single keyboard key to find out about online forex trading.

Such a person does not want to tire their brain doing research for themselves and gathering information about online forex trading.

Such a person does not consider other people’s time to be valuable. How can s/he expects other people to be the ones to answer these basic questions about forex trading?

And this is the sole reason why they will lose. A person with such an attitude and ‘exceptional’ research knowledge may never become a profitable forex trader.

An investor is a die-hard researcher at heart. An investor keeps an open mind and has the ability to find all the answers by him/herself.

Before you ask such dumb questions, remember that Google is your best friend. Type your question on the search engines, and 10/10 times, the answer will be right there in the search engine results.

Master your Mind, Develop the Perfect Trading Discipline

Every successful forex trader needs a set of skills and characteristics. Some of these skills we can acquire through training while others we can only develop from constant practice, which is why a demo account comes handy.

The ability to understand the fundamentals of a currency and the ability to point the direction of the trend, for instance, are some of the key skills that online forex trading demands, but none of them is as important as developing the proper trading psychology and discipline.

What’s it About Trading Discipline That is so Important?

If you ask me, or any other sober forex trader in Kenya, they will tell you that the psychological aspect of trading is the most important and defining part of trading. Forget about a fancy trading system or a million-dollar forex trading course, if your psychological game is not intact, you are headed for doom.

A s a forex trader you will always be entering and exiting trades, sometimes on very short notice. The market will constantly force you to make snap decisions. To operate profitably in such circumstances, you will need an incredible mental game, and by extension, discipline, so that you are able to stick to your plan.

This is what we call self-discipline.

According to Mark Douglas, the author of Trading in the Zone, self-discipline is “a mental technique to redirect our focus of attention to the object of our goal or desire, when that goal or desire conflicts with some other component of our mental environment.”

In short, self-discipline is the ability to develop a mental framework that lets you stay focused and motivated in spite of challenges, losses, mistakes, and conflicts of interest. Particularly, you will need to teach yourself how to get rid of the negative feeling that is associated with losses and setbacks.

Unfortunately, this is easier said than done. When faced by the real market risk, many traders abandon their trading plans and succumb to emotional trading. Greed, fear and euphoria can get the best of you and ruin your plans.

Things would have been different if self-discipline was a trait that you were born with. Unfortunately, it is not.

Many traders find it difficult to develop steady forex trading discipline, which is why automated forex trading software has become so common. But trust me, it is possible to develop the right trading discipline. Being disciplined will help you become a more profitable trader in the long run, even if you decide to use automated trading software in the future.

Here is how you can build your trading discipline:

Developing Clear Trading Goals

Setting clear trading goals and understanding the motivation behind your trading is a good place to begin. Ask yourself, “Why do I want to trade forex? What do I want to gain and achieve from investing in the forex market?”

Sitting in front of your computer, taking trades and hoping for the best is not enough. You must have a target in mind. What are you aiming to achieve by taking that particular trade? How many pips do you hope to gain?

Many beginner forex traders get into trading because they feel it is a get-rich channel. They set unrealistic goals and pay a hefty price for that. Don’t just set a bunch of crappy goals because I told you to do so. Your goals need to be realistic. It is important that you set challenging but achievable goals to avoid frustrations that may result from not hitting your target.

Without a goal in mind, it is possible to let the discouragement of being new to trading defeat your desire to learn.

Here is something that you must keep in mind as you venture into forex trading; every endeavor that you set to undertake will always be difficult in the beginning. This hold true more in online forex trading. Chances are that you will suffer many losses. This part will be disheartening, and if you are not disciplined, chances are that you will give up trading.

Maintaining Focus on What Needs to Be Done

Setting clear and realistic goals puts you one step closer to becoming a successful and disciplined forex trader. It is easier to stay focused on your goals, but that assumes that you actually get off your ass and do what needs to be done i.e. trading. For instance, if your goal is to let profits run and cutting your losses short, you must start putting trailing stops to your trades.

On the contrary, if you did not set clear trading goals, you’ll probably waste a lot of time trying to figure out what needs to be done. In return, this makes you more susceptible to your emotions.

Keeping a Trading Journal

Keeping a trading journal is an easy way to track your past trades. It can also help you identify areas that you need to work on. I also find that a trading journal helps me avoid making impromptu trades since I hold myself accountable for every trade that I take.

After a streak of losses, many traders, I included, start to take trades that are not in their plan. By recording your trades in a journal, you will identify this behavior and work to correct it.

A trading journal is also a great way to keep yourself motivated. It is unavoidable that you will face a lot of obstacles along the way. There will be a lot of times when you will feel discouraged and ready to give up. This is where your self-discipline will be put to the test. In order to succeed, your resolve to push on must be greater than the temptation to give up.

When you have reached your trading goals, take some time to refer back to your trading journal. What were the trades that you took that led to your target. What kind of analysis led you to hit your target? Can you replicate it on your future trades?