Many individual traders are drawn to the Forex market for its high amounts of leverage, continuous 24 hour trading, and big trends. A lot of traders get fooled into believing that the Forex market is ideal for day trading. Some traders are even fooled into believing that day trading, or scalping, the Forex market is easy.
In fairness to some of the automated trading system creators, there are a few Forex day trading systems that actually do work. But the overwhelming majority of Forex day trading systems don't. The vast majority of individual Forex traders who day trade or scalp lose money.
The reason that most Forex day trading systems fail is due to the extremely high transaction costs associated with Forex trading. Most new Forex traders overlook this fact because of the "commission free" claims that Forex brokers use.
It's true, you don't pay commissions in the Forex market You do, however, pay the bid and ask spread. So, please don't confuse "commission free" trading with "free".
Consider the average spread for the EUR/USD which is around 3 pips among most Forex brokers. On a standard lot, 3 pips amounts to $30. You spend $30 on the bid and ask spread every time you click an order. That's a lot.
Consider the bid and ask spread for one of the most popular cross rates in the GBP/JPY. The spread for this pair is usually around 9 pips. This spread amounts to more than $80 for one standard lot.
The bid and ask spreads in the Forex market are huge and very costly. Just imagine placing five or ten trades every day in the GBP/JPY and spending upwards of $400 or even $800 on the bid and ask spread. This is exactly what you're doing when you try to day trade or scalp the Forex market
Most individual Forex traders will lose money when trying to day trade or scalp the Forex market through no fault of their own. It's due to the misconceptions that first, the Forex market is easy to day trade and second, that it's commissions free. These misconceptions stem from the Forex brokers and misleading marketing.
Day trading and scalping the Forex market is just too expensive, plain and simple. That's why it doesn't work. So, if you're thinking about trading the Forex market from a very short-term perspective, I suggest that you really think twice. If you're looking at an automated Forex trading system, make sure to carefully research the system. Trade it with a demo account before committing real money to a day trading system. Monitor the system in real time and carefully study the results. You might be surprised to find that most Forex day trading systems flat out fail.
If you're serious about making money in the Forex market I suggest you commit to a quality online Forex education. Study the Forex market and really learn how it works; learn how exchange rates trend; learn what influences exchange rates.
Once you learn how the Forex market works and what influences exchange rates, you simply need to commit to a Forex trading system that employs a little bit of common sense and addresses some basic variables such as entry point, exit point, stop loss, and position size. Do this, and you'll be well on your way to taking full advantage of the Forex market and building long-term wealth.
