Why Forex Trading Is So Profitable
What Makes Forex Trading More Profitable?
What makes forex trading more profitable than regular investing?
If you answered Forex strategies, you are incorrect.
There is a lot of information out there about the hottest new investment trend. Investing in FOREX markets is wildly profitable in some cases. However, there is very little understanding about what is FOREX and how can investors make so much money trading on FOREX markets.
Some FOREX resources do a good job of explaining Forex trading strategies in detail, while others seem to take a just trust me sort of attitude. Either way, the most important thing to know about Forex investing is why Forex trades are so profitable in some cases. Unfortunately, few Forex experts take the time to make the secret of Forex profits easy to understand by novices and experienced traders. Some less scrupulous Forex traders even take efforts to obscure the source of Forex investing profits.
Would a good financial planner advise you to invest in the Forex markets?
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What Gives Forex Traders Bigger Profits?
The insider secret behind Forex investing and the giant profits claimed by some online Forex traders has nothing to do with what the FOREX market is. It also has nothing to do with currency trading or market timing, or Forex trading indicators, or Forex strategies of any kind.
What give Forex investors giant profits (when things go well) is leverage. Incidentally, leverage is also what makes options trading so profitable and can make flipping real estate worth it.
Leverage is the ability to use other people's money in order to make bigger profits on your trades.
The best way to understand Forex leverage, or any kind of investing leverage is by example.
Suppose that you invested with the world's greatest money manager. In fact, this portfolio manger is so great that he has cracked Wall Street. That means that he can make a 100% return on your investment every year with no down years and no exceptions. You will make 100% guaranteed on your investments.
Sounds great, right?
It is, but there is a catch. As has often been said, it takes money to make money, and investing is no exception.
If you invested $10,000 with the best money manger ever and got a 100% annual return, how many years would it take before you could quit your job and retire and just live off of your investments? Even with a 100% return, it might take longer than you think.
After one year, your $10,000 investment would have doubled to $20,000. There is no way you can retire on that! So, how much money can you make?
- Initial Investment = $10,000
Here is a table show how much money you can make on this great investment.
- After 1 Year = $20,000
- After 2 Years = $40,000
- 3 Years = $80,000
- 4 Years = $160,000
- 5 = $320,000
- 6 = $640,000
- 7 = $1,280,000
Even with a 100% rate of return, it takes seven years to earn $1 million on a $10,000 investment. That is a pretty cold shower on an investor who wants to day trade their way to independence fast and easy.
Thanks to the leverage in Forex investments you could be a millionaire much faster.
How Does Forex Leverage Work? - Coming Next