Is Forex Trading Expensive?

Is forex trading worth it? Can anyone do it? Is it going to be expensive? Frankly, do you have a chance? Let’s find out,

is forex trading worth it

Table of contents:

  1. Brief Introduction
  2. Pros and Cons of Forex
  3. How to Trade With $100
  4. What Are My Exact Costs
  5. Bottom Line

Is Forex Trading Worth It Intro

Of course, but the real question is: “Is forex trading worth it or not?” It is not about how much money is necessary to start forex trading. The key thing you want to know about is how much money you can earn along the way.

NSFX forex broker

Sure, “expensive” and “cheap” are subjective terms, but knowing how to trade forex with $100 is a form of art. There have been some brokers in the past who have allowed traders to open accounts with $5, but this is no way to do business. Is forex trading expensive?  Is forex trading worth it? It depends on the trader, but does it have to be?

Pros & Cons of Forex

Thanks to the miracle of modern technology, forex is more accessible to ordinary people that it had ever been in the past. Whereas at one point in time only major players like banks, corporations and billionaires had access to forex markets, nowadays anyone can get in on the action and try their luck.

Pros & Cons

Compared to the other types of financial markets, forex is more stable and reliable than most. Stocks and commodities may fetch a pretty penny, but after all is said and done, companies can and do fail whereas commodities can be quite unpredictable. Forex, on the other hand, deals with currencies, and those are much more difficult to sway or manipulate.

Forex markets also incorporate loads of technology, due to their complex nature, and some traders have even incorporated some of this technology as a part of their trading strategy. Is forex trading worth it all that precious time and nerves? Well, with automated trading, it just might be.

Sure, there are all sorts of ads for automated trading software, saying how they can make you a millionaire in six months or something like that. Yeah, right. If that is true, then how come they have to make their own money selling their junk online to people like you? Why are they not somewhere in the Caribbean? No, things do not work that way.

is forex trading worth itDon’t misunderstand, the idea of making forex trading worth the hassle by teaching a machine to trade on your behalf is not exactly new – and not half bad, either. It would eliminate human emotions such as fear or greed out of the equation and make decisions much more efficiently than any human trader. Only problem with it’s almost impossible.

Nevertheless, using automated trading signals and other programs as a tool to help you out can definitely make forex trading worth your while. Then again, even forex is not for everyone. Losses are to be expected, and even the most successful forex traders have lost crippling amounts of money. Also, many critics have drawn comparisons between forex and gambling, and for all we know, there just might be something to all these claims.

Finally, some people just aren’t suited to all the pressure and challenges that forex markets have to offer. These and many other reasons are what stand in the way of so many people out there, preventing them from achieving their dreams. To those people, forex trading is definitely not worth it.

Other people, however, have been known to trade successfully with as little as $100, or so the legend goes. We say legend because a story about a guy who started out with $100 and became the next Bill Gates would not even make it as a science fiction novel. For one, the importance of education cannot be overstated.

How to Trade Forex With $100

is forex trading worth itIn order to turn $100 into a success story, a trader would need a lot of skill, luck and experience. Good trading strategies do not simply come to mind; they must be learned, adopted and applied with tactical precision. The truth behind this number is the fact that most brokers require a minimum deposit and $100 is the most common figure out there. Is forex trading worth it on a $100 budget?

Normally, most trading strategies recommend limiting your trades to 1% of your total capital, or 10% if you are quite optimistic about things. In this case, a person with a $100 capital would be making trades that are in the $1-$10 range, so becoming the next Warren Buffet may be put on hold for quite some time. Also, keep in mind that there will be losses. The thing that prompted so many people to wonder if forex trading was worth it was the fact that sometimes, even if you win, you lose. Are you still asking yourself is forex trading worth it?

In fact, the only way to even consider making forex worth your while with $100 capital is to employ an extremely aggressive strategy, trading micro lots and disregarding your traditional forex wisdom.

This does not mean that taking $100 and turning it into $200,000 within a year is impossible, with the right kind of experience and some careful planning. So, is forex trading worth it? The $100 that you are risking, I mean? Well, if so, here is how you do it.

is forex trading worth itFirst of all, get some practice on a demo account, preferably with the same broker you plan to use for actual trading. In fact, practice a lot, because you will be doing some real manual trading. No machines, automated software or exotic currencies. Focus on EUR/USD, but any other major pair should work as well. The actual strategy is very straightforward.

The first thing you want to do is split your money in two equal shares. The one is for trading, and the other is basically your plan B – a way to recover from a bad trade. For starters, you use $50 for trading, and the rest is your recovery money. Normally, you are not supposed to do this, but since you are risking a small amount of money, you need an aggressive strategy in order to get ahead.

The next step is to go through the analysis of news, charts and all sorts of predictions you can find. Don’t worry, your predictions tend to get better as you accumulate experience. Basically, you go through the charts and the news to figure out your next move. But you only trade when the odds are in your favor – if the charts are not looking good, take the rest of the day off. You only trade when the market is volatile. The more up-down-then up again action you see, the better it gets.

With some practice, the right currency pair and under the favorable circumstances, you should be right 9 times out of 10. And on that 10th time, make sure you close your orders within a 15% loss. Don’t worry, these are small quantities of money, and any such losses can be recovered easily.

If you do this right, your capital should double every month or so. Within 6 months, you should be trading with a roughly $6,500. Within a year, anything between $200-400,000 should be attainable. The $200,000 sum would account for any losses, and the $400,000 is the best case scenario.

What Are My Exact Costs?

is forex trading worth itThe exact expenses depend on a lot of things, including the broker you choose, the kind of trader you are, your trading habits and positions and a bunch of other stuff. Most brokers feature an automatic calculator that can help you calculate your exact expenses, so you should have no problems in finding out is forex trading worth it or not.

As for the exact costs, they vary from broker to broker so it is impossible to pin them down in actual numbers. Commissions can range from 4 cents on major currency pairs for 1k lot and go as high as 6 cents on more exotic currencies, or even higher. Spreads can be 0.5 for major currency pairs or 175.00+ if you trade exotic currencies. Here is a chart with some basic expenses that should give you a clue as to what you’re getting into.

EUR/USD EUR/JPY USD/CAD EUR/GBP USD/JPY USD/CHF EUR/CHF

Average spread (pips)

1.8 2.4 2.3 1.2 1.6 1.9 2.5
Commission
Total cost of a 1k trade 18 cents 24 cents 23 cents 12 cents 16 cents 19 cents 25 cents
Total cost of a 100k trade $18 $24 $23 $12 $16 $19 $25
Total cost of a 1M trade $180 $240 $230 $120 $160 $190 $250

Bottom Line

Is forex trading worth it or not? The answer depends on you and you alone. Between the running costs, possible profits and all sorts of other ventures out there, there is no way anyone can make a decision in your stead. It all depends on whether or not you can make enough money to cover all of the expenses and prosper, or not. If so, welcome aboard. If not, good luck at your day job. Don’t quit it just yet.