What’s the ultimate worst case scenario? Consecutive losses. Knowing
how many consecutive losses your system is likely to sustain is the key to
capital conservation. Examples of leverage: 1:1 = one $100K contract per
$100K in capital. 20:1 = 20 $100K contracts per $100K in capital
Convenience
The fact that you need to go to bed or spend time with your family does not
stop the forex markets from operating. In other markets you can trade a
specific window that usually lasts 6-10 hours, which is physically
manageable. Forex, on the other hand, demands 24 hour monitoring.
That can be accomplished through automated trading systems or, less
optimally, through pre-set stop and limit orders or physical monitoring of
a trade.
Cost
“No commission trading” is a marketing slogan many dealers offer as a
perceived benefit of forex. But the fact that there is no commission does
not change the high level of transaction costs paid to dealers through the
bid-ask spread.
There is no doubt that the liquidity, leverage, convenience, and transaction
costs found in the forex markets are great tools for investors – but not
always. Just as easily as these tools can be used for wealth creation, they
can be misused for wealth destruction. The novice investor destroys
wealth, and the sophisticated investor creates it.
WHERE
It is one thing to choose a dealer, and quite another to choose the correct
dealer. Dealers’ service offerings can take many forms, and each dealer
usually has one or two major features that they highlight above all others.
When analyzing dealers, first understand and rank all of their service
offerings, then apply those findings to your trading style to arrive at your
optimal dealer.
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