It's easy to see the appeal some retail investors see in trading foreign exchange.
Unlike stock markets, which are generally only open around 8 hours a day, currency markets are open 24 hours a day, five days a week.
Traders can make trades from their mobile devices before breakfast, in the middle of the night, or while they are eating their dinner.
And traders can supercharge their bets with leverage of up to 50:1. A $100 bet can be leveraged to $5,000. A $2,000 bet can be leveraged into $100,000 in the forex market.
A 2% change in a currency movement can mean a doubling of the initial investment. The problem is that same leverage works both ways, and can wipe out a trader's assets in seconds.
It's also the world's largest market. According to Bloomberg and the Bank for International Settlements, US$5.3 trillion changes hands every day. That's 100 times more than the daily dollar value of just the New York Stock Exchange says Bloomberg.
But the odds are stacked against retail investors who are attracted by the lure of easy profit. Bloomberg says that reports from two of the biggest forex companies shows that 68% of investors had a net loss from trading in each of the past four quarters. That may well exclude those who exited the market after taking a loss.
According to Michael Greenberger, a former director at the US Commodity Futures Trading Commission (CFTC),
"Forex trading is like gambling at a casino because the odds are always stacked against you. People are lured into forex trading the same way they're attracted to a roulette table, it's a no-win proposition."
Most currency brokers aren't neutral parties. They're also active traders and conflicts of interest can arise.
Rules and regulations are few and far between, and in the US brokers can offer any currency price they wish and can give different rates to various customers at any time according to the CFTC.
Forex trading isn't conducted on an exchange either. When a trader sells a currency, the broker can be the buyer, and vice versa.
Even one of the leading US forex trading training company's CEO states that 90% of novice traders will fail. After all, the currency markets are full of thousands of professionals from around the world. If you think of the foreign exchange market as a global sports competition, very few will rise to the top. And most of those that do have years of training and experience, much like top athletes.
This is not a market for amateurs, unless you really want to give away your money.
Then you have revelations that some of the world's biggest banks have agreed to pay regulators in Britain, the US and Switzerland more than US$4 billion for conspiring to manipulate benchmark foreign currency rates.
Not to mention the thousands of dollars in fees foreign exchange companies, including those in Australia, charge for attending their training seminars, lessons, access to their so-called proprietary trading systems or for watching their professionals trade live. If they don't tell you how much it will cost up front or if they don't offer a refund, you might want to question why.
There's no such thing as easy money, whether it's in the property, currency or stock markets, but if you want to get burnt, one of the easiest ways appears to be trading foreign exchange.
