Risk vs Reward

Clearly, there are large amounts of money to be made trading foreign exchange. The forex market is a game in which there are many experienced, well-capitalized, professional traders who do nothing else but trade currencies full time. An inexperienced retail trader has a significant information disadvantage compared to these traders. Retail traders are undercapitalized. In a fair game - one with no information advantages - between two players that continues until one trader goes broke - the player with the lower amount of capital has a highest likelihood of going broke first. Since the retail trader is effectively playing against the market as a whole - which has an almost unlimited supply of capital - he will almost certainly go broke.

Sunday, April 19, 2009