It's been my observation that within online communities interested in investment opportunities that there are, broadly speaking, two kinds of opinions that you get when it comes to trading stocks or today's poster child for big trading profits, foreign currency. The first come from the hopelessly naive and usually high-energy dreamers who promote in near blind religious devotion some particular trading system or website which will generate huge sums of money with very little effort in a matter of days or weeks. This trumpeting is usually met quickly with a great deal of skepticism from the more mature crowd who point out the obvious, that no one would sell such a money tree for a few hundred or even a few thousand dollars.

If you have a winning system, why go through all the effort and risk of taking on a new business venture, namely, to market your system when you could in fact, just continue to use the system indefinitely to generate more money? It's not like it takes all that much more effort to invest a few extra key strokes and add a digit here and there to the trades you're already making.

To become a successful trader then, those with a bit more wisdom argue, it will take time, practice, and study. Afterall, professional traders have not only many years of experience behind them, but plenty of formal education in finance and economics as well. And of course, they are the competition stay-at-home traders face. But interestingly enough, even this more sober view doesn't quite sum up the kind of difficulties which lie on the path to becoming a successful trader -- at least from the perspective of an economist.

Trading systems concocted by self-styled FOREX gurus are nothing more than a kind of economic model. A way of forecasting prices or exchange rates based on historic trends and other macro-economic data. Economists also create models to describe the phenomena of financial markets including the foreign exchange market. But these models differ in one very important way from the kind of models created by trading gurus, it's a matter of pure assumption for economists that trading systems don't work! Economists don't day trade, and no, they don't swing trade either. A high investment return to an economist which can't be explained away by risk is considered an anomaly. And if a trading system were ever proven beyond a reasonable doubt to work, the author of that system in addition to becoming rich beyond anyone's wildest dreams should take a crack at the Nobel Prize, since they'd have clearly upset the reigning paradigm of thirty years or so in the field of economics.

Economists reason that all the information that can be used to predict stock prices or exchange rates is easily enough obtained by all traders and therefore, the implication of all financial information at any given instance is already reflected properly in those prices and exchange rates. Emperical studies back up these beliefs about market efficiency very well. But it's not my purpose in this particular article to make the case of economics. My purpose in this article is merely to point out to the new traders that the typical path of education doesn't exist for trading as for other professions.

If you're interesting in making money by healing people, you'll go to medical school and receive years of study and training teaching you how to do precisely that. If you're a day trader contemplating a formal study of economics or finance to enhance your trading profitability, your coursework will consist in part of debunking the industry you seek to work in. And if economists are even mostly right, the overwhelming likelihood is that it's a really, really bad idea for anyone to quit their job and set up shop in their basement as a foreign currency trader.

-- Adam Bailey

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• Forex Trading: Incorporating Price Behavior into a Forex Trading System


• Trying Forex Trading with the Best Strategy and Approach


• Trading in the Forex Requires Some Caution


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• A Sneaky Way to Steal Someone Elses Forex Trading System


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• What Forex is and Why YOU should trade it.


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• How Many Forex Order Types There Are And How to Use Them In Your Favor


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