Millions of people sink their whole lives into all sorts of businesses to lose it all every day. Restaurants, bars, boutiques, service businesses, factories, etc., fortunes are lost every day in every industry. Many of these businesses require the purchase of illiquid assets that can easily lose most if not all of their value. A great many of these require substantial costs to be incurred long before the entrepreneurs have any market feedback to know whether they have made a good investment. A forex position offers feedback to the trader in instant real time and can be liquidated at a tiny loss in the blink of an eye from anywhere in the world with the stroke of a key or click of a mouse. And yet I am supposed to believe that trading is more risky than starting a restaurant or putting a factory online?!??!? Give me a friggin’ break!!!
Don’t buy the bull**** that any of these other businesses are somehow less risky or that the psychological factors that make traders cut profits short and ride losses do not exist or are without effect in other businesses.
Most business owners resist cutting losses in all industries. This has been a subject in behavioral economics and entrepreneurial studies for decades. Entrepreneurs also tend to take risks that will be difficult to survive financially in the worst case scenario. And they cut profits constantly in their efforts to win customers. They overestimate positive news and underestimate negative news. They are typically overly optimistic about future sales, the collection of receivables, and the expenses they will incur. It is called “entrepreneurial naivete”.
If it were as easy to start a restaurant is it is to open a trading account, there would be the same rate of failure among fresh new restaurateurs as there is among fresh new traders. The rate of failure in either industry is not a function of a “rigged game” or malignant parties gaming fresh meat. It is simply a function of the positive bias biologically inherent to the entrepreneur.
You do not more often hear that “forex trading is risky” because it is more risky than restauranteering. You simply hear that more often because brokers and financial institutions are looking to protect themselves from lawsuits via full disclosure and restaurateurs do not require brokers that give disclosure at all. There are no adds in magazines, on TV, or on the web pushing people to open restaurateur accounts with full disclosure of the risks involved. But there are loads of such adverts for trading.
The fact is, forex trading can be far less risky than restauranteering if the trader knows how to take advantage of the liquidity and execution available 24 hours a day in that industry and unthinkable in food services. And trading has that advantage over almost all other industries.