Forex for Beginners: To Ban or Warn?

In this issue, I would like to depart from the work-life advice on how to become richer, more efficient and more successful, to turn again to the issue of trading. Today I want to share with you reflections on the topic of opening accounts by brokers for newcomers to Forex. I was inspired by the idea of this article that the Russian forex regulator thinks about allowing only professional traders to enter the market, that is, those speculators who have already confirmed their qualifications, having passed prof. examinations. Let’s discuss whether a new trader really needs such a strong “care”.


To begin with, I propose to think over two fundamental questions: “Who is a beginner in Forex?” And “Why is the first deposit lost?”.




A beginner forex trader is a person who became interested in trading in the foreign exchange market after seeing an advertisement about earning opportunities without leaving home or on the Internet, while only beginning to delve into the essence of what is happening “beyond the terminal”.


Most likely, this is a person who read something about trading, about “bulls and bears”, about the trading shoulder and has an idea of how the deals are opened. I think that he has several times successfully opened deals on a demo account and he has a very exemplary strategy that has formed in his head or he somewhere read it.


And finally, a novice trader knows how to make money, if you buy a dollar for rubles cheaper, and then sell it more expensively, but does not know about the statements, requotes and floating spreads ( Do not you know what it is? Look at the end of the article ). Those. in general, a person who decided to try his hand at Forex understands what he will do, difficulties are opened only when he comes across nuances that are not visible at first sight.




Why do traders basically lose their first deposit? Sometimes, but not often, just because of ignorance of the above-mentioned nuances – the strategy assumes a low spread, and on news it expanded, when the trader did not notice, the requotes in the busy time did not allow the deal to be closed in time, the market opened with gepom and so on. Typically, these situations are extremely puzzling for beginners and their deposit, and therefore (as a positive) stimulate a deeper knowledge or (as a negative) to write a complaint somewhere.


Much more often, the first deposit is merged because of an unstable reaction to what is happening or, more simply, on a human factor or psychology. The loss of real money is very different from the minus on the demo: closing the deal at a loss is more difficult, as well as enduring to a profit of 40 points, when there are already 25. About the system of management of funds and discipline is rarely remembered at such moments. Euphoria from its own importance or confusion at losses undermine traders and managers with many years of experience, what can we say about beginners.



As Sergey Kozlovsky from Grand Capital remarked: “The level of financial education and the success of a trader are not always interdependent things. There are often cases of a complete loss of capital by investors with FFMS qualification certificates, and at the same time, success stories of self-taught traders make it possible to assert that financial literacy is an elongated concept. “



We should also mention the question of leverage. Quite often, even traders with experience do not fully understand the principles of margin trading and the risks of a large leverage, let alone the beginning speculators who, on the one hand, frighten the word “credit”, and on the other – it pleases the opportunity to trade $ 100 as well as 100 000 $. Big profits are always big risks, but it is not easy to realize it. Therefore, often beginners on Forex lose their deposit also because of the wrong chosen shoulder.


“It would be simpler to say that newcomers should not offer services that they will not understand, but it’s still the company’s task – to convey the essence of the products offered and make them understandable,” – Igor Volkov, president of MFX Broker.




Let’s sum up what the forex trader should know in order to more or less be prepared and consciously start trading:


    • What is forex and how it functions. What are the risks of trading on Forex.


    • How does a forex broker or dealer work: getting quotes, making deals, commissions, spreads and so on.


    • About how the terminal works and deals are made.


    • What is leverage, what risks it brings.


    • What is a money management system (Money Management), how to use it and why.


    • About trading strategies and market movements.


    • On the psychology of commerce.



Even a general understanding of these issues will reduce the risks of losing the first deposit, as well as the number of complaints and appeals of novice traders to regulators and forex communities with questions about fraud companies.


“To enable traders to earn money in financial markets, one should not impose restrictions, but increase financial literacy. This is not just important, it is a fundamental moment when trading forex. The trader should understand what bid and ask, collateral requirements and leverage, ” – confirms my opinion, public relations specialist FxPro Evgeniya Konovalova.




Turning to the brokers with the question of whether the company should take responsibility for determining the level of knowledge of the trader and, based on this, to limit its capabilities, I received many different answers. For the most part, companies agree that to clarify the client at the time of opening an account, as far as he is aware of the opportunities and risks of trading in the foreign exchange market, one must, however, somehow check the veracity of this answer, be responsible for his subsequent actions or limit his opportunities within the framework provided services does not make sense.


“Given the fact that both the client and the company are interested in the fact that the trader still began to trade through the company (and the company is interested in this even more), the objectivity of such a check will always cause doubts. However, even if it is done by a specially appointed body, it will be difficult to guarantee the quality of the knowledge test, ” – Nikolai Solabuto, managing director of Finam Management MC.


This is quite a reasonable opinion: of course, a self-respecting company whose earnings are based on a commission on the volume of the client’s trading, informing the client about all possible situations, supports not only their reputation but also their income. A trader who quickly loses a deposit is unlikely to continue to trade and will no longer make a profit, so reducing the percentage of quickly merging customers is in the interest of a bona fide broker. But to force the novice to trade only on demo or cent accounts or to check his knowledge and rigidly determine the set of tools available to him does not look like a clever solution. The amount of funds that a trader can and wants to risk is different for everyone, and he depends on the well-being of a person. Knowledge, however, everyone prefers to receive in different ways: someone wants to see a demo, and someone immediately is interested in going into real trading,


“It is difficult to objectively determine the criteria for assessing the level of financial education of traders because different trading strategies require a different level of knowledge,” said Victor Kupriyanov, representative of the dealing department of JustForex.


The only thing that would be worth limiting (and many companies also agreed on this opinion) is the trade shoulder provided to the newcomer . If, by opening an account, the trader indicates that his knowledge level is low or absent, then it would be nice for a company to think a little about the customer about its risks, giving a maximum lever of not more than 1: 100, explaining the reasons, and notifying him about the possibility to increase his leverage with time . If the client claims that the level of his knowledge is sufficient for active scalp with a large shoulder, then, probably, it is not necessary to limit it in the possibilities, because the risks he consciously incurs.


“Based on the client’s experience, a decision is made about the level of guarantee security that is established for him. The more experienced the client, the larger the size of the “shoulder” for him is permissible. This, in fact, is in the interests of the broker, since a client who does not adequately assess risks and commits transactions without proper understanding of the situation is likely to lose money. As a result, he will cease to be the source of the commission for the company, and even create a bad reputation for it and exchange transactions “, – Nikolai Solabuto, managing director of Finam Management MC.


Those. notify all risks, talk about all possible situations and at the same time give the right to choose the client himself how he wants to work and what risks he is willing to take, this is a very democratic approach that suits all three sides – the company, the client and the regulator.


Anton Sharonov from NPBFX responded very well to this question: “As for beginners and risks, I like the approach of Swiss Forex banks, the essence of which is to directly register all the risks in the contracts, as well as to outline the borders of responsibility of the parties to the contract as forex- company, and client. In mature civil societies, a capable client himself is able to make a decision whether this type of activity suits him or not. ” So why do not we use this useful experience?




Summing up, I must say that the article turned out to be more for representatives of companies than for traders. Probably, it happened because the market is changing in connection with the appearance of regulation and at the same time the opinion of dealers is taken into account, and the opinion of traders is not very.


We are put in the position of an unreasonable consumer, who stands in the chain of decisions the very latest. At the same time, the quality of industry services is assessed, alas, only by the abundance of complaints, not taking into account the positive experience of trading, which is quite a lot, but which is not openly spoken about. Therefore, without taking responsibility for speaking out for everyone, but still having considerable experience and having long been watching the development of Forex in Russia, I would say that it’s completely pointless to limit the trade to beginning traders. With this approach, an industry that can bring income to everyone will simply perish. As Oleg Okhrimets from the Exness Group said correctly: “Forex-retail was originally created to simplify access to financial markets for individuals, regardless of their skills. Any artificial restrictions will only lead to the flow of customers to other jurisdictions. “


But to make a list of recommendations for the broker about what should be reported to the client who opens the account, how to notify him of the risks and give the opportunity to choose for himself suitable tools at this level, it is quite possible. It is unlikely, of course, this will significantly reduce the share of lost first deposits, but raise financial literacy, awareness of clients and reduce the flow of claims.




For traders, I would recommend choosing partners such companies that care about the education and capabilities of their customers, do not hide anything and notify the risks as openly as possible. Pay attention to what your managers tell you, what they promise in advertising. Those who openly talk about trading as risky investments and possible losses associated with the trading process are more likely not to deceive your trust. And vice versa…


“When completing the registration form, we always ask the client about his knowledge, work experience, and warn about trading risks. If his experience is not sufficient, then we strongly recommend that you get acquainted with the market on a demo account. In addition, for beginners, we have a section on Forex for beginners and Help Center on our site. For experienced clients, by default, we provide a leverage of 1: 100, and not a maximum of 1: 500, ” is the modern experience of one of the most popular companies, whose name I do not want to name so that the article does not seem to be an advertisement. I just want to show that this is the right way, open, honest and worthy, which brokers are already on, creating the right basis for the work of the modern currency market in Russia. Such companies, fortunately, quite a lot.


Related posts