Don’t let news discourage you. Only because some investors lost money trading Forex, it doesn’t mean you’ll also do it.
You are daily struggling to complete work assignments, and you are looking for a solution to grow your monthly income so that you can live a more comfortable life. Forex trading is a side gig that can supplement your income, so you should make use of your free time. But it all depends on how much time and effort you are willing to invest in this side gig.
What should you know about Forex trading?
Don’t tell the world you are a Forex trader before you understand what this type of trading is.
It’s frustrating not to be able to reach your financial goals and can make you jump into trading Forex without really understanding what it implies. You are aware that many investors experienced financial success because they traded currencies part-time, and you are ready to follow their example.
Huffington Post estimated the market to $4 trillion, and this means that it’s ripe with opportunity for new investors. So, you need to know that this market facilitates the trading of the value of currencies around the world. You basically try to predict how your pair of currencies moves on a given day and place a trade. You can choose any pair you want, but it’s advisable to consider economic news, political problems, and other similar factors when selecting one because they influence the movement of the market.
What does a Forex trader do?
Before deciding if Forex trading is something you would like to try, you need to research to find out how this market functions.
You need capital to place trades, so you need to determine how much you afford to invest. Small trades can help you understand how the market functions without risking your savings. The average platform requires $100 to start an account so you can start from saving this sum.
Some Forex brokers require traders to deposit at least $10,000 when they open the account so you need to carefully select the broker you want to collaborate with. Some platforms allow you to create a demo account to understand how the market works and to become comfortable with their practices before risking your savings. Browse the market to identify the broker that brings the greatest benefits.
Are you good at making predictions? All your trades will rely on the predictions you make on how certain currencies will move. If you are good at trading on the stock market, you’ll find easy to trade in the foreign exchange market.
You’ll make smart investments only if you pay attention to the world events
What currency pairs do you want to trade?
It all comes to the currency pair you choose, so you need to check the movement of multiple ones and determine which one works best for you. The Forex market allows you to trade 24/7, but to get the best financial results do it during the peak hours. Check what currency pairs have their peak hours when you’re available to trade.
Let’s say you have a traditional 9-10 job, you’ll probably trade early in the morning, or late in the night, so you need to identify what pair has its peak then. Most of the times, high volumes occur at the end of the day, so trading after work seems a good idea.
Can you use technology to boost your profit?
Only because seasoned traders do their trades manually, it doesn’t mean you cannot take advantage of the available technology to boost your profit. Until you learn how to do it all on your own, you should use a tool to trade on your behalf.
You’ll find many online tools that can automate your trades and limit the risk. Some of the programs can monitor currency prices, while others can place an order. You can use multiple tools at once if they help you place a profitable trade.
Based on your needs you can determine what automated system you need. Some providers customise the tools to fit your strategies so you can align them with your investment plan.
Are you disciplined?
If you prefer to make trading decisions on your own you need to adopt discipline and dissociation because they influence the success of the investment. For example, you need discipline when you choose the trading platform you use to place the investments because every one is different. For example the MetaTrader4 platform for trading is great for beginner and intermediate traders because it’s simple to use, and it provides multiple tools helpful to set your strategy.
It’s advisable to take profits on materialising instead of following big profits from complex spreads. This strategy requires discipline because you need to determine when favourable spreads are widening.
Sometimes you’ll be surprised how fast some trends change and affect your investments. A part-time trader needs to pay attention to all market movements and to identify the ones that can generate a big profit.
Can you earn a living from trading Forex?
Sometimes, part-time traders find this gig so profitable they decide to switch to full-time trading. Before resigning your job, you need to determine how much money you need monthly and according to this you pick the investments to fund them. The foreign exchange market functions 24/7 so you can use an automated tool to stop or sell orders while you sleep.
Take moderate risk if you want to earn a living from trading Forex because the bigger the returns, the higher the risk to lose everything you invest.
If you need $10,000 per month to live comfortably, you need to invest $200,000 of which capital returns 5%. As your skills improve you can earn $250,000 so your investment will probably generate 15% return. Before deciding if Forex is something you can do for a living, you should understand how much you can invest without affecting your comfortable life.
Don’t resign your job before you make savings that can fund your living for more than 3 months.
Disclaimer: This content does not necessarily represent the views of IWB.