The idea of being a full time Forex trader might sound like a nice idea, but it’s not as easy as it sounds. By its very nature, Forex trading is an ever-changing environment of highs and lows and only the most disciplined are able to make a career of it.
The key is having a good idea about what you’re getting into before you get in. With that in mind, here are a few pros and cons of Forex trading to get you thinking and give you something to aim for…
You’re in control
One of the fundamental things to remember about Forex trading is that no one is ever forcing you to make a trade. While the market is inherently volatile (and for many traders that’s a significant part of its appeal) you always have the final say about whether or not to enter into a trade and how much, or how little, you want to risk.
Just as there’s no one forcing you to make trades, there are no real limitations on when, where or how you trade. Because the market is almost always open, there are opportunities to explore when it suits you. For example, it’s very common for traders working regular jobs to not have time to focus on their trading during the day. Therefore, they might restrict their active trading to evenings or weekends and just use mobile devices to monitor trades at other times. This provides them with a sound base to build their account and trading skills.
Flexibility also applies to the style of trading you want to pursue; whether it’s short term, long term, day trading, high volume for low profit or vice versa, you’re not bound by any one method.
The art of practice
When you’re new to trading, a Demo account - an exact replica of the Live trading environment that uses virtual funds - is the absolute best way to learn to trade without any risk and get an insight into whether Forex trading is for you. But even after you’ve made the transition to Live trading, you’ll find that a Demo account is still a unique and valuable tool for testing out different strategies and honing your skills.
The Forex market is highly liquid. What that means is that there are a lot of market participants and the number of transactions is very high, so there’s less chance of huge price fluctuations. It also means there’s better efficiency, better spreads and less possibility for price manipulation, giving you a reliable base to build from.
It’s simple, getting simpler
As Forex trading has moved from a reliance on human brokers to an online model with automatic execution and no dealer intervention, its accessibility and popularity has soared. Flowing on from that are a huge number of analytical tools, applications and programs designed to make trading a simple and more intuitive experience. When you add the extensive education now available, there’s always something new to learn, no matter how experienced a trader you are.
Trading is inherently risky as every trade has the potential to be a losing one. The trader’s job is to try and mitigate that risk and some of the simplest ways to do this include reducing your leverage and picking an appropriate strategy. Raising your leverage can be a great way to spread your capital more widely but if you’re using a high level of leverage and the trade goes against you, you could be left with a big loss. Likewise you can try chasing big profits through highly volatile trades, but the downside is that if it goes the wrong way you could be out of pocket. A tool like Stop Loss is an example of a simple way to help reduce your risk.
There’s a huge amount of data and information available to traders, to the point where it can be overwhelming. So how much is too much? Again, that depends on the trader and their strategy. An experienced trader will likely be more comfortable digesting large amounts of information while those new to the market will be more likely to concentrate on a few key metrics.
It can be exciting to experience a few consecutive winning trades, but this should be tempered with the knowledge that just one subsequent losing trade can set you back. Trading requires a high degree of discipline and should therefore be viewed as a long term strategy. Having a run of favourable results has no effect on the outcome of the next trade. All trades should be considered independently, within the context of your trading strategy and not made on the basis of simply ‘being on a good run’.
The Demo hangover
When you’re practising on, or testing with, a demo account using virtual funds, the complete lack of risk lets you trade with absolute freedom. But once you transfer what you’ve done in the Demo to a live account being funded with real money, you might find your attitude to certain trades and risk levels changes and influences how you actually place trades. It’s a basic psychological difference that all traders should take into consideration.
Choosing an unregulated broker is a bad decision from the onset and one fraught with dangers. By using a regulated broker (AxiTrader is licensed by ASIC in Australia, FCA in the UK, and DFSA in Dubai), you’ve got legal accountability in the event something goes wrong. Regulation won’t necessarily help if the market happens to go against one of your trades, but it’s there to back you up if something more untoward should happen.
As with anything, Forex trading is inherently full of ups and downs so to make it your full time job requires a very disciplined approach and a willingness to put in hard work, consistently. If you can strike the right balance, you’ll give yourself the best platform to launch a trading career.
(Updated on May 23, 2019)
The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.
Forex trading robots use computer algorithms to help determine the best price at which you should buy or sell a currency pair. Learn about EAs here.