Top tips for starting your own forex trading enterprise
You won't be on the right side of a trade every time, but here's how you can maximise your chances of trading success
The rise of amateur trading as a leisure pursuit that can bring in some welcome money on the side has received its fair share of criticism in the popular press over recent weeks.
Of course, horror stories that compare trading to gambling and talk about amateurs diving in feet first are great for selling newspapers. They also provide some cautionary advice on what can go wrong when enthusiasm outweighs knowledge, preparation and sound strategy.
But when you look beyond the hype and the headlines, there is no getting past the fact that people can and do make good money trading. As a business proposition, it has plenty going for it. Start-up costs are restricted to the specialist software you might choose to invest in and the opening balance that you transfer to your trading account. And from there, the sky is the limit.
The thing to understand is that as with any new business, a trading enterprise will only succeed if you are prepared to put in hours of time, dedication and hard work, and to accept that in the early weeks, returns will be minimal, if anything.
So let’s put away both the newspaper horror stories and the rose tinted spectacles, and run through some essential things you need to keep in mind if you’re planning on making a career out of your trading.
Trading is as risky as any other start-up
The people who go into trading and fail are usually the ones who think it is a sure fire way for anyone to make easy money. That’s simply not the case. We’ve all read the statistics about more than 80% of start-ups folding within two years, and for traders the percentage is even higher.
With any start-up business you have to be truly exceptional and prepared to put in the effort. On the flip-side of the coin, there are plenty of traders who failed at the first attempt, learned from their mistakes and went on to enjoy major success.
There’s a lot to learn in forex trading
Anyone can spend an hour reading the financial press or watching Bloomberg and come away feeling as if they know it all. The truth is, forex trading is immensely complex and nuanced. Understanding what drives change in currency pairs can be as complicated as reading weather patterns and relies on just as many variables. Then there are the tools and indicators you need to get to grips with, from MACD to Bollinger Bands.
On top of all that, there is constant evolution in the very nature of the currency markets. Traders need to be as adept at cryptocurrency analysis as they are at reading the behaviour of the traditional currency pairings. In short, this is a discipline in which you are never going to stop learning, and the only place to start is from ground zero, there are no short cuts.
You need the right mindset
Speculate to accumulate is all very well, but it can be a dangerous rule to follow unless it is tempered by sound strategy. The underlying concept behind forex trading could not be simpler – market factors mean that currencies fluctuate in value against one another, so buy low and sell high. But this is ultimately a closed system, so for every winning trade there is an equal and opposite losing trade.
Even the best traders can’t be on the right side of every trade every time, and you need to accept the fact that when you start out, you’ll have more than a few trades that don’t work out as planned. Are you ready for the fact that sometimes, all that hard work will leave you coming away with nothing at the end of it?
It’s all about the strategy – study the markets
Every new business start-up revolves around a sound business plan and a clearly defined strategy. The same applies here. Study the markets, choose your area of focus and set your strategic goals. Apply all the risk management and mitigation techniques you will learn, and most of all, stick to the plan.
That can sometimes be difficult to do, particularly when times are hard and nothing seems to be going the way it should. But that is exactly the time that you shouldn’t be making wholesale changes and throwing that carefully crafted plan out of the window.
Every strategy needs a little refinement and modification from time to time, so monitor performance, learn by your mistakes and feed the new insights that success or failure give you back into the strategy. But do so in the cold light of day and with a clear head.
Keep all those points in mind, and there is literally nothing to stop you from making a successful career in trading. Good luck, and don’t give up!