Should I trade Forex?
“Should I trade Forex?” This is a question a lot of traders may have already asked themselves. Although there’s no right answer, there are many pros and cons to bear in mind. In this article, we are going to talk about benefits and disadvantages of trading. You can find which are the main advantages of turning Forex trading a source of income and the drawbacks of doing it.
Choose when to trade
It’s you who decide when to enter and exit the market. This is an important advantage since you can choose to trade only when the odds are in your favor. When the market is too volatile and there is a lot of uncertainty about the future, you can simply withdraw from trading. Besides, if you trade during your free time, you can easily adapt to changes in your working hours. Since Forex market is open 24 hours during weekdays, you can trade even if the trading session from your region is already closed or didn’t open yet.
No need to rely on someone else
A major advantage of trading for a living instead of having a usual job position is that you don’t need to rely on another’s work to perform well. Many times, you may find yourself dependent on what your colleagues do and that may lower your performance. In trading, you are only dependent on yourself. You can easily create your own strategy and test in your own way. Of course, you can and should share your thoughts with other traders to exchange points of view. However, ultimately, you can always disagree with what others say and do it your own way.
You don’t have a boss
Besides not having to rely on what others do, you also don’t need to answer to anyone. Have you already thought about not having to listen to your boss asking what you have already done? What about your annoying colleague which is always telling you to do things differently? With trading, all these problems disappear. Suddenly, you’re on your own. You trade when you want in the way you want and no one will control your actions. There’s a feeling of freedom which cannot be found in a regular job.
The fact that there’s no such thing as an “authority” also means there’s no outside pressure. We all know how stressful it can be to always have your colleagues or your boss pressuring you to perform better. Fortunately, none of these happen in trading. The only pressure that exists is the one you put on yourself.
Market and trading opportunities will always be there
There are more than 100 pairs which you can trade 24h a day. Opportunities will always exist independently of the trading session. You can choose the session you prefer to trade in and be sure there’ll be a chance to make money. Besides, you will always have a second chance. If you have a bad trade or miss a good trading opportunity, the market will provide you another chance to perform better. If you have a bad day, the market will always be there tomorrow and opportunities will come for you to recover.
Entry cost is low
All you need to trade is a small amount of money and to open an account in a bank or brokerage house. You may have to pay a small execution fee and the spread but no more than that. This is a great advantage of forex trading over stock trading since commissions are usually higher when trading stocks. Besides, commissions are not fixed like in stocks and futures. As commissions are in percentage, this does not negatively impact accounts with a small capital.
There is of course expensive equipment and software that you can buy to help you in trading. However, it’s possible to trade using simple strategies and achieve good results without a significant investment.
Access to free information
In stocks and futures, where exchanges are centralized and controlled by big companies, you’ll have to pay for any extra you may need. Whether you need intraday data, fundamental news, depth of market, in other markets, it always comes with an associated cost. But in Forex, you can easily have free access to this kind of data in any timeframe, for the last dozens of years. The main problem is not accessing information, but filtering what’s important or not.
This easy access to a lot of information is also relevant if you want to test a strategy. Some platforms like Metatrader offer you a tester in which you can backtest a new strategy and see what are the results.
We already discussed some major advantages of Forex trading. However, there are also some major cons for you to keep in mind.
There’s no fixed salary
One of them is not earning a fixed income per month. The money you earn will depend solely on your performance during that month. This means you can earn a lot in one month, not earn nothing at all or even lose money. If you prefer to earn a fixed income in spite of how well you perform, it may be better to not depend only on trading to pay your bills!
It’s a risky activity
The market is constantly changing, and your performance will depend directly on how well you adapt to this changes. So, if you’re risk averse, trading may not be right activity for you. You need to be constantly attentive to what’s happening in the market to not be caught off guard. It’s very important to know how to deal with uncertainty and be able to manage your account having that into consideration. Improving your knowledge by knowing what are the Intermarket relationships or what money management strategies exist to protect your capital can help you to overcome this problem.
It can become stressful
The amount of uncertainty and the pace at which prices change may become very stressful. It’s very important to keep calm even when the market is going against you, otherwise, you may end up taking wrong decisions. Being able to withstand high levels of stress is one of the major requirements to be a successful trader.
This may be particularly evident in scalping. Since scalpers try to get profit from small changes in prices, they need to act really fast to catch the beginning of the movement. This may become very stressful since they need to be very attentive to open and exit their positions really fast.
The Bottom Line
Overall, it will always come down to your own personality and interests. If you’re the kind of person which can handle stress easily and even like a bit of uncertainty, maybe Forex trading is the right activity for you. If you’re tired of your job, you may even think about trading for a living, if you’ve been consistently successful in the past.
However, if you prefer not to be dependent on uncertainty and like to be sure that you’ll have a fixed amount of income at the end of the month, maybe trading is not for you, at least for a living. You may want to trade more conservatively in your free time. This way, you can do something you like without being too exposed.