Considering Trading Forex as a Business? Is it Possible?
Forex trading can make a great side gig. This way, you can always fall back on your full-time job, if you lose your trading capital. But is it possible to trade forex as your major business?
Anyone can start a forex business. In fact, not only is it possible to set up a forex trading business, it is also quite possible to maintain a successful one.
But if you’re planning to turn forex into your main source of income, you would have to treat it as a business, and not just as a side hustle. This means devoting your time, efforts, and investments entirely to it.
Advantages and Disadvantages of Starting A Forex Business
Just like every other business, a forex business has its own pros and cons. Proper considerations of these factors can help you decide whether it's something you really want to do.
If you start a forex business today, here are some things you’re going to enjoy.
You can work anytime, and from anywhere. The forex market is open to traders 24/7 from Monday to Friday except on public holidays. Everything you need to access the market is an internet connection and your computer. You don’t need to visit a physical location to run your forex business, because there are just no geographical limitations to where you can work from.
It also means that you can work any time of the day (or night). However, putting the active trading sessions of your favorite currency pairs into consideration is important when choosing your working hours. But beyond that, you control your work time.
Vast trading opportunities. Forex is an online business in which opportunities abound. You always have a chance to make pips in various market conditions. There are tricks to approach even dead markets, although your profits might be limited. Also, you have access to hundreds of trading instruments. You’re never short of opportunities to make your own fortune.
Leverage. Simply put, leverage is the loan your broker readily lends you to allow you to take on potentially bigger trades. You don’t need any paperwork besides the general KYC you did when creating an account with your broker.
In forex, you can borrow as much as 1000 times your capital using leverages. When wielded rightly, leverage can be one of the best things that could ever happen to a forex trader.
A forex business isn’t all sugar and honey. Here are some of the drawbacks you should expect to come across when starting out:
High volatility, high risk. We’ve mentioned above that the high leverage opportunities are an advantage. Well, that’s only half the story. Forex leverage could also turn against you and be your biggest enemy. This is due to the high volatility and risk of the business. With bad risk management, you could lose all your capital in the blink of an eye.
Complexity. Contrary to what many people might tell you, forex trading is not easy. Successful forex trading is not impossible, but it’s surely not a straight and easy path to follow. There are complex intricacies about the market that you have to understand, like how fundamentals affect the market, or how to build a trading system.
When it comes to forex trading tools alone, there are over a million out there. This may be a good thing until you have to pick just one, and that’s when the decision paralysis kicks in. In addition, knowing the best strategies to use per trading session is also a skill that takes time to master.
Besides those, there are some more psychological aspects that make up the big puzzle. For instance, knowing why most forex traders fail can help you keep your account afloat. It would also aid you in learning about the common mistakes of novice forex traders.
What You Need to Set Up a Forex Business
Now that you know the potential pros and cons, you might be facing when starting a forex business, here are some things you would need to get started.
Proficiency in Forex. This probably goes without saying. You don’t apply to be a doctor without knowing how to treat people. So, using the same logic, you must be proficient in forex before you actually start forex trading as a business.
A Business Plan. Like in every other business, one of the first things to do is to create a detailed business plan. This plan should describe everything you intend to achieve with your forex business. It should also include steps on how you plan to reach your goals.
A good example of what should be in your forex business plan is what currency pairs you intend to trade and how much time you want to dedicate to trading. Your profit projections and strategies to mitigate risks should also be included in your business plan.
Gather A Substantial Capital. Can you start a forex business with $100? Maybe you can. But is it advisable? No. Unless you want your forex business to grow at an agonizingly slow rate, or you intend to take an exceedingly blind risk, starting a forex business with anything less that $1000 might not be the best idea.
A Respectable Broker. You may not completely understand the importance of choosing a reliable broker until you start handling huge accounts. No matter how little your forex business capital is, you expect the business to grow with time, and your forex account with it. When this happens, you want to have established your business with a broker that executes your trades on time, gives you the least stressful withdrawals, offers low spreads and reasonable leverages.
Trading forex as a full time trader culminates in the things we’ve mentioned in this article. But it’s easier said than done. You have to put in a lot of work, dedication, and time.