Should You Trade Forex or Shouldn’t?
Forex trading which is often though as an easy way to make money, is very tempting but in reality it is very difficult. The Forex market is the largest and most liquid market in the world, however Forex trading has its disadvantages due to its high liquidity and high risk.
We have complied a list of reasons why traders should and shouldn’t trade forex. Every aspiring forex trader should ask himself why he wants to jump into forex trading before getting started.
Why You Should Trade Forex
#1. You like the idea of managing your trading anytime, anywhere
The Forex market is open 24 hours a day on weekdays, allowing traders to trade at any time of the day or night. It offers flexibility for traders who want to trade part-time as there are no opening or market closing times. However, the trading volume is different depending how many sessions overlap. In addition, it often decreases when there are bank holidays in major sessions.
#2. You like studying technical or fundamental analysis
Forex trading is often requires deep knowledge of price studies charts and technical patterns therefore if this sounds something you like then forex trading may be for you.
The impact of news is also powerful in the forex market, as currencies react quickly to macroeconomic news, political events and economic data. Therefore, as a forex trader you should monitor the economic calendar for fundamentals to see when the price of a currency pair can open up and break through critical levels thanks to higher volatility.
#3. You can manage a high-risk environment
Forex market can be a volatile market, so you need to manage some degree of risk. To better protect your trading capital, it is important to have a sound risk and management system with rules to follow.
For example, you should determine your stop-loss and take-profit levels before entering the market. In this way, you will already know how much you will already lose and how much you can expect to win from your position. This is what it is called the “risk/reward ratio”.
Another example is adjusting the size of a position based on current conditions and the evolution of trading capital. These rules should be part of your trading plan which you should stick and follow.
#4. Develop a trading plan and follow your method
The most essential factors in trading are commitment, patience and dedication. Having a trading plan to follow when trading is important if you want to be successful. However, you need to stick to it and be committed to follow as well as have patience to open/close your positions according to your conditions.
#5. You are willing to take advantage of a growth market with high liquidity, volatility and leverage
The high trading volume increases market liquidity. This means that traders can start trading easily and quickly, while mitigating the risk of potential price manipulation by others. For example, you can use trend following methods and position trading strategies that take less time than short term trading such as scalping or day trading.
Why You Should Not Trade Forex?
#1. You do not have money to lose
The forex market industry can be volatile and there is always the risk of losing money when trading currency pairs. Therefore, you need to add margin trading and leverage.
#2. You don’t know what you are doing
You should not trade if you jump into forex trading without knowledge. First, you need to ensure that you know at least the basics of the markets, what factors affects the markets and how trading works. In addition, you need to have a trading strategy that suits your trading style and risk management rules that will allocate your funds to trades.
If you do not have any trading experience then you need to think twice, as forex trading might not be right for you at the moment, until you educate yourself.
#3. You can’t handle losses
Important factor in this industry is the forex trading psychology. When making trading decisions two things can happen, you can be right and and make money or you can be wrong and lose money. You need to understand and be prepared -losing is part of the game. It is ok to be wrong and if you can’t handle losing, you won’t be able to be profitable in the long term.
#4. Unwilling to take risks
Forex trading can be a risky activity due to rapidly changing market conditions, high volatility and leverage. Huge returns can be made in the forex market, but these types of returns are not without risk, especially when using leverage. So if you are generally a person who is not taking risks then Forex trading is not your personality type.
#5 You don’t have time
There are several trading styles available when trading currencies, each of which requires a certain amount of time in front of the screen. For example, you can use trend following methods and position trading strategies that take less time than short term trading such as scalping or day trading. Remember that it takes time to learn trading and the forex market and develop a proper trading plan. Set aside time to devote to this activity before you start trading any currency pair.
Conclusion
If you want to take advantage of forex trading, we recommend using a demo account before risking real money in your trading account. Unless you try your broker’s trading platform first, your chances of success are low. This includes real-time charts and trading tools, as well as trading conditions to test your own trading system.
