The foreign exchange market is the biggest and most popular financial market in the world. Every day, more than $5 trillion (£3.5 trillion) is traded by individuals and organisations, and some serious money can be made. It does take dedication and commitment to consistently turn a profit, however. Not every trader can dedicate enough time to treat trading like a full-time job, but whatever proportion of your life you do give over to trading should be taken seriously. An occupation that actually costs you money could be deemed an expensive hobby, and if that’s all you’re looking to get out of it, maybe you should take up classic car restoration instead.
In order to treat your Forex trading like a business, you will need to account for all your costs. Your successful trades not only have to outweigh your unsuccessful ones – and there will be plenty of those over a long enough period of time – but they also have to cover your expenses.
These will include the spreads and/or commissions charged by brokers for carrying out your orders but could also include a number of other items. You might need to invest in an up-to-date PC if you do not have one, and you might also wish to purchase software – your trading platform will be hosted by your brokers, but you might want to complement this with various analytical programs. You might also subscribe to periodicals or research services. You can even include the costs of the electricity you use and the other costs of using your home as an office.
In order to make a consistent profit, you will have to make more profit than losses on your trades and cover all your expenses. Statistically, you don’t need to make more winning trades than losing ones; a smaller amount of larger wins may be enough to compensate for a larger amount of smaller losses. The trick (and it can be a difficult one to pull off) is to take smart, measured risks that will yield high returns when successful and which outweigh the risk factor.
When you know the general range of your expenses, you can also make goals that you are looking to achieve and, from this, you can work out and define your capital requirements. It’s important not to treat Forex trading as a get-rich-quick scheme. The successful traders tend to be those who put in the effort, working consistently and methodically and ploughing profits back into the account, just as you would do with any other fledgling business. It may be tempting to simply throw more money in from other sources, but it’s important not to over-commit or use more than you can afford to lose.
Create a business-like environment for your trading, set up a routine, and stick to your chosen trading strategy that fits with your personality, resources and time commitments. Invest in the business in terms of time and learning and you are more likely to make it a success.
You can learn how to make the Forex market work for you by attending one of our free 2-hour seminars. Click here to find a forex seminar near you now.