Is trading forex a great opportunity to make additional money?
There’s no doubt that the coronavirus pandemic has had a huge socio-economic impact in the UK, with the poorest fifth of working-age households estimated to be 20% poorer than their French counterparts.
With disposable income levels having taken a significant hit through 2020, it makes sense that Brits should be looking for new and passive ways of generating income as a way of supplementing their existing earnings.
But is forex trading a viable way to make additional money? We’d argue that it is, but you’ll need to keep the following in mind if you’re to achieve success!
Invest Wisely and Consider the Risk-reward Balance
Let’s start with the basics; as you’ll need to invest your capital wisely in the forex market if you’re to achieve sustainable success over time.
More specifically, you’ll have to consider the risk/reward proposition posed by forex trading, particularly given the volatile and derivative nature of the marketplace.
For example, you can trade currencies on margin, which affords you inflated leverage of up to 100:1 in relation to your deposit size. This allows you to control huge amounts of capital with a relatively small amount of money, potentially increasing your gains significantly over time.
However, you can also incur disproportionate losses through this model, so you’ll need a healthy appetite for risk and strategic approach to investing your capital.
Planning is Key to Your Success
While this may sound obvious, it’s important to note that forex planning doesn’t just involve accumulating theoretical knowledge from books, websites and seminars.
In fact, it also requires you to test and hone your carefully developed strategies through a so-called “demo account”, which should be readily available through your futures broker or online trading platforms.
This enables you to bridge the often huge gap between theoretical knowledge and practical trading experience, as demo accounts provide a simulated, real-time marketplace in which you can experiment without any discernible risk at all.
You Must Avoid Emotive Trading at All Costs
Determinism is often considered as a key characteristic of successful traders, as this enables you to recognise the underlying rules and laws that govern change in the marketplace.
This is particularly true in a volatile and competitive market like the foreign exchange, and there’s no doubt that a keen sense of determinism can help you to avoid emotive and hasty decision making.
Make no mistake; emotive trading is one of the biggest challenges for any aspiring forex trader, as you must make your decisions based on technical analysis and a keen understanding of specific market trends.