Why Forex Trading Is Or Isn’t For You

Last Updated July 23rd 2021

6 Min Read

Forex market - it is the most heavily traded market in the world. It is also an easy market to get into where you can open a trading account without a huge investment capital. But sometimes this highly volatile market becomes a place where you can suffer huge losses. At the same time, the high liquidity that runs all day is favourable for traders with varying levels of experience. But then again, there is a high risk if you have limited trading knowledge in this high leverage market.

There are countless benefits to forex trading; however, there are associated risks with it. If you are considering forex trading as a potential investment, you’ll need to make sure that it is the right market for you. This article will give you a good idea of whether forex trading is right for you or not.

Forex stands for foreign exchange and refers to the buying and selling currency values with the aim of making a profit.

Forex Trading Is For You:

✅ If you find the idea of trading 24 hours a day exciting:

Unlike stock trading, where you are limited by time and location, forex trading can be done 24 hours a day, 5 days a week. Forex trading does not have any opening hours and as long as there’s a market open somewhere in the world in one of the major forex exchanges, deals can take place. So, if you like the rolling hours of the forex trading market, then currency trading is for you.

✅ If you can handle the stress in a high-risk environment:

The high volumes of currency trades make this global trade market enormously volatile. You can benefit from leverage, but forex trading can easily turn into a stressful situation, without a solid knowledge about finances and currency trading. If you love to work in high-risk situations and deal well under stress, then you should be a forex trader.

✅ If you have developed a trading plan and follow a strategy:

Forex trading needs a sound long-standing strategy and trading plan that requires knowledge and a keen understanding of the global happenings and how currencies can be affected by political, economic, and social events. If you think you can research about the markets and keep your forex trading performance at its best, forex trading may be for you.

✅ If you have a sound knowledge of technical and fundamental indicators:

There are a few must-know indicators when it comes to fundamental and technical analysis. If the vast range of technical and fundamental methods used to trade in the financial markets do not appear daunting to you, then you should take the plunge into forex trading.

✅ If you want to take advantage of a highly liquid, volatile and leverage market:

There is a significant level of trading activity that happens in the forex market which increases the liquidity of the market. In a liquid market, a seller will quickly find a buyer. The availability of leverage allows you to open a high position with a relatively small amount of capital.

Forex Trading Is Not For You:

❌ If you do not have an appetite for risk:

Forex trading can be inherently risky, given the volatility involved in the sector. Unless you have a good amount of mental readiness and grit to bear any possible downsides in your investments, this may not be an ideal business to be in. Someone with an aversion to risk is better off not trying a hand at being in the forex market. Recheck your appetite for uncertainty and risk before plunging into the world of foreign exchange.

❌ If you do not have some funds you can afford to earmark:

Now, even if you have the required appetite for risk, remember that this is a volatile market and settlements would need to be made periodically. You will be required to bring in some capital as the leverage for the margin trading. The possibility of a loss in transacting can jeopardise the hard earned money you use as capital. If you do not have a spare fund to keep aside, it is best not to dig into your savings that are meant for your living expenses. Taking a loan also comes with its risks and will require you to be aware about adverse results in forex trading.

❌ If you don’t have the aptitude or required knowledge levels:

Entering any domain for which you don’t have interest or aptitude can be a dangerous decision and even counterproductive.

All segments of the financial market need high levels of knowledge to operate and make a profit. But the forex market demands particularly sound understanding to withstand the choppy conditions and make money as well. It’s best to avoid forex trading unless you are confident of domain knowledge.

❌ If you cannot spare time and attention:

As is the case with other areas in the financial market like stocks, mutual funds and such instruments, forex trading also is demanding of time and attention. Without meticulous tracking and constant alertness to developments in the forex market, returns may be low or even cause losses.

❌ If making profits is your singular aim:

Finally, as we saw above, you need to have an appetite for risk, have a tidy sum you can afford to earmark, have an aptitude and be knowledgeable about forex trading, and can also afford to spare time for this endeavour. Without all these, jumping into the world of forex trading is not a good idea at all.

That brings us to the final reason why forex trading may not be for you. Going by the success stories of those who have made a killing from this, people take up trading in forex to make a fast buck or because they were successful in other financial market instruments. Dabbling in the forex market is also not for those who expect a quick buck or refuse to accept losses and stay invested for profits and tend to lose more.

So, now that you know what takes you to become a forex trader and what‘s not. Before you take a step into forex trading, you should carry out extensive research and ensure you understand the ins and outs of the market.