Forex trading has grown in popularity as it has become more accessible to all types of people around the world. It is a global market with a diverse group of participants. However, while more and more people are becoming involved in forex trading, the question remains if it is possible to trade forex for a living. The short answer is that yes, it is possible to trade forex for a living with many part-time and full-time traders proving the point. Here we will look in more detail at how this is possible.
Putting in the Work
As with any new job, there is plenty of work required before you become proficient. In addition, there is a learning period, much the same as learning a new job when you are unlikely to be performing ideally and will need to learn from mistakes that you make. Forex trading requires time, effort and practice.
Getting Started as a Successful Trader
Before you begin, you need to set yourself up for success. This begins with choosing a trading strategy. To do this, you need to work out what sort of trader you are and try out strategies that will fit with your trading style and personality. With all the background work that you do to choose the right strategy to suit you, it is worthwhile to open a demo trading account to try out these strategies for yourself. A demo account will allow you to trade on the market at no financial risk. Look at charts and historical data to give you an idea how strategies worked in the past. While it is true that historical prices are not a good indicator of future performance, they will indicate which strategies have worked and which have not. It is unlikely that a strategy that has never worked will suddenly begin to work.
Trading with Leverage
Leverage is one of the reasons why forex trading has become popular and why it has become possible to trade forex for a living. Leverage allows traders to take on much larger positions than they would be able to with their own capital. Brokers may offer between 50 to 400 times a trader’s capital so that with leverage of 100:1 a trader will be able to deposit $1,000, but use $100,000. This makes it possible to significantly magnify potential returns; however, in the same way as returns are magnified, so are losses and losses can become significant with too much leverage. To be successful as a trader, it is important to limit the risk on each trade. It is recommended not to trade more than 1% of the trader’s capital on each trade. For example, with an account of $1,000, the trader should not risk more than $10 (1% of $1,000) on each trade. By limiting risk, the returns will be smaller, but the losses will never be devastating and traders will be able to return and trade again, even on the same day.