Are you thinking about starting to trade Forex? Ask yourself these six questions first to get a clear idea if it’s right for you and what are your expectations from trading.
Forex trading is a really popular activity these days. Many people from around the world have started trading foreign exchange currency to earn an extra income with a pretty minimal effort.
This growth in popularity has made the Forex market become the biggest financial market in the world. Fun fact: the market is also 2.5 times larger than the global GDP, being worth approximately $1.93 quadrillion. Plus, find out that over %5.3 trillion are traded in the market on a daily basis.
Sounds intimidating, right?
Well, truth be told: Forex trading isn’t that difficult. Although it isn’t a risk-free activity, trading exchange currency is now accessible to everyone who owns a computer and a strong Internet connection. But, the real question is, “is it right for everybody?”. There’s no easy answer to that because the truth is, it depends.
So, before you start trading Forex, ask yourself these six questions and think things out to see if Forex trading is suitable for you.
Read How To Start Forex Trading: The Ultimate Beginners Guide.
1. Am I prepared to trade?
Perhaps the very first question you should ask yourself before you start trading is whether or not you are prepared for this commitment.
Yes, you’ve read that right: Forex trading takes a lot of commitment.
Blame it on exaggerated marketing, but although trading Forex is often promoted as an easy and quick way to earn some extra money, this activity takes patience, consistent trading, and a lot of experience to bring you a satisfactory profit.
So, to know whether or not you are prepared to join the trading game, you should consider things like:
- Do you have the time to trade?
- Do you want to invest resources in trading education?
- Do you understand how the market works?
Your answers to all these questions will let you know if you’re really ready to enter the trading arena.
2. What are my Forex trading goals?
The next thing you should figure out is what are your trading goals. It’s never wise to start an activity, especially one that could cost you big, without having a clear idea of what you want to achieve. What’s more, you don’t just have to set your trading goals. You also need to set realistic ones. Plus, once you know your goals, you need to become aware of the amount of work and commitment you need to put on the table to achieve them.
So, think of what you’re hoping to achieve through Forex trading. Maybe you want to make yourself a millionaire through trading foreign exchange currency. If that’s the case, expect to trade consistently for some time now and to continuously work towards your improvement. If you only wish for a small passive income, you may be able to invest less time and resources in your trading activities.
3. Can I be a self-disciplined trader?
Successful trading requires discipline. Not only that you have to stick to plenty of trading rules, but you also have to be able to keep your eyes on the prize all the time.
From setting clear-cut trading goals to directing your focus to what needs to be done and remaining focused despite mistakes and losses, these are all traits of a self-disciplined trader.
When you enter a trade, it’s not enough to sit in front of the computer and hope for the best. You need to have a target in mind, make the right decisions to achieve it, and be able to overcome losses if they occur and start again. Find out if you can do all that.
4. What currency do I want to invest in?
As a Forex trader, you need to know your currencies very well. But, you simply can’t do adequate research and know currency inside out unless you know exactly what you want to invest in.
So, analyze and understand the most commonly traded currencies and decide what you want to invest in. Next, learn every insight you can about the currencies you want to trade, including the ups and downs and the events that impacted their value.
Pro tip: Don’t keep all your eggs in the same basket. One of the golden rules of all investors and traders is to invest in multiple currencies because having a diverse portfolio helps you manage financial risk better.
5. What do I expect from the Forex broker?
One of the first steps you’ll make as a Forex trader is to choose a broker. But the truth is that most beginner traders don’t take this step too seriously, leading to mistakes that will cost them big.
Now, there are many things to consider when choosing a broker. Some factors are crucial, and some depend on your personal preferences and trading goals. More precisely, essential factors to consider when choosing a broker include:
- Reliability and trustworthiness
- Advantageous trading costs
- A good trading platform
- A secure trading platform
- Enough trading tools and trading educational resources
Besides these things, you also need to consider what you expect from the broker, depending on your personal needs and preferences. For example, maybe you want to learn more about trading. In that case, it makes sense to look for a broker who offers plenty of learning materials and access to financial news. Or, maybe you are a trader that trades in high volumes. In such a case, it makes sense to look at the list of high leverage forex brokers and choose one from there.
6. Can I control my emotions while trading Forex?
Last but not least, you should ask yourself if you are able to manage powerful emotions while trading to avoid making poor investment decisions.
Emotional trading is a common concept in the Forex trading world. And, it is definitely something that most successful traders succeed to stay away from. It basically represents allowing feelings and emotions to impact your decision-making when trading.
Trading isn’t a risk-free activity, as mentioned above. It can also involve significant losses, leading to emotions like frustration, sadness, fear, despair, and many other negative feelings. In contrast, winning a substantial amount of money can also impact your decision-making when trading.
So, it is essential to determine if you can manage your emotions as a trader. If you believe that your feelings may influence you, it is wise to learn how to avoid that.
