If you are thinking about making the jump and investing in a trading account, there are a lot of choices and a lot of decisions that you need to make. Your family, your friends, and people randomly over the internet will want to give you advice. They will want to point you in the direction of what they like and what they think is right. This can be helpful but it can also be detrimental. With so many different voices and opinions being thrown at you, it can make it hard to keep sight of what it is and the reasons as to why you want to trade in the first place.
With this in mind, we have come up with some questions that you should be asking yourself. They will help you to really understand why it is that you are looking to trade and why you should or should not be doing it. You may not be able to answer them all or you may not be sure of the answer and that is fine. Use this as an opportunity to work them out, as this will then enable you to know whether trading forex is the right thing for you.
What is your end goal with trading?
When people look at trading, they often see the big numbers and the fortunes that could be made. If this is your end goal then you could be in for a little bit of a surprise. Things aren’t that simple and people very rarely see those larger numbers in their accounts. It is important that you have a more realistic end goal, something like being able to quit your job. This is achievable. A lot of people do it and it is certainly something worthy to aim for. Ensure that your goal is manageable and that you do not forget it, keep your eye on it to help you remain focused. People Will say that it is wrong or bad, but it is your goal, and if you believe in it, you should be able to achieve it. Just ensure that you actually have one as you are not simply trading blind, there will be times where it will be hard to motivate yourself.
How does the idea of trading make you feel?
Before thinking about this, have you actually traded before Either real or demo accounts? If you have then think about it when you were actually trading, if not, just think about how you would feel about trading with your own money. Many people like the idea of trading or the idea that they will be able to make money, but when it actually comes to trading or to actually risk some of your own money. If you feel nervous about putting your money on the line or taking a risk with it then trading may not quite be the right thing for you, or you will need to ensure that whichever strategy or trading style that you are going for suits your risk tolerance. You need to be able to accept a certain level of risk if you want to trade. Also, consider your thoughts and feelings towards learning, many people do not like to sit down and read a lot of information. If you can manage this then it’s a big plus. If you cannot then it could be a long journey ahead of you.
Do you have enough time to trade?
Trading takes time, a lot of time, if you were to think about your average week, excluding the weekends, how much time do you actually have free? You need to consider your other hobbies, your family, your social life, and of course work. 99% of people start trading as a side hobby, something to do after work or on their day off. It’s great that you are doing it alongside your work, but this will end up taking away pretty much all of your free time. There will also be some limits to what you can do, some strategies and trading styles require you to be in front of the computer for extended periods of time while others only a few minutes. So before you decide how you want to trade you will need to work out which style would better suit you.
Do you have enough capital to trade?
Trading takes money. While it has become increasingly accessible, with accounts being able to be opened from as little as $10, it does not mean that you will be able to be successful with that amount, let alone make enough to achieve the goals and targets you would have set for yourself. If you want to be successful and to use proper risk management techniques then you will need to ensure that you have enough money to support it. Your capital needs to be in line with your goals, so if you want to earn $10 a month, then a $100 account may be enough, but if you want to earn $1,000 per month then you will need at least a $10,000 account in order to do it safely. Trading can be an expensive game, and remember that any money that you put in is being put at risk, you are able to lose it all regardless of how good your money management is.
Do I have the determination and dedication for it?
Trading takes a lot of dedication and commitment to be successful. It is true that anyone can trade, anyone can enter into a trade, but it takes time and a lot of effort to fully understand why you are putting on trades and also which trades you should be taking. If you are someone that gets bored easily and likes to move onto the next thing, then trading may not be right for you. You need to go into trading with the idea and understanding that this is a long term thing, we are talking years or even a lifetime. You won’t be successful straight away, in fact, the majority of people who trade quit within the first year either due to losses or simply getting bored of it. Know that you will be here for the long haul, and if you are the sort of person with the personality that can deal with that, then it is a good start.
The start of your trading journey comes far before the first trade has been made. It comes far before you have even signed up with a broker and it has even begun before you have read your first educational article. You need to think about whether the prospect of being a trader is right for you right at the very start. If you are not sure or don’t think it is for you, there is nothing wrong with that, but you do not want to then still get involved, spend hours of your life learning and trying just to confirm that it is not right for you. Simply look for something that is instead. If you feel that it is right, then start learning, you are now embarking on a long and hard journey, but one that can reward you with pretty much everything you need to stick with it and continue to learn.