Posts Tagged ‘forex trading emotions’

Should I Consider FOREX Trading as a Business?

Wednesday, January 18th, 2012

Many FOREX traders do FOREX trading as a profitable business.  Successful FOREX traders, however, have overcome certain challenges to prepare themselves for profitable FOREX trading.  Before making the decision to do FOREX trading as a business, you need to know where stand on key factors that can break your FOREX trading business before it starts.  For example, consider whether you have time to learn FOREX well enough to potentially make a full-time living from it.  Ask yourself how much you can afford to lose to make your FOREX trading business a success.  Finally, consider whether you can complete trades without emotion and with a trading strategy.  Your answers to these questions will give you clues as to whether FOREX trading as a business is right for you.

Do I Have Time to Learn FOREX Trading as a Business?

When considering FOREX trading as a business, think about how much time each day you can invest in growing your business.  You should plan to invest a minimum of 3 hours daily doing activities that build your FOREX business, such as watching FOREX market behavior, reading FOREX trading books, viewing FOREX webinars, making practice trades, studying global economic activity, and staying abreast of FOREX news.  These tasks build your FOREX knowledge base and teach you the skill sets you need to trade the FOREX profitably, such as money management skills, emotional and mental discipline, and adherence to a trading strategy.

The time you invest in learning FOREX trading as a business is as important as the money you invest.  Without proper understanding of how to use money to make money in the FOREX market, you will lose your entire cash investment quickly.

Forex trading as a business

How Much Can I Afford to Invest in FOREX Trading as a Business?

In order to do FOREX trading as a business, you must accept that you will lose money.  In fact, you will probably lose the majority of your initial investment.  Cash losses are routine and necessary in FOREX trading to become or stay profitable.  Even the most seasoned traders take losses as part of a trading strategy.  For example, you will need to take a loss if one of your pairs falls below a certain price or takes an unexpected turn for the worse.  Cash losses are just a fact of life for FOREX traders.  That said, any cash investment you make in FOREX trading as a business must be cash you can afford to lose.  Do not invest your rent money, car note, creditor payments, or any other money you need to survive.  Only invest disposable income not earmarked for savings or other living expenses.  FOREX trading as a business is not a get-rich-quick scheme.

Can I Manage My Emotions in FOREX Trading as a Business?

The emotional challenge of FOREX trading as a business is not to be underestimated.  In the same way that shortchanging your time or money investment can handicap your FOREX trading business, so, too, can shortchanging your emotional discipline wipe out your trading account in a matter of minutes.

In order for your FOREX trading as a business to prosper, you must be able to manage your emotions.  This entails such disciplines as exiting a trade according to your trading strategy and not your unwillingness to lose money, cutting losing trades despite big monetary losses, and trading only a small set percentage of your trading account per trade rather than going all or nothing.  The compulsion to take on more risk, stay in the market longer than necessary, or stay in losing trades can be so strong at times that just getting up and walking away from the computer is the only way to break the spell.  To do FOREX trading as a business, you must prepare yourself to manage compulsive drives in and outside of the FOREX market.  In the words of the Kenny Rogers hit tune, “The Gambler:” “You gotta know when to hold ‘em.  Know when to fold ‘em.  Know when to walk away.  Know when to run.  You never count your money while you sittin’ at the table.  There’ll be time enough for countin’ when the dealin’s done…”

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