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Forex trading is becoming very popular for young people these days. It can lead to high profits with flexible working hours, but it can also be very risky, and there is a lot to learn before you can become an efficient trader.
Can forex trading make you rich?
It is worth becoming a forex trader if you are willing to learn how to trade foreign currency. The profits can be high, and the work is very flexible since the global markets are open twenty-four hours a day. However, high profits also mean high risk, so you can lose money easily and quickly.
This article will explain what forex traders do and what the pros and cons are of being one. There are also some resources you can use to learn about forex trading.
It can take a lot of work to be a forex trader, so you need to know the pros and cons before becoming one.
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What is a Forex Trader?
Forex, or foreign exchange, is trading different currencies for many reasons, including commercial banking, investing, or trading. However, the two biggest reasons that forex traders work include making money and hedging prices for overseas trading.
Since forex traders work worldwide, the market is open twenty-four hours a day on weekdays.
There are forex traders in nearly every country who are constantly trading foreign currency. Since the currency is always trading, the exchange rates between currencies are always changing too.
However, it is good that there is a high volume of traders because there is always a currency available to buy and sell when you want.
The goal of forex traders who hedge prices is to get the best price on future international goods and services. They predict prices, and if they think prices will increase, they will guarantee the current exchange rate for the future in hopes of saving money.
Other forex traders trade foreign currencies hoping to make a profit. These traders are constantly monitoring the market and trade currency when prices fluctuate. This type of forex trading is very risky, but it can also be very profitable.
If forex trading did not exist, global trade, travel, and international businesses would not be possible at the level that they occur today. For forex trading to occur, we need forex traders.
But is it worth being a forex trader? Next, we will detail the pros and cons of being a forex trader.
Pros of Being a Forex Trader
Being a forex trader has many pros, including flexibility, high profitability, and low regulation.
Let’s take a closer look at these pros.
Forex trading happens twenty-four hours a day, five days a week. But the markets are only closed on weekends, allowing you to trade whenever you want. The stock market is also closed on weekends, while closing at the end of every weekday, giving investors limited time to trade.
However, you can trade forex in any timezone at any time of the day.
You can trade during the standard workday hours, you can trade late at night, or you can trade early in the morning, whatever works for you. This flexibility does not come with many jobs, so if flexibility is important for you, being a forex trader is worth it.
Another positive aspect of being a forex trader is that profitability can be very high.
The good chance of having high profits is partly because forex trading is risky, and high risk can mean a high reward. But, this is also because the forex market is extremely liquid.
A highly liquid market exists when a high volume of trading happens with a low deviation in prices or value.
Since so much currency is constantly traded in the forex market by so many traders, prices in the market do not drastically change when large amounts of money or people are trading.
The high liquidity is good for forex traders because you do not need to worry about a high volume of trades in a short period affecting your portfolio.
Low Regulation of Trading
Finally, the low regulation of forex trading makes it easy for anyone to participate in the market. A deregulated market means low fees, no barriers to enter the market, and the ability to trade with different strategies.
Cons of Being a Forex Trader
Even though there are a lot of pros to being a forex trader, there are also cons. To be a forex trader, you will need to learn a lot about forex trading first. Let’s take a closer look at the cons of being a forex trader.
Forex trading is one of the riskiest markets to trade in because of the high volatility.
Any national or international event can affect the market in a major way, whether it be negative or positive. A sudden negative change can make you lose all of your money, with no way to get it back.
You’re On Your Own
In the pros section, we discussed the low regulation of forex trading. While this is a good thing, it can also be bad since you are essentially on your own as a forex trader.
Not only do you need to learn everything on your own, but you also have to make trading decisions on your own.
Currency Rates Fluctuate Constantly
Furthermore, the unregulated market can lead to high fluctuations in the currency rates. Since there are no regulations, and global economic or political events can drastically change the trading rates, your forex can quickly lose or gain value when you are not trading.
Your Portfolio Can Change Quickly
While you can trade at any time, trading also occurs when you are not monitoring your money, leading to a quick change in your portfolio.
For example, if you are based in New York, you can trade at two in the morning since markets are open in Tokyo. However, you will most likely be asleep at two in the morning while trading continues in Asia.
Learn How to Trade Forex
Forex trading can be a very difficult career because there is so much you need to learn about foreign currency, the markets, and trading strategies.
If you think becoming a forex trader is worth it, these resources will help you get started learning everything you need to become a forex trader:
- ForexSignals.com: Don't just trade, trade like a pro. Inside our 5-star Trading Room we're going to arm you with the education, the tools, the motivation and the market analysis you need to make it as a confident trader.
- Forex Trading: The Basics Explained in Simple Terms: This is the perfect book to start reading if you’re a beginner. You will learn the basics of forex, how it works, and all the important terminology you need to know. This book also comes with some bonus features from the author, including a private forex group, access to live trading videos, and more.
- Forex Trading for Beginners: After you learn the basics and the terminology, you can use this book to learn about deciphering the markets. The markets, trends, and data you will use when you are a forex trader will be difficult to understand, but this book will help you understand everything.
- Forex Trading Using Volume Price Analysis: Finally, this book will help you practice some basic forex trading skills. You will work through different forex charts using different strategies to build your skills and help you find a trading strategy that works for you.
Should You Become a Forex Trader?
Forex trading has a lot of flexibility, and it can be a highly profitable job. However, trading foreign currencies can be very risky, and currency rates can change at any time.
If you think forex trading is a good career for you, make sure to utilize the books above. After you learn about forex trading and start practicing, you will see how forex trading can be worth it with time and effort.
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