Traditional, brick-and-mortar businesses have come under increased pressure of late, thanks largely to inflationary pressures and the rampant acceleration of commercial energy prices.
While new Prime Minister Liz Truss has moved to cap domestic energy prices at £2,500 per annum for a period of two years, support for businesses has been limited to just six months.
As a result, some firms are still facing the prospect of their energy bills rising by more than 500% in the near-term, leaving some fearing for their immediate futures.
With this in mind, it’s little wonder that people are turning to online business models with low overheads and techniques such as forex trading to earn money. But is this a viable prospect, and what steps can you take to turn forex trading into a lucrative and sustainable career?
The numbers behind forex trading
The forex market has grown exponentially of late, reaching a daily trading volume of $6.6 trillion in April 2019 (up from $5.1 trillion just three years’ previously).
This has created a market worth in excess of $2.409 quadrillion in 2019, while this value continues to increase incrementally year-on-year.
Interestingly, it’s the US Dollar (USD) that dominates the forex market and retains a disproportionate level of influence, featuring on one side of 88% of all forex trades.
Similarly, the seven major currency pairs (each of which pits the USD against other major currencies such as the British pound or Euro) comprise 68% of the market’s total trading volume. This highlights the appeal of such pairs, which are inherently liquid and easy to buy or sell in the real-time market.
There are other interesting insights that define the contemporary marketplace. For example, while the market is undoubtedly male dominated, it’s female traders that achieve better results and higher levels of profit.
Overall, female forex traders are known to outperform their male counterparts by 1.8% globally, suggesting that forex entities and organisations can profit by increasing female representation among their numbers.
How to create a successful forex trading career
Whether you’re interested in international currencies or have experience of forex trading on a part-time basis, the growth of the market suggests that now may be the ideal time to transition this into a full-time career.
It should be noted that just 30% of forex traders are profitable, however, so you’ll need to act cautiously whether you want to create an FX business or operate as a sole trader. Here are some considerations to keep in mind:
1. Build a base of knowledge and experience
You’ll need patience and time to thrive as a professional forex trader, as you’ll have to build a vast base of knowledge (and ideally experience) if you’re to succeed over time.
Make no mistake; knowledge is the main weapon in your armoury as an aspiring forex trader, especially at an exalted or professional level. This can be sourced through numerous means, from books by proven traders and expert webinars to reputable online brokerage sites.
Make no mistake; knowledge helps to build an understanding of the macroeconomic and geopolitical factors that impact real-time currency prices, from inflation and interest rates and international trade flows. Such comprehension also cultivates a keen sense of determinism, which helps you to identify the underlying laws that govern change in the forex market.
We’d also recommend building on this knowledge by using a demo account. This affords you access to a simulated and risk-free marketplace, which replicates real-time conditions and enables you to enhance, hone and backtest different trading strategies.
2. Use leverage wisely
Both margin and leverage play a pivotal role in forex trading, with the former describing the amount of money required to open a position (or deposit) and the latter reflecting the multiple of exposure to account equity.
As a result, leverage is usually expressed as a multiple (up to 200:1 through some reputable brokers) and can be accessed to open disproportionately higher positions and more sizable returns.
However, highly leveraged positions can also see you incur significant losses if the market moves against you, so it’s important to use this wisely and conservatively when chasing sustainable gains.
More specifically, you should cap your leverage in line with the value of your starting capital and appetite for risk, while considering your wider trading strategy and average position size.
3. Finally, manage risk and test your skill level
The key to succeeding as a professional forex trader is achieving consistent returns over time, which in turn requires you to minimise loss.
Fortunately, your online brokerage account features a number of tools to help in this respect. Take stop losses, for example, which are optional and enable you to automatically close your positions once they’ve incurred a predetermined level of loss (which can be set according to your strategy and the wider market conditions).
This way, you can safeguard your capital and avoid seismic losses, without necessarily compromising your potential returns from the outset.
You can also take our educational trading quiz to test your current level of knowledge and ability.
This enables you to manage your risk from the outset, while highlighting potential areas for you to improve on before you become a full-time trader.
The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision. London Loves Business bears no responsibility for any gains or losses.