As with all professions; with good, there has to come some bad. This post will take you through the far less glamorous side of Forex trading and the stress that comes with it! We will look at the main issues that traders face, including problems when trading your own personal account.
The short answer to the title question is that Forex trading can indeed make you a very successful living. However, the so-called "gurus" and coaches rarely mention the difficult side of the industry. Neither does the copious amounts of educational material on the internet.
Before we go into the details of the article, it is important to understand why we never hear or read about the stresses of Forex trading in forums and books and indeed courses that we may have purchased.
Why We Never Hear about the Stresses of Forex Trading
The reason is two-fold. Firstly, it doesn’t pay to put your customers off from buying your products. Secondly, most of those teaching have never actually traded in a professional capacity. I believe it is very important to understand every aspect of the business before fully committing yourself to it.
The most common dream of a new Forex trader is to go online, read a book and then become fully self-sufficient; to trade their own account and make a consistent living from home.
The reality is far different.
Imagine having guaranteed bills and obligations but no guaranteed income. This is the exact scenario that drives people into full-time employment in the first place. The risks associated with self-employment are the exact same risks that a Forex trader faces when going it alone.
The difference is that Forex trading is usually a completely new industry. And how much money you make from trading is completely out of your sphere of influence.
When this is circling around in the back of your mind and you have just had a few bad days trading, it can very quickly become extremely stressful. Because at the end of the month, you still have to pay your bills.
A common scenario is having a negative month trading; having to use some of your trading capital to survive and then having to take more risk on what is left to make money in the future. This is just one of many situations which will lead to even bigger losses.
This level of stress can wreck havoc with your life. It is not to be taken lightly and should be accounted for well in advance of quitting your job and trading full-time.
How to Avoid These Scenarios
First of all, NEVER just pluck profit forecasts out of thin air (it’s amazing how many traders do this). Only base your profit predictions on your past history that you have actually achieved on a trading account, by physically taking the trades.
Anything else, including back-testing, is absolute nonsense. It will hurt you in the long-run.
Secondly, ensure that you have a financial buffer in place that you can use to cover your costs without eating into your trading capital and without any draw-downs.
The minimum you need is enough to cover 6 months bills and living costs. The longer you can do without income the better.
Finally, work out how much capital you need based on your existing history. Do NOT use leverage to quickly grow your account!
Leverage (and the abuse of it) is one of the biggest killers of new traders. Avoid it
As a percentage, work out what your average profit is each month. Then, ensure you have enough capital to generate a figure that will support you without using leverage. The worst case scenario is that you will fail to make much and may even lose a bit instead. But with leverage, the worst case scenario is always so much worse.
These are simply ways to lessen the stress before you start, but if you find yourself in the saddle already and you are becoming more stressed, then take some time off. Get a change of scenery and stay away from your screens until you are yearning to get back and you are once again excited by the challenge.
Nothing is worth risking your health for, so make sure you follow the tips above to keep yourself as focused and stress-free as possible!
At no time should anyone view the information presented anywhere on this website as advice, recommendation or proven. Everything reflected is merely opinion and may not be accurate. The purpose of the site is to express the opinions and views of Jarratt Davis. There is no intention to offer specific help, advice or suggestions to anyone reading any of the content posted here.
Editors’ Picks
EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates
Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.
GBP/USD softens to near 1.3600 as BoE hints further rate cuts
The GBP/USD pair loses ground to near 1.3610 during the early Asian session on Monday. The Pound Sterling softens against the Greenback amid growing expectations of the Bank of England’s interest-rate cut. Traders will take more cues from the Fedspeak later on Monday.
USD/JPY drops back below 157.00 on Japan's verbal intervention
USD/JPY has come under moderate selling pressure below 157.00 in the Asian session on Monday. The Japanese Yen lost ground to near 157.70 following Japan’s ruling Liberal Democratic Party's outright majority win in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi. However, JPY buyers jumped back and dragged the pair southward on FX verbal intervention by Japan’s Finance Minister Katayama.
Editors’ Picks
USD/JPY drops back below 157.00 on Japan's verbal intervention
USD/JPY has come under moderate selling pressure below 157.00 in the Asian session on Monday. The Japanese Yen lost ground to near 157.70 following Japan’s ruling Liberal Democratic Party's outright majority win in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi. However, JPY buyers jumped back and dragged the pair southward on FX verbal intervention by Japan’s Finance Minister Katayama.
Gold eyes acceptance above $5,000, kicking off a big week
Gold is consolidating the latest uptick at around the $5,000 mark, with buyers gathering pace for a sustained uptrend as a critical week kicks off. All eyes remain on the delayed Nonfarm Payrolls and Consumer Price Index data from the United States due on Wednesday and Friday, respectively.
AUD/USD: Buyers eyes 0.7050 amid upbeat mood
AUD/USD builds on Friday's goodish rebound from sub-0.6900 levels and kicks off the new week on a positive note, with bulls awaiting a sustained move and acceptance above mid-0.7000s before placing fresh bets. The widening RBA-Fed divergence, along with the upbeat market mood, acts as a tailwind for the risk-sensitive Aussie amid some follow-through US Dollar selling for the second straight day.
Top Crypto Gainers: Aster, Decred, and Kaspa rise as selling pressure wanes
Altcoins such as Aster, Decred, and Kaspa are leading the broader cryptocurrency market recovery over the last 24 hours, as Bitcoin holds above $70,000 on Monday, up from the $60,000 dip on Thursday.
Weekly column: Saturn-Neptune and the end of the Dollar’s 15-year bull cycle
Tariffs are not only inflationary for a nation but also risk undermining the trust and credibility that go hand in hand with the responsibility of being the leading nation in the free world and controlling the world’s reserve currency.
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