Forex Trading Career Pros and Cons

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Contributor, Benzinga
June 8, 2023

The foreign exchange market is one of the most liquid markets in the world and offers traders the opportunity to trade global currency pairs. 

The foreign exchange market is accessible to almost everyone, and it has become a popular potential career choice. In addition, the idea of making money from anywhere has made forex trading seem like the perfect option for many.

From the outside, forex trading is often seen as a simple moneymaking process, but in reality, it is an extremely challenging endeavor that requires a significant amount of time and effort to perfect. As a result, while forex trading can be a successful career path for some, for the majority, it is not. 

Disclosure: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Can Trading the Foreign Exchange Market be a Career?

Forex trading has become increasingly popular in recent years, and many people have asked the question: can you make a career out of forex trading? The answer is yes - but it is not an easy path. Forex traders need to be knowledgeable about the global economy and international markets, understand risk management strategies, and have a disciplined approach to trading.

As with any type of career, forex trading requires dedication and hard work. Successful traders invest time in learning the basics of currency markets and how different economic forces affect exchange rates. They also stay informed about geopolitical news that could affect their trades. Additionally, they develop strategies to limit risk, manage their emotions and maintain discipline when trading.

It is also important to have realistic expectations when trading in the forex market. Successful traders manage their risk and diversify their portfolios. They understand that there will be both winners and losers in the market, so they strive to maintain a balance between profits and losses. 

Forex Trading Career: The Pros

Being a foreign exchange trader, despite its challenges, can offer advantages to an individual pursuing a career. After all, it is a highly desired profession, despite the potential pitfalls aspiring traders face.

1. Low Capital Needed

Because of its tight spreads and low fees, all that is required to start your forex trading career is a minimal amount of capital. 

Large amounts of capital are likely required to invest in markets such as equities, futures or options, but this need is less of a worry in forex. The possibilities of margin and leverage offer potentially more significant gains. 

Leverage comes with higher risks and larger potential losses, so it is an option that you must be consider thoroughly before you use. In addition, while you can start with a low amount of capital, this does not mean you will automatically make money. It is important to consider the risks.

2. Convenience

One of the advantages of forex trading, and possibly a disadvantage too, is the ability to trade at any time. Whether you are busy during the day or have some spare time, the forex markets run all day during the working week, making it convenient. 

Therefore, it suits all trading styles and is advantageous to short-term traders who can complete trades within hours. On the other hand, you can also take longer-term positions. 

You can rely on hundreds of indicators, and everything is designed to give you the best experience possible when trading. Convenience is a significant attraction, especially to less-experienced traders.

3. Low Costs

You can choose from many brokers. Therefore, to attract new customers, brokers tend to keep fees and costs to a minimum. As a result, brokers tend to make profits through their spreads, which means no broker charges are applied. 

In addition, equipment or minimal investment is required, making it a viable career option. To kickstart your trading career, all you need is a laptop, a small amount of capital and a broker.

4. High Liquidity

Compared to other financial markets such as stocks or bonds, the forex market has the highest liquidity. Trillions of dollars move in and out of the market daily, and trades can quickly be filled without high costs. 

Liquidity is the backbone of the investment market. Liquidity provides traders with low spreads and the opportunity to open and close a trade at all times.

Liquidity is essential to any market, and forex traders do not have to worry about volatile opens or closes as the forex market is constantly trading.

5. Numerous Pairs

You can choose from numerous currency pairs, including eight major currencies. Therefore, if you see significant losses in one pair, you have the option to switch to several currency pairs. 

Your criteria for choosing a pair may vary based on its volatility, economic actions or technical developments. 

Many traders develop an edge in one currency pair that may not work with another. Therefore, switching between currencies is a common practice to find your best match. 

Forex Trading Career: The Cons

A forex career is not all plain sailing, and despite its positives, every trader will likely face some challenges along the way. So it’s crucial to be aware of disadvantages.

1. Complex Price Changes

Forex prices are influenced by numerous factors, and it may be challenging to track. Monetary actions and the global economy can significantly impact forex rates, which can be difficult to conclude. Making the wrong choice can result in a loss.

To combat these scenarios, a plan must be in place. Many individuals make money from forex trading despite complex prices. The solution is to find an edge or a plan, either through technical or macro analysis, and stick to it.

2. High risk

Forex traders can gain significant profits through leverage. But leverage means you also risk higher losses. Therefore, it is essential to evaluate the risks beforehand. 

Risk must always be considered if you decide to begin your trading career. A good rule is to only trade with capital you are willing to lose. As a result, your emotions will not play as much a part in your trades, and you can trade more confidently. 

3. No Assistance

Another drawback is the minimal assistance given to forex traders. In the stock market, an individual can seek help from portfolio managers or advisors. However, forex traders tend to be left to their own devices. Significant losses and no assistance can lead to beginners quitting. 

There is no quick solution to this problem. Discipline and hard work are essential requirements to achieving success as a foreign exchange trader. However, to prevent further losses, you must remain determined to achieve profits and use all possible avenues of learning.

5. Volatility

The high volatility in the forex market can be considered a pro and a con for traders. Volatility keeps costs low, but with no control over the macroeconomic developments, it is difficult to predict where the price will move.

Therefore, if you make an incorrect judgment, there is little you can do to change the direction of the market, causing potentially severe damage to your funds. 

The best approach to combat these difficulties is to keep strict stop losses for every trade you place. Trade using a well-designed plan.

6. Competition

The biggest forex traders in the world are major institutions with a level of funding and a team of employees to help them execute the best trades possible. You will be competing against the very best.

From the start, you will be up against professionals and some of the smartest minds in trading and finance. The market is not kind to beginners.

Mistakes to Avoid as a Forex Trader

The market is both high risk and high reward. Therefore, mistakes are bound to happen, and it is something all traders deal with.

  • Trading without a net: You can’t stare at the markets all day and night. Therefore, trading without a stop loss is almost suicide and is a sure way to lose a significant portion of your funds. You must plan each trade beforehand. A stop loss will give you an exit strategy at a strict price, and it is a good way to limit your emotions.
  • Overtrading: Losses are part of the reality of trading, but the ultimate goal is to limit them as much as possible. A loss can be painful, and this is where your emotions can play a significant factor in your trading. Placing follow-up trades to recover your losses can cause a larger downfall. Overtrading is a very standard mistake for traders, and the solution is set on how you control your emotions. But, if you stick to your plan, your edge should compensate for any potential losses in the long run.
  • Beginner trading: Investing your hard-earned cash in a market you are just learning is a dangerous game. A new trading strategy offers no guarantee of a reward and has no history to back it up. Friendly advice would be to begin trading on a practice account to use virtual funds. This practice gives you the opportunity to test out trading plans and learn from errors you may encounter without risking your capital. However, keep in mind that trading with real money and fake money can have an entirely different impact on your emotions, and how you handle trades may be completely different with your funds on the line.
  • Overreacting: Taking a loss will be a painful experience for any individual. The emotions of regret and accepting that you were wrong are not always easy. But trades will come and go daily, and accepting losses as part of your plan will be crucial in the long run.
  • Insufficient capital: While you can open an account with a small amount of capital, the capital needed in order to trade safely (with appropriate risk management) and sustain a full-time career as a trader is more than most can afford. Even if you have that capital, there is no guarantee you will be a successful trader. One final reminder, don’t let the highs get too high and the lows get too low. Whether on a winning or losing run, do not let your emotions take over and overreact.

Compare Forex Brokers

A forex trading career cannot begin without a broker. The broker is the middleman between you and the stock exchange, and it will carry out the instructions you set out. 

The broker executes your transaction but charges a fee through its spreads. Benzinga lists the best forex brokers.

  • securely through Plus500's website
    securely through Plus500's website
    Best For:
    Mobile Users
    Rating:
    Read Review
  • securely through Forex.com's website
    securely through Forex.com's website
    Best For:
    Forex Trading in and Outside the U.S.
    Rating:
    Read Review

    CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

  • securely through AvaTrade's website
    securely through AvaTrade's website
    Best For:
    Non US Forex Trading
    Rating:
    Read Review
  • securely through FxGlory's website
    securely through FxGlory's website
    Best For:
    Fixed Spreads
    Rating:
    Read Review
  • securely through IG Markets's website
    securely through IG Markets's website
    Best For:
    Forex Execution
    Rating:
    Read Review

    Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

  • securely through eToro Forex's website
    securely through eToro Forex's website
    Best For:
    Demo Accounts
    Rating:
    Read Review

    CFD trading is not available to U.S. users. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

  • securely through HYCM Capital Markets's website
    securely through HYCM Capital Markets's website
    Best For:
    Forex Trading
    Rating:
    Read Review

Frequently Asked Questions

Q

Can you make a living with forex trading?

A

It is possible to make living from forex trading. The markets have enabled millions of people to trade and earn money. However, a variety of factors will determine whether you are one of the few able to make a living from the forex markets. Forex trading can be a difficult road leading to significant losses. It is an achievable goal, but it requires a lot of discipline and hard work. Even then, you have no guarantee of success.

Q

Is it worth it to trade forex?

A

Trading forex is worth considering for anyone looking to invest or set time aside to perfect the craft. However, it is not worth it as a get-rich-quick scheme. Forex is the most liquid market in the world, and this feature presents opportunities for some of the best players to make immense profits. Moreover, it is easily accessible and available for all, experience or not. Trading forex is only worth it if you step into it with the right mindset. For many, it can take years to make a profit, and if you can’t see yourself sticking at it, forex may not be the best approach for you.

Get a Forex Pro on Your Side

FOREX.com, registered with the Commodity Futures Trading Commission (CFTC), lets you trade a wide range of forex markets with low pricing and fast, quality execution on every trade. 

You can also tap into:

  • EUR/USD as low as 0.2 with fixed $5 commissions per 100,000
  • Powerful, purpose-built currency trading platforms
  • Monthly cash rebates of up to $9 per million dollars traded with FOREX.com’s Active Trader Program

Learn more about FOREX.com’s low pricing and how you can get started trading with FOREX.com.