Trading in the forex market can be profitable but not without its risk, and like anything else, although the market welcomes everyone, it’s definitely NOT for everyone.
What we mean is that forex trading has inherent risks that might be exciting for some but unbearable for other people. So, is forex trading for you? Well, that really depends on your investor personality. There are actually three investor archetypes. Understanding each personality can give you insights on whether or not forex trading is right for you.
The first type of investor personality is the analyst:
The analyst is the type of investor who will analyse all the implications of his decisions before investing a single cent. The best example of this type of investor is Warren Buffet.
The second type of investor is the trader:
Having a trader-type investor personality means you are decisive but don’t necessarily rely on complete information to make a decision. This type of investor relies more on his gut feelings. George Soros comes to mind when it comes to this personality.
The third type of investor personality is the actuary personality:
Like an actuary in an insurance company, this type of investor is focused on an outcome and not concerned with one single event. Think Benjamin Graham.
If you ask us, we think that the best type of personality for forex trading is a combination of the analyst and trader personality.
Although it’s been compared to gambling, you can actually lessen your risk of losing a lot of money in forex trading by analysing how certain factors, like a change in national policy, affect the movement of a currency, whether it’s for better or for worse. On the other hand, you can’t always predict how the market is going react to certain events. Sometimes you will need to rely on your gut instinct to predict the markets.
If you’re interested in trading in the forex markets, you can and you should, however, you should only do it with money you can afford to lose. Unlike the stock markets, forex trading has a low entry point. You will only need $200 to get started. If you ask us, however, we think you should try the demo accounts first before trading with real money. That way, you will only learn more about how the market works without actually trading real money.
There are many ways to earn money from forex trading. You can buy a currency pair right now, when the base currency is low, and hold it for the long term and only sell it when base currency rises in price. You could also hold your currency pair for a short time, i.e., a few hours, and sell just at the right time. Whatever strategy you take, however, there’s no escaping the need to make an educated guess.
A lot of traders many years before they master forex. So don’t it to be a walk in the park. Safe trading and trade well!