Forex trading involves risk. A lot of risk. It is the largest market in the world. Yes, larger than the stock market in the whole world combined. What it means to us is that, there’s a lot of money floating around the market and it comes with a price. Its hell out there. Especially to people who doesn’t know what they are doing. But that’s ok. I’m here to help you. Think of me as your local tourist guide in your travel to Africa. I will show you places where there lions and will tell you how you should behave towards them. If you got eaten, well, too bad. Nobody’s gonna whine.
Back to the risk thing. Yeah, there’s a lot of risk in forex. And you, as a trader, should know how to manage risk. Don’t be like a cowboy guns blazing then going home without your clothes on. Forex will and have always made millionaires and homeless in a span of days to a year. You should never underestimate it nor think that you already know how it behaves. What you should do is:
Fix Your Finances
If you are venturing into forex to feed your family, to pay debts, to pay rent or to have money to feed yourself, you are in this business for the wrong reason. You will lose. I don’t want to shoot down your dream but I think, if you want to be successful at forex trading, the money you use as your capital should be money you are willing to lose.
To make it short, money for forex is money that you don’t need. I think that people who have responsibility and need the money that goes into forex will be attached to the money. And when emotions are involved, things don’t go the way you plan.
What I suggest is to have a stable job. Pay your debts. Save part of your money as emergency fund. Then save the remaining money to go into your forex trading account. If you build up enough capital then you can take the risk. Quit your job if you want to. Just don’t sacrifice other people’s future for the sake of trading. This is I think, the best way to go.
If you’re still confident that you can go in and trade forex using the money that you need for survival. Go ahead. I’ve seen a lot of them already to care. Some people need to get hurt before they learn. The choice is yours.
Invest
Trading and investing are 2 different types of making money. But it doesn’t mean you should pick one for the other. Investing gives you the ability to earn money passively. Over the long period of time, it has been proven time and time again that investing is better than trading. So make sure you have money to invest while you make money on trading.
If you do not know how to invest in stocks. I suggest you buy the index. Ask your banker about index fund and I’m sure they’ll be happy to help you. If they don’t offer index fund, ask other banks. I think, index fund is the best investment if I don’t know how to invest. But if you’re a savvy investor, I won’t hold you back. It’s actually better to know investing so you save on the management fees.
Assignment
- Expenses List: List down all your expenses and see if there are things that you can fix and not pay. Cable television for me is just extra money you can save. Things like that. Total the amount of expenses you need to pay every month.
- Assets List: On another list, list down all the assets that you have to see how much money should come in. In this list you are trying to figure out your cash flow. List only assets that gives you money. AKA sources of income every month. For example, rental apartment, stock dividends, job. Then total the amount of money that comes in every month.
- For some people, you may realize that the only asset that you can list is… Your Job. That’s the only source of income for you right now. That’s ok. We all wake up to the harsh reality that if you got fired, you’re screwed. But its a good thing to realize that early.
- Subtract assets list to expenses list. The total is the money you are free to use for investment or capital for your forex trading. Make a goal on how much capital you want to start your forex trading and plan accordingly how much you will save every month for this goal.