Updated from its original posting on 2013-08-13
The prospect of becoming a full-time forex trader is a very entertaining thought. Heck, you get to be your own boss, there’s the potential for very high returns, and for most of us, it’s something that we love to do. Who doesn’t want that?
But as we constantly mention here on BabyPips.com, forex trading is serious business. Beneath the lure of earning a lot of money quickly, there are lot of underlying risks involved. Becoming a full-time forex trader, relying only on trading for all of your living expenses, is simply easier said than done!
Before you even seriously start to consider it, here are four questions that you need to ask yourself.
1. Are you successful at forex trading now?
Don’t get the notion that once hang your corporate suit and tie and start earning money in your pajamas by trading 24/7, you’ll have enough time to make better trading decisions. Chances are, if you’re not making money now as a part-time trader, your account balance won’t get any better if you trade full-time.
I ain’t just talking about your money either. Without the slightest doubt in yourself, you gotta make sure you’re disciplined too! You need to have a trading journal and do your homework. If you’re not doing it now, you probably won’t do them when you make the shift either.
2. Are you (mentally) tough enough?
As if trading doesn’t put enough pressure on you, can you imagine how much more it would be if you knew that a trade could determine whether or not you can pay for your mortgage?
Forum member ericlee125 pointed out that the pressure that comes with being a full-time trader could potentially lead us to make bad trades. It will put you in a vulnerable position wherein if you can’t control your emotions, you will likely make bad decisions that you wouldn’t normally make.
3. Do you have enough money?
Of course, capital will always be an issue to consider when it comes to going full-time in forex trading. You gotta make sure that you have enough money to risk and that you will be comfortable with a few account fluctuations every now and then. More importantly, you have to be prepared in case losing streaks or large drawdowns occur.
Forum member SimonTemplar mentioned that full-time forex trading can work for you if you are able to accept that your income or account balance will fluctuate along with the market. Aside from that, he cautions against relying solely on your trading profits to cover regular expenses. He recommends considering the worst case scenarios, such as consecutive losing months, before going full-time.
When you are undercapitalized or if you don’t think you’d be comfortable with drawdowns, you might have to think twice about trading full-time. The increased pressure of having to maintain profits could take its toll on your health if you aren’t ready to handle the consequences.
4. Why do you want to be a full-time trader?
Most importantly, you really need to be clear about your reasons for taking the leap and going full-time. Do you really believe that this is for you? Or do you just want to get rich quickly? Is it because you hate your day job so much that you’re ready to pounce on any other alternative?
It is crucial to give yourself an honest assessment of your current situation, your skills as a trader, your mental stamina, and your financial standing. If you rely mostly on your paycheck to pay your bills, mortgage, or children’s tuition fees, then full-time forex trading might not be for you just yet. You don’t want to put your lifestyle or family’s well-being on the line and face constant pressure to make money.
Again, forex trading means serious business. There are plenty of risks involved and it’s not just in the monetary aspect. Take your time before going full-time and make sure that you are ready financially, mentally, and emotionally.