The burning question most newcomers to the forex market want to know is whether it’s possible to make a decent living from forex trading. Maybe not even a decent living, but at least enough to top up listless revenue streams with the ever-present shadow of a recession looming over South Africa.
Forex trading has certainly grown in popularity and for the moment, the South African government is only imposing measures that govern exchange control issues and cash outflow. You may find the rare forex trading broker that’s registered with the Financial Services Conduct Authority which is the official regulatory body in South Africa; but most South Africans are trading via off-shore platforms and typically fund their forex accounts using the single discretionary allowance (SDA).
What is the single discretionary allowance? It’s an allowance within an overall limit of R1 million per calendar year which a South African resident over the age of 18 years may use for any legal purpose overseas. The SDA may be used at the sole discretion of a South African resident without having to justify it to the governmental powers that be.
In short, it’s relatively easy to set up a forex trading account in South Africa and start transacting, and the domestic forex trading environment is pretty open-ended from a regulatory standpoint. So, back to the burning question; is it possible to earn a living from forex trading?
The truth is forex trading is no longer the realm of the fortunate few. It’s a reality for many but the ones that are successful are those that can see the red flags flapping in their face and take heed when cautioned.
Read everything you can on the subject
If you get roped into a weekend course on forex trading, you may fall victim to the allure of “false advertising”. If they try to convince you it’s easy to make money trading forex, you should get up and run a mile. If forex trading was that easy, everybody would be doing it.
It’s up to you to find out exactly how forex trading works and what the pitfalls are. You can only do this by learning from others who’ve made a relative success of forex trading and putting that forex education into practice.
Start slowly and small
Start trading with a demo account, using virtual money. This will give you time develop a trading strategy without the risk of losing actual money. Take your time and keep practicing. Rather make mistakes with virtual money than risk losing real money.
Study the forex market
The more time and effort you put into learning how to trade forex, researching the forex market and understanding the inherent risks involved; the more successful you’re likely to be over time. Start by studying the major currency pairs and choosing your preferred trade.
The popular currency pairs are: GBP/ US$, EUR/ US$, US$/ CA$ and US$/JPY. Funny enough, the South African Rand is a popular choice because it offers a high degree of fluctuation and variance.
Ask yourself the important questions
The answer to these questions will ultimately influence what forex trading strategy you adopt.
Firstly, do you want to make a living from forex trading or do you want to grow your wealth? How much time can you dedicate to forex trading? And lastly, are you more attracted to a higher winning rate for smaller gains, or a lower winning rate for larger gains.
Develop a sound forex trading strategy and timeframe
Once you’ve established a trading strategy and timeframe, you can develop a trading plan. Decide if you are going to be a day trader, position trader, swing trader, news trader or scalper; or a combination of all of those. These are terms you’ll become familiar with the more you learn about forex trading, but the point is to find a forex trading strategy that works for you.
For example, if you have a full-time job and limited hours available for trading; you should consider position trading. Swing trading is better suited for those with a few more hours at their disposal; and day trading and scalping is suitable for those that can spend the whole day at the computer.
Commit to your trading hours
This might be a juggle if you have a full-time job so be realistic when setting your forex trading goals. Forex trading requires discipline and patience; you can’t rush the process and you can’t cut corners.
Keep your emotions in check
Expect to have gains and losses and don’t beat yourself up for too long if you have a bad day at the forex track. If you have a clear, possibly multi-prong trading strategy, familiarise yourself with managing the inherent risks of forex trading and over time you should develop a good intuition for trade movement. You’ll eventually gain traction and start making a profit.
Factor in the cost of forex trading
It’s the hidden cost of forex trading that can dramatically reduce how much profit you make. You need to take into consideration trading commissions, spreads, account maintenance and deposit and/ or withdrawal fees. It’s important that you familiarise yourself with these costs when you’re practicing with a demo account and running a low-value trading account.
In summary
The road to riches with forex trading is rocky; fraught with twists and turns that can derail your average ‘man in the street’. To level the playing field, put a few safeguards in place to minimise your risks and err on the side of caution by limiting your leverage and keeping your stop-losses tight. Education, practice, discipline and patience wins the forex trading race at the end of the day.
https://www.thesouthafrican.com/business-finance/what-you-should-know-before-you-start-trading-forex/
2019-08-20 10:17:59Z
CBMiZWh0dHBzOi8vd3d3LnRoZXNvdXRoYWZyaWNhbi5jb20vYnVzaW5lc3MtZmluYW5jZS93aGF0LXlvdS1zaG91bGQta25vdy1iZWZvcmUteW91LXN0YXJ0LXRyYWRpbmctZm9yZXgv0gFpaHR0cHM6Ly93d3cudGhlc291dGhhZnJpY2FuLmNvbS9idXNpbmVzcy1maW5hbmNlL3doYXQteW91LXNob3VsZC1rbm93LWJlZm9yZS15b3Utc3RhcnQtdHJhZGluZy1mb3JleC9hbXAv
Bagikan Berita Ini
0 Response to "What you should know before you start trading forex - The South African"
Post a Comment