How To Smash A Side Hustle In Forex Trading
Forex trading can seem like a full-time occupation, but the truth is, most people fit trading in around their day job. With some research and practice, it’s perfectly possible to complement your salary with some significant returns from a side hustle in forex trading. Think this sounds too good to be true? Here’s how to make it happen!
Make sure you know the basics
If you are a total beginner, then it’s a good idea to set up a demo account to get some practise in, and make sure you have got to grips with the basics of the game. You don’t need any specialist equipment besides an ordinary desktop PC or a laptop, to access a platform that provides forex instant funding.
If you are already competent at dealing with your personal finances, including budgeting and investing, you should find the fundamentals of forex trading relatively easy to pick up. The forex market is extremely dynamic and flexible, and operates almost 24 hours a day, making it ideal for those who want to use it as a profitable side hustle.
Develop the right mindset
You need to accept that the risk of loss is a part of trading, and risk needs to be managed to avoid the prospect of getting drawn into a situation that you can’t sustain financially or emotionally. Trading within a limited time frame means that you will have to make quick decisions, so it’s important to be psychologically prepared for the challenge.
You need to learn how to manage the natural human emotions of greed for greater profits, and fear of losses, to avoid being drawn into subjective, rather than objective decisions. There’s plenty of material both on and offline about the psychology of trading, so it’s worth familiarising yourself with some of it before you get going.
Leverage is a finance provided by brokers to traders, which allows you to buy currency lots for a fraction of the cash represented in a lot. High leverage is available for forex trading, which is normally expressed as a ratio.
For example, a ratio of 1:1000 means that you can trade with just $100 for an investment of $100,000. To trade with a 1% margin, you would need $1,000.
As you can see, high leverage can substantially increase your profit potential, but it needs to be understood and used wisely to minimise losses. Start small, risking just 0.25% or 0.5% of your total capital per trade at first. Some funding platforms will charge a fee for leverage, so make sure you are familiar with the terms and conditions before signing up.
Commit yourself to a strategy
It does take more than the occasional dabble to make forex trading worthwhile, so it’s important to work out your strategy and stick to it. If you have a full-on schedule, you’ll have to do some juggling so that you have a few hours spare at the weekend or in the evenings.
Keep a track of your gains and losses as you go along, to give you an insight into what is working and what isn’t. This will help you to refine your methods. Some traders even do something called ‘backtesting’, which is a process of reviewing historical data to see which strategies work and which don’t.
Set yourself realistic goals, and know how much money you are prepared to risk losing with each deal. This means reviewing your outgoings and income, and working out how much disposable cash you can stand to lose without threatening your ability to pay essential bills, or damaging your savings account too badly.
Identify peak trading times
Because forex markets are open around the world on an almost 24/5 basis, it’s easy enough to fit trading in around your scheduled work hours. However, it’s important to note that the markets are more active at some times of day than others.
Research the most optimal times of day which fit into your available trading hours, which will probably be early morning or later in the evening. The markets for the major currencies are generally most active at the beginning of the day.
Use US Dollars as a trading pair
Beginners are advised to use US dollars (USD) as one of their trading pairs, as this is the most readily available and frequently traded currency of all. For a new or part time trader without the time or experience to study the markets carefully, trading the USD with the Euro (EUR) or the British pound (GPB) is advised.
Other pairs that can be traded relatively easily include the USD/JPY (Japanese Yen), USD/CHF (Swiss Franc), USD/CAD (Canadian Dollar), and USD/AUD (Australian Dollar). More exotic currencies from emerging markets are best left for more experienced traders, as they are prone to greater volubility and carry a higher risk of making losses.
The time of day you are available to trade will also influence your choice of currency pairs. For example, the best time to trade for the major London, Tokyo, and Sydney stock markets is when they open at 8am UTC.
Even experienced traders will use tools to put a ‘stop loss’ on their account. This puts an automatic stop to trading when the value drops to a certain level below the entry price. This is a common risk management strategy, which prevents heavy losses in a fast-moving climate.
Learn as much as you can
Forex trading is a steep learning curve, but it is perfectly possible for anyone who is prepared to put in the work to make it a lucrative part time occupation.
This will happen faster if you keep up with the broader factors that influence the currency markets, such as geopolitical events, the unemployment rates of particular countries, and the level of demand for particular commodities produced by individual countries.
Many people find that joining online forums and communities is a great way to learn from others who have already learnt from their mistakes! You will also be able to post questions yourself if you are curious about something. This can be helpful, but be aware that most users will be posting anonymously and not everyone will be providing correct information.
Strike a balance between getting practical experience of trading, and learning as much as you can from forums, books, videos, courses, and trade journals. Focus on the currencies that you want to trade in, and learn how to analyse their movements. Also read as much as you can about risk management strategies, as this is crucial to successful forex trading.
There is no single strategy or formula for success in forex trading, but over time, you can hone your instincts and knowledge to mitigate the risks and maximise the potential. The more prepared you are, the better your results will be. Becoming skilled in trading takes time and patience, and it is always better to take small steps that can easily be reversed.