5 Things To Keep In Mind When Taking Up Forex Trading As a Side Hustle
Having a side hustle can be a great way of generating extra income when your primary job isn’t enough – or simply when you want to diversify your sources of revenue and keep your options open. Over the years, people have had different ideas of what the perfect side hustle is: working as an Uber driver, taking jobs on freelance websites, selling used items, drop shipping, or completing online surveys. However, one thing that all these side hustles have in common is that they can be pretty time-consuming and, if there’s something that people have come to value more during quarantine, it’s that personal time is priceless. Working from home has already blurred the boundaries between work and personal life, so very few people want to add another professional responsibility to their schedule. Instead, we’re beginning to see more people investing and seeking passive income opportunities as a way to make extra money. In particular, Forex trading has emerged as a growing trend, especially among Millennials.
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The Forex trading volume has been steadily increasing every year because there are almost no barriers to entry. If in the past you needed a degree in finance, a Wall Street career, and plenty of disposable income to even hope to trade on the foreign exchange market, now you can even become a trader as a student in your 20s.
Forex trading does have a lot of potential as a side hustle and, if you do it right, you can grow your wealth. However, it should be pointed out that Forex is easy to get into, but hard to master. To have a positive experience with it, you need a lot of discipline, and you have to start with realistic expectations. Here are five things you need to consider when trying out Forex as a side hustle:
Experience isn’t required, but you should invest in your trading education.
One of the best things about becoming a Forex trader in 2021 is that you don’t need experience to get started – not even a degree in finance. Students with no prior trading experience and people with regular day jobs have managed to make money trading Forex. However, that doesn’t mean you don’t need a trading education. Getting started is easy, but you still get to learn the basics. In time, you should also familiarize yourself with concepts such as fundamental and technical analysis to see what makes the market fluctuate. Otherwise, you may make bad decisions that could cost you the money from your main source of income. Forex will always involve a certain degree of risk, just like the stock market, and educating yourself is one of the ways to minimize risk.
Your choice of Forex broker will influence your overall experience.
Choosing the right Forex broker is just as important as investing in trading education. That’s because each broker offers different features and trading instruments (currencies, crypto, metals, energies, etc.), they may be based on different platforms, and they may require different deposits. Some offer low leverage, others high leverage, and various types of spreads. Your country of origin also matters when choosing a Forex broker. For example, if you’re a trader based in the US, you may have noticed that there are less than five regulated Forex brokers in the US because the regulations are too strict. However, you can work with an offshore broker who is regulated by a foreign authority and who can offer you better terms and access to more features. Needless to say, it’s important to read as many reviews as possible to find out if other beginner traders have had a pleasant experience with the broker (for example, if the customer service was prompt enough and if misunderstandings were cleared in favor of the trader).
How much time can you allocate to trading every day?
There’s more than one type of Forex trading strategy, and one of the factors you should take into account when choosing yours is how much time you can realistically allocate every day. Some people are alright with checking their account once every hour, while for someone, this is too exhausting and time-consuming, which is why they prefer longer positions. Here are your options:
- Day trading: you buy and sell commodities within the same day.
- Position trading: you can buy and sell commodities within anywhere from one day to one week, depending on the direction of the market.
- Swing trading: you can usually hold swing trades for more than a day, but less than in the case of position trading.
- Scalping: this is one of the quickest trading strategies, and traders make money by exploiting small market moves that occur frequently.
What’s your risk appetite?
If you want to make money by trading Forex, you should be ready to accept the idea that there’s no such thing as risk-free trading. Risk, as well as losses, are inevitable. However, you can control both of them by choosing a trading strategy that matches your risk appetite and risk tolerance. For example, you can start by creating a demo account and trading without investing real money for a few weeks until you get used to it. If you don’t feel comfortable checking your account every day or you think that it’s too time-consuming, you can try longer-term strategies like swing trading and position trading.
Profit might not come immediately, and Forex has a learning curve.
There are many success stories out there about people who started trading with $250 in their account and turned them into six figures. However, these stories don’t represent the full picture. For every person who managed to grow their wealth through Forex, there are dozens who lost a lot of money because they didn’t make the right choices. So, while Forex may be easy to get into, you still need to be patient and invest in your education. Think of it like starting a new business: you might not generate too much revenue in the beginning, but if you’re consistent, profit won’t be late to appear.
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