Currency trading – or foreign exchange trading – is one of the largest commodities markets within the financial sector. Fast-paced, dynamic and hugely volatile, it is also one of the most profitable, of course if you put in the work to become a profitable trader.
The key to becoming a profitable trader is diligence, patience and definitely the talent with numbers.
Currency traders focus on the foreign exchange market – also known as the Forex market – and look to execute trades based on the performance of two types of currency against each other.
Although the basic concept is simple – you are essentially trying to sell for a higher price than what you paid – knowing and understanding the political and socio-economic factors behind market shifts (and developing a proven strategy to exploit them) are what separates profitable traders from the rest.
Although many investment banks, equity firms and Forex companies employ dedicated traders, there’s also a significant number of ‘amateur’ and part-time participants in the market, with many looking to supplement their income or simply trade for fun.
Either way, your day-to-day responsibilities may include:
identifying and executing potentially profitable trades
developing and adhering to responsible trading strategies that minimize loss
researching market conditions and keeping abreast of any external factors that may affect currency rates, either negatively or positively
building positive relationships with brokers and other industry players
Essential Skills and Qualities
While Forex traders come from a wide variety of backgrounds – both in terms of education and experience – they all share several must-have skills and qualities, including:
patience – many experienced traders assert that patience and discipline are hugely important aspects of the role; after all, when things are slow, it can be all too easy to get itchy fingers and make a poor – and potentially very costly – trade
diligence – profitable traders don’t buy or sell on a whim; they look at every possible angle of every trade and weigh up the pros and cons before executing
attention to detail – whether it be spotting something in the charts that others may have missed or picking up on an obscure news story that could have far-reaching consequences, it’s vital to keep your eye on the ball and take everything in
research skills – if you want to understand why a certain currency may be on the way up or down, then you need to consult a variety of resources; the ability to conduct effective and reliable research can often give you a competitive edge
global awareness – often, currency peaks and troughs are a direct result of political actions or socio-economic circumstances; keeping on top of developments relevant to your chosen currencies and, more importantly, understanding how they might have an effect, is a highly useful skill
numerical skills – it may go without saying, but your trading career will be a lot easier if you have a firm grasp of numbers, including how to read and analyze data and make quick calculations.
Developing Your Career
Again, how far you go in your currency trading career is down to your own motivations and circumstances. For instance, if you wish to work for an investment organization, then there is the scope to progress beyond the trading floor and into executive management or strategy. As you develop your network of contacts, other career opportunities may arise, too, such as working in an advisory capacity for industry clients or government organizations.
Once you have a proven and established reputation and a consistently healthy profit margin, you might also be approached by investors to trade on their behalf. If this is the case, then starting your own company can be an appealing prospect from a workload management perspective, and you’ll get to play the market on your own terms.
Of course, you might just be happy to put up a small amount of capital and try to get a little return on your investment each month; it really is up to you. While the percentage of profitable Forex traders is generally low, there are numerous online guides that can provide tips and assistance in how to formulate a strategy that yields results, and with discipline and know-how, you could gradually transition from your hated 9-to-5 job to a viable and more exciting alternative.
That’s the key, though: it really is up to you.
Have you ever tried your hand at currency trading? Tell us about your experiences in the comments section below.
By Suren Subramaniam | 22 October 2020