The proper motivation to trade Forex is not exactly what you may think.
There is no singular proper motivation to trade Forex. It just does not exist, most participants in the retail Forex Market come in with a similar set of expectations. Retail and institutional participants have different motivations, trading volumes, benchmarks and money at stake. Retail Forex traders often fail to be profitable, it's not 90% or 95% or 99% unprofitability - it's actually around 76.65% at this present time. It's not as daunting as many present it, as these individuals have their own motivations to presenting false information. Let's re-define proper motivation and explain the reasons why people enter the market in the first place and what would be considered reasonable.
The Problem: Retail Forex Traders are Motivated by Amassing Riches
Yes, traders enter this market expecting to make millions derived from so little. They want a lot of money for the purposes of buying things that they have been told that they cannot afford. These would be considered discretionary expenses, but they are so discretionary that they could be considered decadent. There is a lack of practicality.
Forums and social media are much like a carnival fun house full of deception.
People want to maximize returns to make a lot of money, but what are they going to do with the money if they actually get it? They are sold on a dream rather than an actual realistic outcome. Many are motivated to trade Forex to turn a little bit of money into a lot of money with no clear idea of what they will do next.
So why are you looking to get into this market? If you are in the market, why are you trading?
The proper motivation to trade Forex may be as simple as setting reasonable expectations and not being influenced by flashy and spammy peddlers.
If your motivation is to be a Professional Forex Trader...
Re-think this mentality. The world is changing drastically. Placing trades manually while looking for the right setups is tedious, a waste of time, inexact, likely unfounded during properly executed backtests and stressful.
With a deposit amount less than $50,000, you are not going to be a professional Forex Trader. It's tough, but true. One bad month can significantly damage your balance and challenge your income-earning means. Most retail traders have a poor sense of deposit loads, put all of their eggs into one basket, and are looking to strike extravagant returns in very little time.
The proper motivation to trade Forex is certainly not this either. While it may seem professional and businesslike, it is executed wrong and the methods are antiquated.
This industry is incredibly unsexy and it is not supposed to be as dramatic as the marketing materials suggest. Most trading participants are actually algorithmic traders. This is what a real trader looks like in 2018.
It's code. Typically written in Python and C++. Many participants also use MQL4 and MQL5, which is the convenient cousin to C++ that is used for MetaTrader 4 and 5.
So no, you will not be quitting your job to sit in front of a screen or multiple screens and placing trades.
This is not your life as a professional trader.
Neither is this.
It certainly is not this. Although, you may be trying desperately to connect to a Wi-Fi Network when attempting to do it.
So what are proper motivations?
Attaining short-term, reasonable goals.
Here are a few examples of proper motivations for having a Forex Trading account. A small portion of your overall portfolio can be in the Forex Market, but never more than 10%.
The Holiday Fund
You have a job, a spouse and maybe a few children. You have a nuclear family and you have an investment portfolio, but life is to be enjoyed. After all, you have holiday time for a reason. August and December are calling you wanting you to get away and do something with your family. Why save up or make the discretionary spending decision that could cut into other spending?
Instead of saving for that trip... Why not put your money to work for you? This is a good and proper motivation for getting into the Forex Market. It's tangible, reasonable and not out of the bounds of your financial situation.
A well-managed $20,000 deposit could result in an $8,000-$10,000 budget for holidays every year. In August, you can take that trip to Walt Disney World or Disneyland Paris, visit Peppa Pig World in Paultons Park, go to Tropical Islands Resort or take in the beaches of Majorca and Calabria. In December, you can visit New York, Amsterdam or Rome. The options are abundant.
If you do not have kids and a spouse, your trips can be more frequent and less expensive. Travel with friends or meet some new ones without requiring a screen! Enjoy a beer in Brussels and keep track of your Forex Portfolio.
Budget is Paid For
A well-managed deposit of more than $10,000 can pay for ordinary non-discretionary and discretionary expenses.
- Food budget: Whether you eat-in or go out, this can be defrayed significantly.
- Wardrobe budget: Want to always stay in-style?
- Rent: Defray your current rental expenses.
- Car Lease: This can be defrayed by monthly returns.
- Insurance Premiums
- Fuel Costs
These are just a few examples of short-term use of Forex Trading profits. Of course, you will have to pay taxes on your profits. However, there are ways to avoid taxation legally, but this will be covered in a different article.
Setting aside into other Investments
The withdrawn profits from Forex Trading can be put into other avenues for investment. Retirement, paying for University, home ownership, bullion, or anything else that would require a larger amount of money that would take years to raise funds can have a shorter timeframe to raising the funds.
Long Term Goals are Proper Motivation to Trade Forex
Making Forex a small part of the larger overall portfolio can result in better overall returns. The leveraged nature of the investments in Forex make it something that should be less than 10% of your overall portfolio. The objective is to build up a large enough portfolio over time to generate consistent, sustainable and comfortable levels of income.
Retirement or the ability to pursue an entrepreneurial dream without risking your ability to sustain yourself are good examples of long term goals.
So what's your motivation to trade Forex? What's your motivation to invest?
Let's talk about it. Get a Free Consultation with Freevestor and we can discuss your goals. You'll also get a Free Report.