We’re all aware that the value of a given currency is subject to change.
Fluctuations and discrepancies appear due to factors ranging from inflation and speculation to current political affairs – for example, Brexit has significantly affected the value of British pounds sterling.
But what if you could turn these same discrepancies into a sustainable way to turn a profit?
This is the fundamental idea of running a currency trading business. You buy and sell foreign currency, timing the market so as to maximise profit and minimise drawdown.
The notion of trading forex full time is an appealing one. Yet, just like with any other business, it isn’t something to jump into. In this short article, we’ll be discussing some of the key considerations to make before setting up your own currency trading business.
Create a business plan
Regardless of what your future business deals in, it’s essential that you have a good plan in place. You need to have a clear idea of how your business is going to operate before you begin. Here are a few key questions to consider:
- What are your start-up costs?
- What are your ongoing costs?
- What support do you need, if any, and where will you get it from?
Prepare a strategy
Before starting up a trading business, it’s important to recognise the value of preparation. You need to ensure that the way that you run your business is congruent with your goals and temperament.
In order to do this, it’s best to develop a trading strategy. In moments of doubt, you’ll be able to fall back on this to instruct your next move.
Your strategy should include the following key details:
Risk tolerance: The amount of risk that you’re willing to take on is mostly determined by your personal temperament. This will also limit the level of reward that you’re seeking since the two go hand-in-hand in trading.
Time frame: The time periods that you want to trade over will indicate which trading methods are more appropriate for you.
Method: There are many different ways to trade forex, such as spread betting, buying support and selling resistance, or using indicator crossovers.
Instrument: Different trading instruments are better suited to certain trading methods. Be sure to test your method across different instruments to get an idea of which will work best for your strategy.
Open your business
With all the proper planning in place the only thing that’s left for you to do is to register your business and begin trading.
Remember that you will make losses as well as gains. As long as your overall ratio is positive, your business will make money in the long run. Be patient, stay disciplined and your currency trading business will be a success.
