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I wasn’t always into the whole financial education scene. In fact, I started understanding the depth of the financial world in June of 2019 (roughly less than two years from today). I knew that I wanted to make more money in the early days, but I did not understand anything about assets or liabilities.
I knew that I did not want to get another job- no pizza delivery or Uber. I researched work-from-home jobs, but they were all mundane jobs consisting of customer service or data entry. I had already started teaching online for $35/hour, but I wanted to do more to speed up my wealth creation.
Enter Foreign Exchange trading or FOREX for short. FOREX is the trading of two currencies against one another- the pair is one entity. By reading the news, making predictions, and watching the charts- making money is possible.
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I want to state upfront that I didn’t have the mindset that I have now. Today, I have a much broader understanding of passive income systems, patience, and how everything fits together. If I tried FOREX trading today, my results might be different.
The main reason I gave FOREX a try was that it met my freedom requirements. I wanted to earn money entirely from my computer and wanted the freedom to travel anywhere in the world. At the time, I didn’t think starting a blog or writing books was possible. I let limiting beliefs control my destiny.
Back to FOREX, I enjoyed being a foreign exchange trader. It may be something I pick up again one day. This article comes up because I am currently reading a book on Commodities trading, and it a lot more complex than FOREX. Of the two, FOREX is way more approachable and within reach of the average retail trader (non-professionals). I want to review some of the pros and cons of FOREX trading.
Pro- Work from home. I love that you could work from anywhere. Heck, you can trade from your phone. When you start adding all sorts of overlays and charts, it may get a little out of hand, but it is still possible to be on the move and FOREX trade.
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Pro- You learn technical analysis. Technical analysis is one of the two types of security analysis, the other being fundamental analysis. About a year after I attempted FOREX trading, I read the bible on stock market investing, “The Intelligent Investor” by Benjamin Graham.
Technical analysis is the data side of investing. You focus on what the charts are telling you. Fundamental analysis focuses on the underlying value of the security or currency. Fundamental analysts are reading the news, reviewing financial statements, and studying history.
Both types of trading are important, but again I was green to the world of FOREX. I believed that technical analysis, because it was more exciting, was the way to go.
However, today I am different. I believe in dedicating 3-4 hours a day to researching my blog topics- financial mindset, retirement planning, investing, real estate, and business.
Using similar time requirements for FOREX, leveraging technical and fundamental analysis can be possible. That is the best bet. If I jump back into FOREX, I will spend at least 1 hour a day researching currencies, away from the charts.
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Pro- Cool charting techniques. My favorite part of FOREX trading was learning all the different charting techniques, symbols, and averages. Every time I read Seeking Alpha, I swear I run into something I learned in my FOREX days. An example is a Fibonacci retracement. I never heard of this before, but I read about it at least once a week.
Pro- Technical analysis carries over to stocks and commodities. Everything you learn about technical analysis carries over to stocks and commodities. The reason is that you are only focusing on charting. Things such as RSI and VIX levels are essential in all of these markets.
Cons- Sitting in front of my computer. Ultimately, sitting in front of my computer all day was why I gave up FOREX trading. Again, I had lousy work habits and approached them the wrong way. I was trying to be a technical analyst when that is not how my brain works. I am a fundamental analyst at heart.
I like to research and understand the underlining stock, commodity, or currency. I have never bought a stock based on a technical analyst. If I believed a stock is undervalued, it is because I understand the company, its’ prospects, and think it will recover over the long-term. I have not purchased a stock because a chart tells me it will make a move higher in the next few weeks.
So why would I do technical analysis for FOREX? Again, this is why I constantly harp on reading. Reading books has opened my eyes to the world of finance and also myself. I am not a technical analyst. So my time spent doing FOREX was out of character, and that is why I did not enjoy it.
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Starting over, I would read the news and current events. I would learn the different currency announcements and conferences. There are also essential reports, such as gross domestic product and non-farm payroll, that I never opened or read. I think I would enjoy FOREX trading using fundamental analysis.
Cons- Leverage. Leverage is the name of the game in FOREX and commodities. Remember, leverage means loans or borrowed money. It magnifies anything that it touches. If you win, you win big; and If you lose, you lose big.
Luckily, I do not have a gambling gene, so I never got in over my head. I put about $200 into my account and walked away with my $200. If you have a gambling gene or addiction, don’t jump into this world. Watching the little charts go up and down can be very addicting. You can start to chase the symbols.
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How would I FOREX trade today? Two years later, I am a much brighter dude. I have read books that have made me a lot of money. I understand who I am and what FOREX can bring to the table for me.
I would focus on fundamental analysis. I would watch charts go up and down every day. I would pick a currency pair that I felt was important to me to study. In this case, maybe America and Turkey. I would be careful because this currency pair is considered exotic and costs more to trade.
I would have $1000 in my account and not add more. I would make a couple of trades, based on the news and current events, and continue with my life. Doing this consistently and learning over time, I feel you could be a winner. The goal is to win 60% of your trades.
If you trade the same amount every trade and win 60% of the time, you are a net winner. You can be a long-term winner in FOREX. Everybody you read online is selling you something. It is the same in stocks. Once you get past the noise, stock market investing is exceptionally dull. You pick good dividend-paying stocks and keep buying them.
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Final thoughts. I think FOREX trading has a place in my future endeavors since I now am a much more patient and intentional individual. I understand that I am a fundamental analyst, not a technical one, and I would spend time reading and understanding the market, not looking at charts and graphs.
I did not enjoy FOREX because I hate sitting in front of a computer. I can do it for blogging because writing is my creativity in action. Sitting in front of a computer is a means to an end. My job is to convey my voice, thoughts, and creative flair into a blog or article. Technical analysis is soul-draining to me.
I look forward to jumping back into FOREX, most likely when I retire. I can see myself spending about an hour a day learning and reading about markets and such. It is an exciting world, and your foreign currency knowledge can have huge impacts on your real-world endeavors, especially if you plan on spending time overseas as we do.
I would say that if you are interested, read a book on it. I love some of the terminologies and charting tricks, even if I don’t use them. It is fun to hear them in the wild on Seeking Alpha forums. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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