Before you can begin to identify the trading style and approach
that works best for you, give some serious thought to what
resources you have available to support your trading. As with
many of life’s endeavors, when it comes to financial-market
trading, there are two main resources that people never seem
to have enough of: time and money. Deciding how much of each
you can devote to currency trading helps to establish how you
pursue your trading goals.
If you’re a full-time trader, you have lots of time to devote to
market analysis and actually trading the market. But because
currencies trade around the clock, you still have to be mindful
of which session you’re trading, and of the daily peaks and
troughs of activity and liquidity. Just because the market is always open
doesn’t mean it’s necessarily always a good time to trade.
If you have a full-time job, your boss may not appreciate your
taking time to catch up on the charts or economic data
reports while you’re at work. That means you’ll have to use
your free time to do your market research. Be realistic when
you think about how much time you’ll be able to devote on a
regular basis, keeping in mind family obligations and other
personal circumstances.
When it comes to money, we can’t stress enough that
trading
capital has to be risk capital and that
you should never risk
any money that you can’t afford to lose. The standard definition
of risk capital is money that, if lost, will not materially
affect your standard of living. It goes without saying that borrowed
money is not risk capital — you should never use borrowed
money for speculative trading.
When you determine how much risk capital you have available
for trading, you’ll have a better idea of what size account
you can trade and what position size you can handle. Most
online trading platforms typically offer generous leverage
ratios that allow you to control a larger position with less
required margin. But just because they offer high leverage
doesn’t mean you have to fully utilize it.
More on this next time!
