What it is like to be a forex trader?

A foreign exchange (forex) or currency trader can mean different things depending on whether the person is a private individual speculating on their own trading account/s or a professional, trading currency on behalf of a bank or investment management firm and their clients.

What is a retail forex trader?

A retail forex (FX) trader is a person who aims to benefit from the exchange rate between two different currencies. Most retail FX traders are looking to speculate on the direction of currency movements over the short term and concern themselves with strategies which include day trading and scalping, trend following or position trading.

A retail FX trader is likely to make use of an online trading platform to allow instant access to the world of currency markets and provide research, analytics and trade execution tools.

There is also a smaller portion of FX traders who would use the currency market as a hedging or insurance type tool to help protect the value of offshore investments or cross border financial transactions.

A retail FX trader is concerned with using the currency market in aim of benefitting him or herself relative to their personal investment needs and risk appetite.

What is a professional forex trader?

A professional forex trader is considered a person involved in currency transactions on behalf of a bank or financial institution, executing orders for the business and or their clients.

A professional forex trader will often be using currencies to hedge or protect investment portfolios or for the purchase of cross border assets for the institution and or their clients.

A professional forex trader deals with significantly larger sums of money and usually trades within the interbank market.

Whereas a retail FX trader will determine their own risk criteria for their portfolio and positions, a professional forex trader will be mandated by the business for which they operate on how much currency risk they are allowed to assume in the marketplace.

A retail forex trader is responsible for only their portfolio, while a professional forex trader has many more people to account for.

What is it like to be a forex trader?

In which ever capacity you are as a forex trader (i.e., retail, or professional), the currency market provides a high potential for both risk and reward. In turn, forex trading can be both exciting and stressful.

Yes, there are many advertising the luxurious lifestyle that the industry could bring, but it is important to remember that to be successful requires a lot of work, understanding, and there is the potential for loss along the way as well.

A forex trader will spend a good portion of their time reading, researching, analyzing, executing trades as well as record keeping. For continual self-improvement in the trader’s skill set, self-evaluation of success and failures will need to form a regular part of a FX traders’ regime, whether daily, weekly or monthly.

Self-reflection on realized strengths and weakness mean a continued introspection into oneself, requiring enormous amounts of self-discipline.

Another consideration with regards to what its like being a forex trader, is that the forex market opens at 12am Monday (GMT+2) and closes at 12am Saturdays (GMT+2) and trade pretty much continuously through this time. Over this period there will be higher levels of activity at different times of the day (and night) relative to which country exchanges are open and when they are overlapping. This means that forex traders will often need to keep unorthodox hours in terms of there business hours, depending on which currency markets they are trading. This is an important consideration when looking to pursue the FX trading lifestyle as it can affect other aspects of one’s life.

How much can you make with forex trading?

While a professional forex trader for an institution will likely be salaried with the possibility of benefits and commissions, there is no guarantee to how much money a retail FX trader could make in the forex market. Even strategies that have a proven historical track record do not provide a certain future monetary outcome.

The money made trading forex will be a function of the trader’s ability and amount of risk capital they have available for the endeavor.

A highly skilled forex trader may have the ability to write their own salary, although a trader who has not developed their skills might never reach a point of profitability.

In summary:

• Retail FX traders are largely concerned with speculating on currency markets, manage their own portfolios and determine their own risk profiles

• Professional FX traders will manage funds of banks, institutions and / or their respective clients often looking to hedge portfolios and cross border asset transactions, while working to the mandates of their employer

• The forex market offers both a high potential for reward and high level of risk

• The high risk to reward nature of forex trading suggests an elevated degree of both stress and excitement

• Forex traders will need to spend a good portion of their time reading, researching, analyzing, executing trades as well as record keeping

• Forex traders will often end up working unorthodox business hours in lieu of the continuous nature of the currency market

• Professional forex traders working for an institution are likely to be salaried with benefits and commissions

• Retail forex traders will write their own salary through trading dependent on their skill levels and risk capital available for the market

• There is no guarantee on the level of profitability in the currency markets