Contrary to the opinion of many, forex is a serious business. It takes long, hard hours of study and preparation, there is a money commitment involved and there are risks. It is not a get-rich-scheme in any sort of view and it definitely does not come with guaranteed profits. Just like any other business, you can rise to the top or you can sink to a point of losing your trading account. However, if you follow the guidelines, have proven yourself as a profitable trader and are ready to take the plunge by turning your part-time hobby into a full-blown business, then do it with confidence.
Take the Expenses into Account
If you have already been trading successfully on a part-time basis, then you probably have most of what is needed to turn those trades into a business. You should have a computer, a good knowledge of how to make profitable trades, a broker whom you have a good working relationship with and the necessary office equipment. While you will still have the same commissions to pay to your broker, most of your expenses will come, unfortunately, from your trades that end up as losses. Your losses are considered to be your number one expense when you trade forex as a business. But don’t despair – there are steps you can take to reduce your risk of loss and increase your chances of profitability.
Profits from Business
We are not talking about the forex basics here, which are things like learning, studying, watching the news and monitoring your trading journal. Hopefully, if you have not accomplished all the tasks, you won’t be considering setting up a business. Since we can safely assume you are past all that and have plenty of trading experience to look back on, we can move on to the actual points that will help your business become profitable. The main point is that you will have more trades that win than trades that lose. Compared to the number of losing trades you have placed, your winning trades need to be higher. In short, if you have not gotten to the point of a higher percentage of wins, you may want to reconsider turning forex trading into a business at a later time. When looking at the winning trades, we’re actually speaking about risk-reward. If your risk-reward ratio is set around 1:2 on each trade, you only need to win from 35 – 40% of the time to realize a respectable profit. So it’s not just about percentages. It’s more about the number of wins compared to losses. But don’t make the mistake of waiting until your wins are up to a high percentage, or you may never create a business!
Consistency Pays Off
You spent a lot of time creating your strategy and adjusting it to a point where you feel like it’s time to develop your trading into a business, so go ahead. Be disciplined in your work, stick to your strategy and trade like a pro!