Foreign Currency Trading – Hobby, Game, Or Business?

Whether you are just starting out in the Forex trading world, or have been trading for some time, the mindset you have about the market will determine to a large extent the output of your venture. There are 3 basic approaches to trading the Forex market, and believe it or not, a large number of traders that take each one of these approaches.

Approach # 1: Forex Trading is a hobby.

A trader who approaches the Forex market as a hobby will only devote time to his trading when it does not interfere with other more important aspects of his life. He will not generally have a plan, and if he does, he believes it is optional to stick to his plan. He does not keep a trading diary of all of his trades, and usually takes no thought of any money management principles. He will trade whatever money he has at the time, and if he loses it all, will simply deposit more to his account when it's convenient. The probability of making a long term profit in this manner is almost zero.

Approach # 2: Forex Trading is a game (of chance).

It is surprising how many people either consciously or subconsciously approach Forex trading with this mindset. This approach is one step removed even from the "hobby" trader. This type of trader does not believe that it is possible to make a long-term profit in Forex, but trades suddenless because of the "thrill" of the game.

He throws money at the market like a roulette wheel, and some who trade with this idea even make a profit for a short period of time. They will continue to trade, lose money, and add money to their account until they are either out of trading capital, in debt, or grow tired of the game.

Approach # 3: Forex Trading is a business.

The trader who approaches the Forex market as a business of course has the highest probability of making a long term profit, and even making it his full-time work. He will apply all the aspects of running a legal business to his enterprise, including a trading plan, proper money management, long-term planning, and continuing education.

To be fair, one approach is not inherently "good" or "bad", but depending on which one you choose, will have a very different exit. If you choose to approach the Forex market as a hobby, or even as a game, then understand that the cost of enjoyment of your hobby or game will be very high. If, on the other hand, you approach it as a business, with a long-term mentality, then you will one day reach the enviable position of a "professional trader", who makes his living (and better) from the Forex market.



Source by Barry Hines


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