As the forex market is getting really popular by the day, due to its round-the-clock availability, ease of access, and huge liquidity, some people are seriously considering trading forex as a career but are not sure if it is worth the time and effort. So, the question: “Is trading forex really worth it?” has become very common in recent times.

Well, the answer to that question depends on what you have in mind. Do you want to know if you can make money trading forex or if you can make more money trading forex than doing something else? The answer to the former is pretty straightforward: yes, you can; if others are doing it, you, too, can! For the latter, the answer will depend a lot on your trading capital and other factors. Forex trading only offers you an opportunity to make money, but how much you make depends on how much you put in — both in trading capital and learning.

In this post, we will explore why forex trading is really worth the effort, the risks involved, and how you can become a profitable trader. But first, let’s find out what forex trading is all about.

Trading forex: What does it really mean?

Forex trading simply means to exchange one currency for another. That is, one is either selling currency A to buy currency B or selling currency B to buy currency A. There are many reasons for trading currencies, and they vary with the entity trading the currencies.

Commercial banks, for example, trade the foreign exchange market as a part of their business operations, helping their clients to secure foreign currencies for their various needs. However, aside from the usual banking services, these banks also trade the forex market for speculative purposes, trying to profit from price movements.

For corporations with international operations or those that have to import some products or services from abroad, the foreign exchange market is where they can get the relevant currencies for their business transactions.

Forex trading, for institutional investors like hedge funds and investment funds, is purely for speculation. The same is true for individual retail traders like you and me. We trade the forex market to profit from price movements, by buying low and selling high or vice versa.

Now, your question is whether it’s really worth it to speculate on the forex market as a retail trader and make money from the opportunity offered by changing exchange rates. The simple answer is yes, provided you learn how to trade the market, stay focused and disciplined, and follow the rules of the game. Having said that, let’s take a look at why forex trading offers a unique way to make money.

Why trading forex can be highly beneficial

There are many reasons why learning to trade the forex market is worth your time and effort. Whether you’re looking to build a career trading forex or to create another source of income, the forex market offers unique benefits when compared to other markets. Here are some of the benefits of trading forex as a retail trader:

It requires the least cost to start

One of the main benefits of trading forex is that you can with a small amount and gradually grow your account. Although it varies with forex brokers, the initial capital required to start trading forex is relatively small compared to other financial products, such as stocks, commodities, futures, or options.

Some forex brokers may even allow you to open a trading account with as low as $50 or even lower. Compare that with at least $500 minimum requirement for trading futures contract or the $2,000 minimum balance for trading stocks on margin or the over $25,000 required for day trading stocks.

As long as the initial trading capital is concerned, forex trading is the cheapest to start. Coupled with the easy availability of charting platforms and a plethora of technical indicators and fundamental analysis websites, the ease of entry in the forex market is appealing.

You can trade at any time

The forex market is active 24 hours a day and, at least, five days a week. This makes it possible for you to trade at any time of your choosing — morning, afternoon, or night. What this means is that you can be a part-time trader while keeping your 9-5 job. All that matters is that you plan your trading to suit the market session you’re trading.

As you know, there 3 main overlapping market sessions — the Asian, London, and New York sessions. Volatility is usually low during the Asian session, so if the time you plan to trade coincides with the Asian session, you need to adjust your profit targets and stop loss — especially if you are using a day trading strategy. If you’re swing trading on the daily timeframe, you may not need to bother with the different market sessions.

There is huge liquidity

More than $5 trillion are transacted in the forex market on a daily basis, so there is a lot of liquidity in the market. In fact, it is the largest financial market based on the daily value of transactions. This offers a lot of advantages compared to other markets. One of them is efficient pricing with tighter spreads.

Another advantage is that you can easily get in and out of your trades without much difficulty, as there are always traders to take up the other end of your trades. So, the issue of non-filled orders is almost non-existent.

The volatility can be advantageous

One good thing about the forex market is that it has enough volatility, which makes it possible for traders to make some reasonable profits within a few hours. By volatility, we mean the rate with which the price moves and the size of the swings. Some currency pairs can move more than 100 pips per day, so targeting about 50 pips per day from such pairs is not out of place.

In markets where there is minimal volatility, it may take a long time for the price to make a reasonable movement that can yield an appreciable profit. Thus, trading forex offers a huge benefit in that regard if you know how to manage the risk associated with higher volatility.

The cost of trading is low

One of the most interesting benefits of trading forex is that the cost of a transaction is much lower compared to what you get in other markets. Unlike stockbrokers who charge separate brokerage commissions, most forex brokers get their fees from the spreads, which is very small compared to the average stock brokerage fees.

Even when forex brokers charge a separate commission, the amount is only a fraction of the fees charged by stockbrokers. One of the reasons for the low cost of transactions in forex trading is the huge liquidity in the market, which allows the forex brokers to leverage on the volume of transactions. Another reason is that the market operates over the counter, and there is a huge competition among brokers.

There are multiple currency pairs to trade

Because currencies are traded in pairs, there are many currency pairs you can trade, ranging from the major pairs, such as EUR/USD, GBP/USD, USD/JPY, USD/CHF, USD/CAD, NZD/USD, and AUD/USD, to minor currency pairs and exotic pairs.

Though volatility and liquidity vary with each of the currency pairs and some exotic pairs may have extremely low liquidity, there a lot of pairs with normal liquidity and volatility that you can trade.

You can trade in both directions

Here comes one of the unique features of trading the forex market — there is no restriction on trading in either direction (long or short) — unlike what happens in most equity markets where traders may not be allowed to go short on stocks. This offers a great advantage because there are occasions when the best trading opportunity may be to go short.

In fact, some brokers allow hedging strategies, in which case, traders can enter trades in both directions at the same time.

It offers an opportunity to make an extra income

Ultimately, the forex market presents an opportunity to make extra income while you continue with your paid job. If you learn how the market works, the events and data that moves the market, and how to properly read the price chart, you may be able to make consistent profits trading forex part-time. This can help you out with some bills or fund your next vacation.

You may even wish not to touch your profits and gradually grow your account. Over time you may build it to a huge amount that your regular profits may be able to take care of your living expenses.

You gain knowledge about the economic and financial matters

When you learn to trade forex, you will begin to understand the type of news and events that move the global financial markets. And almost automatically, you will pick interest in financial news and start following the discussions on such channels as Bloomberg and CNBC, as well as your local channels that discuss financial matters and government policies.

With your new-found knowledge in economic and financial matters, you would understand your government’s policies and their potential effects on your local economy. So, you can plan how to protect yourself from adverse policies and position yourself to benefit from favorable policies. For example, if your government’s policy would devalue your local currency in the near future, it may make sense to preserve much of your wealth in a strong foreign currency.

The drawbacks of trading forex

While there are many reasons why forex trading is a worthy journey to embark on, there are also some drawbacks you need to be aware of before taking that step. Here are the key ones to take note of:


Although volatility can be a good thing — after all, it enables traders to make huge profits in relatively short periods of time — high volatility can be extremely dangerous if you’re not prepared for it. Just as it can help you make huge profits quickly, it can also be the other way round — you quickly accumulate huge losses.

It can happen that you incur a series of losses because your stop loss easily gets triggered or you have a massive drawdown when you’re in a wrong trade without a stop loss. Whatever the case, you can lose heavily if you don’t know how to manage trades in markets with high volatility.

The solution to the issue of high volatility is to study the market well and understand the price movements before you put your money on the line. You should know the appropriate size of stop loss for different levels of market volatility.

Excessive leverage

Another killer for beginner traders is the use of leverage. Forex brokers can offer massive leverage — up to 500:1 or even 1,000:1. With leverage, you can carry larger trades than your trading capital can ordinarily carry, but using a leverage of 500:1 is quite insane because any slightest adverse price movement, your account is decimated. As leverage magnifies potential profits, it magnifies losses as well.

The good thing is that even though the broker offers those outrageous leverage, you can choose not to use it. A little leverage, say 2:1 or 3:1 may be fine, but when your leverage starts running into tens and hundreds, you are calling for a disaster.

Lack of transparency

As you already know, the forex market is not regulated by any central exchange — though, individual brokers may be regulated in the countries where they operate. Because of this deregulation of the market, different brokers operate differently. While some offer direct access to the interbank market, others absorb their clients’ orders in-house, creating a possibility for conflict of interest when they trade against their clients.

In addition, there are a lot of brokers that operate offshore and are poorly regulated. Some may not even be regulated by any financial authority. These sorts of brokers can be very dishonest and work against you. It is best if you can use a broker that is regulated by a tier-1 financial regulator, such as the FCA, ASIC, CFTC, IIROC, or ESMA.

The mental stress

Another important factor to consider is the mental toll forex trading takes on you. Trading forex can be emotionally draining, especially when you have not learned to control your emotions. The reason is simple: money is involved. It doesn’t feel good to watch the market move against your position and attempting to hit your stop loss. You may even lose sleep sometimes when you leave your position open overnight.

While you may not totally eliminate your emotions when trading, you, at least, need to control it so that it doesn’t affect your trading decisions. One of the best ways to keep emotions at bay is to trade with an amount you can afford to lose without losing sleep. Also, start with set-and-forget strategy — where you set your trade, stop loss, and profit target and wait for the outcome. This way, you take your mind away from your position until you get an outcome, which could be positive or negative.

How to become profitable and make money trading forex

Now that you’ve seen some of the benefits and drawbacks of trading forex, let’s take a look at how you can develop yourself to become the profitable trader you desire.

Accept the reality: trading forex is not a route to get rich quickly

If you wish to get rich quickly, you had better look elsewhere as forex trading may not be for you. There are other ways you can make money, so it may be better to look for another business. Forex trading is not your instant ticket out of poverty. To succeed in your forex trading journey, you need to have a passion for it, which can carry you on when the journey becomes tough.

Becoming rich trading forex is a long-term thing — you have to compound your profit and grow your account over many years. So, patience and consistency are the key qualities you must have, as well as the passion to continue when the going gets tough.

You must forget about the idea of quick money as it can lead you to use excessive leverage, which can blow your account before you even get started.

Have a main source of income

This is very important. You need to have a good source of income if you want to succeed in forex trading, and here are why: Firstly, you need to raise enough trading capital that can make reasonable profits without using too much leverage. While you can open a forex account and start trading with as low as 100 bucks, you may only be making a few cents per trade unless you’re using excessive leverage.

The second reason to have a good source of income is that you need to be able to feed yourself and pay your bills until your profits are big and consistent enough to sustain you. If you start living on your profit early on, you are more likely to make some serious mistakes. For instance, you may be unwilling to take a loss, which could make you trade without a stop loss — a call for a disaster.

Moreover, the only way to grow your wealth trading forex is by compounding your profits. If you’re reliant on your profits, you won’t be able to grow.

Learn how the market works

There is a need to understand how forex trading works and the events that move the market. Without adequate knowledge, you will find it difficult to succeed in the market. Apart from learning the basic terminologies and the concept of exchange rates and trading volumes, you need to get a deep practical knowledge of these four areas:

  1. How to use your trading platform
  2. How to perform technical and fundamental analysis
  3. Developing a reliable risk and money management rules
  4. Developing the mindset of a trader — trading psychology

You need to practice with your trading platform on a demo account until you master the various features and functionalities to make for easy sailing when you move to a live account. Also, you need to know the various data, news, and events that can move the market and how much impact they can have on the market. You should also learn how to read the chart and analyze both the price action and the indicators.

Understanding how to manage your trading capital and the amount of risk you take in each trade is very vital for your survival in the market. This will determine the lot size you trade and the number of pips you use for your stop loss. And finally, you should read Mark Douglas’ works on trading psychology, and when you want to start live trading, open a micro account first and practice with small amounts until you master your trading emotions.

Search for a truthful broker

The broker you use is very essential to your success in the forex market. Some brokers are very dishonest. Any money you deposit with such a broker is as good as gone. The interesting thing is that most of those dishonest brokers are either not regulated at all or have offshore regulation.

Thus, the first to check when considering a broker is whether it is regulated by a reputable financial authority and where it operates from. You should look for a big brokerage brand that is regulated by the FCA, CFTC, ASIC, or IIROC. The next thing to check is their order execution model. It is preferable to use an ECN or STP broker. A dealing desk (market maker) broker can trade against you, no matter how good the broker is, and that could create an opportunity for a conflict of interest.

Don’t misuse leverage

Many brokers allow and even encourage their clients to make use of massive leverage. While a bit of leverage can help you grow your account faster if your strategy is making money, too much leverage can turn a profitable strategy to a losing one, and here’s how: No matter how profitable a strategy is, it can still have a losing streak. When you’re using large leverage, two or three straight losses can inflict mortal damage to your trading account.

That a broker allows up to 400:1 leverage does not mean you use leverage at all, let alone using up to that. As a rule, do not use more than 3:1 leverage until you’re well experienced in trading forex, and even when you think that you’re experienced enough, don’t go beyond 5:1 leverage.

Keep your emotions in check

We all have this particular attachment to money — nobody wants to lose money — and coupled with the great desire to make more money, our human emotions are laid bare when trading forex. There are many emotions we can manifest when trading, but the commonest ones are fear, greed, hope, and anger. These emotions can sabotage your efforts in the market in one way or another.

Fear, for example, can stop you from entering a trade when your trade signal occurs probably because the last few trades were losers. Similarly, you may start chasing a trade you missed because you don’t want to miss out on the opportunity. In another situation, the price may be moving heavily against you, and instead of closing the trade, you will hope for the price to reverse. To succeed in the forex trading game, you should be able to put all these emotions in check.

Have a growth plan

Now, you put everything right, started trading, and things are going well. What is your growth plan? It is very important to have a plan for what to do with your profits. Will you be withdrawing your profits monthly, quarterly, or yearly, or do you intend to plow every penny back to grow your account?

You need to answer all these questions and develop a growth plan for your business. Yes, trading is a serious business, even if you are trading part-time.

Final words

Is trading forex really worth it? Yes, it is worth it, and there are many reasons why. But you need to develop the proper mindset, have a reliable means of income, learn how the market works, use a truthful broker, and have a growth plan — as you would any other business.