An In-Depth Look Into Retail Forex Trading

Retail Forex trading constitutes a fraction of the actual industry. Yet since the market size is estimated around $5 trillion transacted per day, even a fraction seems like a large amount. Retail trading encompasses everyday people who trade on their own behalf instead of for hedge funds or banks, which are termed as professional or institutional traders. So what is retail trading? And what factors prime a successful career in Forex trading?

A forex trading chart

Retail Forex Trading Explained

Forex trading pertains to the buying and selling of currencies, such as US Dollar, Japanese Yen, New Zealand Dollar, and Great British Pound. Now, when attached to the “retail” part, the phrase pertains to transactions made by people who are not employed by a company and is trading on their own interests. Busy professionals employed in other industries, stay-at-home parents, and retirees are all encompassed by this title.

Why People Trade

One of the few reasons why people trade is to be independent. People who make trading their full-time source of income or at least attempt to do so are independent of their schedules and decisions. They no longer need to adhere to the corporate structure, which entails working with people you don’t really like, commuting long hours, getting into some office drama and politics, etc.

People also trade because of the freedom that trading affords. As a trader, you get to express your ideas in an unlimited number of ways without anyone getting any say to it. You can buy a currency pair for your own reasons even when others are selling or short pairs when others are buying. On the same note, this provision of freedom must be used appropriately otherwise you risk incurring heavy financial losses.

How to Achieve Success

Success in retail forex trading requires a unique set of traits and knowledge that you won’t find needed in other professions. For instance, as a retail forex trader, you must have patience to wait for opportunities to emerge before actually taking a position. More importantly, as some would argue, is the ability or rather the willpower to close a losing position before it results to larger losses. For the very reason of having such an enormous requirement for the right psychological mindset, the failure rate for retail trading is set at an alarming 90 per cent.

Aside from the psychological aspect of trading, experts who have studied traders for years and those who have been in the profession for a fair amount of time both agree that success takes shape through the culmination of technical and fundamental analysis. The ability to read market data and interpret accordingly can have a tremendous impact towards your bottom line.

Technical analysis involves the use of historical chart data to predict future market direction. Traders and analysts interpret the information with the best of their abilities to come up with high probability trade ideas and setups. Fundamental analysis, on the other hand, use macro and micro economic factors to determine supply and demand levels in particular currencies.

How to Obtain Information

Information in retail trading can benefit one’s venture into the financial market. However, it’s also a double-edged sword that can do harm when used improperly. Obtaining information only from reliable sources and limiting the amount of information you obtain are essential habits that should be practiced at the earliest stage of trading possible. Sources like Compare Forex Brokers, for example, can provide unbiased reviews and in-depth assessments of brokerage firms.

Final Notes

Trading the forex market will be stressful and challenging at times. Those who are resilient enough and adapt quickly, however, can find themselves extracting consistent profits over time and gaining financial independence from dead-end day jobs.

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