Many people start the new year with grand plans to change their lives. They might want to start a new career, find a new partner, or relocate somewhere entirely different.
They see the striking of midnight as a chance to reset their path, moving away from where they were heading before and finding a completely new route.
Dr Dennis Buttimer commented on the reason why so many of us make New Year’s resolutions, saying: “I think most people want a second chance to improve the quality of their lives.”
He stated: “The New Year offers a blank slate – an opportunity to get things right. When we set New Year’s resolutions, we are utilising a very important concept called self-efficacy, which means that by virtue of aspiring to a goal and following through on it, I have a sense of control over what’s happening in my life.”
So, whether losing weight, quitting smoking, or changing career is one of your New Year’s resolutions, at the beginning of January, you finally feel like it is within your control to do something about it.
For some people, this could be stepping into the world of foreign exchange (Forex) trading.
But how do you know if this is the right move for you?
1) Previous experience in trading
Like any career move, it is not the best idea to give up your day job – and your financial security – without being certain about your next step.
The only way to do this in Forex trading is to have previous experience in the field.
This isn’t always easy, as many traders work on their own, but you could look for a mentor who is successful in the industry and get in touch with them. They might let you follow, and learn from, them, so you can get a good idea of what life is really like for a trader. This might include working for themselves, around the clock, and without a steady income.
You could also get your foot in the door at a lower tier trading firm, letting you see how the trading world works and getting a taste for the fast-paced environment of trading.
Although neither can give you the full experience of being a Forex trader, they will offer a glimpse into the industry. If it doesn’t feel right, this will give you a good idea about whether you should take the leap or stick with the career you have.
2) Do you like taking risks?
Not all traders are risk-hungry, but you should be able to tolerate, manage, and even enjoy, the gamble involved in trading large sums of money.
If taking risks, even with strong risk management strategies, still makes you feel nervous and uneasy, the trading world is not right for you, as even inaction can result in losses.
Failure to enter or exit a trade at the right time could have disastrous consequences, so the skill is knowing when the risk is worth taking and when staying put could be an even riskier move.
Some traders might find it easier to use instant funding from prop funds, as they are not risking their own finances. However, before they are granted access to this cash, they need to prove their risk management abilities first.
Therefore, if the prop firm is not convinced they have the talent to know when to take the risk, they will not give them the money in the first place.
3) You have an eye for analysis
Being a good trader is all about effective analysis. You need to be able to look at the figures and determine what trends, patterns and charts they fit into. This will inform you what is likely to occur in the future and, subsequently, what actions to take next.
You need a good eye for statistics, in order to understand the analysis fully, as this will enable you to get the best results.
It is also important to have an understanding of how other factors affect patterns and trends, such as political upheaval, economic changes, and national events. Therefore, you need to be able to analyse these changes to determine whether there will be higher volatility in the market, and if this means currency pair prices will accelerate.
4) Prepared to spend all day thinking about trading
Many traders say trading found them, as opposed to the other way round. They live and breathe the markets, and want to be involved in any changes that occur – no matter what time of the day it is, whether they are on holiday, or if it is Christmas Day.
This means you need to be prepared to work on the trades outside of normal office hours, as many fluctuations could occur when you have taken your eye off the markets.
Although this sounds like incredibly hard work, for traders, this comes naturally to them, as they want to be involved in everything that is happening.
However, if this sounds like far too much work, and you can imagine this becoming a demand on your time that you are not happy about giving, you might prefer a more passive form of investing.
5) You are able to control your emotions
Although traders can certainly get a taste for the excitement, the risk and the adrenaline, on the whole it is essential they are able to stay in control of their emotions.
If you begin to let your actions become dictated by the thrill of earning money or the disappointment of losing it, you will not know when to enter or exit a trade at the right time.
Instead, you will be tempted to keep cashing in even though your strategy tells you otherwise, or you will try to regain the monies lost when you should cut your losses.
It is essential to stick to the trading plan as this will help you to mitigate big fluctuations, but it is much harder to do this if your actions are controlled by your emotions.
6) You have realistic expectations
Many people have these grand ideas that people working in financial markets are rolling in it, but the truth is their salary can vary massively.
In fact, according to job search website Glassdoor, the average salary of a Forex trader in London varies between £45,367 and £175,361. This shows the huge differentiation between wages.
While the lower salary is still more than £10,000 over the median annual earnings for full-time employees in the UK, it is on par with the median salary of those working in the capital.
Furthermore, while the top end of the scale is substantially higher than the national average salary, it still seems poultry compared with some of the world’s most successful Forex traders, including George Soros, who is reportedly worth $6.7 billion (££5.31 billion).
If you have your eyes set on earning billions of pounds from this career move, it might be sensible to reset your expectations, as your salary increase might be marginable.
Of course, you might not earn any more than you were doing with your previous job, and you could even find yourself making a loss, particularly in the first few months, as it will take some time to find your feet in the trading world.
7) You’ve done your research
The new year can make it even more tempting to jump ship to a different career than any other time, but it is essential you have done your research when it comes to Forex trading.
Buy the books, listen to the podcasts, and search the internet for reputable resources, so you fully understand what it involves, what it will look like for your finances, and how much of your time it will take over.
To really know if this is the right career move for you, you could complete an evaluation process for a prop firm. This allows you to put your skills to the test and see whether you have what it takes by using a dummy account before you spend real money.
In a program like this, you can demonstrate your risk management talents, try to determine patterns and trends, and get a feel for whether you are able to remain emotionless at challenging times.
As it is only a demo account, you are not using real money, so you have nothing to lose if you are not as adept as you thought you would be.
Depending on the provider, you might not have a deadline you have to complete the evaluation process by, which gives you time to either practice and improve your skills, or realise this move is not the right one for you.
Even if you decide you are not going to be 2024’s most successful trader after all, you have put the research you have learnt to the test without losing any real cash.
This is a great opportunity for beginners to see whether Forex trading is right for them, whether they need to do some more learning, or whether they need something more steady and secure for their job.