Both forex trading and stock trading can be lucrative side hustles, but they both come with their risks and rewards. There are stories of people making a killing in the stock market, but there are also tales of people losing everything they’ve put in. The same goes for forex and stock trading.
Caveat: it’s a volatile market. We’re looking at a bear stock market, crypto is in a downward spiral, and inflation is constantly climbing. What this does offer, though, is the opportunity to buy low and potentially sell high later on when the world economy stabilizes.
Should you begin with stocks or forex trading? Here’s a look at the pros and cons of each to help you decide which is right for you.
Option 1: Forex trading
Forex trading is a type of investment where you buy and sell different currencies with the hope of making a profit, based on the fluctuations of currency value. It can be a great way to make some extra money on the side, but it’s important to remember that it’s also a risky investment. Forex trading works by buying a currency when it’s weak and selling it when it’s strong so that you can make a profit from the difference in price.
There are a few things to keep in mind if you’re thinking about starting forex trading:
You’ll need to learn about different currencies and how they move in relation to each other. This requires an understanding of foreign markets and economies. If you’re interested in learning more about forex trading, there are plenty of resources out there, including online courses and books. And if you’re feeling confident, you can start trading with a small amount of money and see how it goes.
There are also true ecn broker services that give you a trading platform online. Many of these give you a practice account, where you can spend virtual money and trade based on the actual market, so you can try it out, or experiment with strategies, without risking real money. Many of these services also have auto-trading features, so you can set up your account to automatically make trades for you.
You’ll need to have some money to invest. You can’t trade on margin (i.e. you can’t borrow money to invest), so you’ll need to have enough money in your account to cover the positions you’re taking. How much you need will depend on how much you’re willing to risk per trade.
Start small. $300-500 is a good amount to get your feet wet, and once you get a feel for the gains and losses and the rhythm of trading, you can start investing more heavily over time. Slow and steady may not win you the race, but it will keep you in the green.
It’s important to be patient and not get too greedy; making small profits over time is better than trying to hit a home run with every trade.
In general, it’s recommended to keep your risk per trade at 1% or less. This means that if you have a $1,000 account, you should aim not to lose more than $10 on a single trade. This doesn’t seem like a lot, but these small losses can compound, and if you end up with a string of losses, this could put a dent in your account. So make small moves and small adjustments to your strategy.
Just remember that like any other investment, there is always risk involved in forex trading, so only invest what you can afford to lose.
Option 2: Stock trading
Stock trading can also be a great side hustle for people with full-time jobs. It’s a way to make some extra money on the side, while also investing in something that has potential to grow over time. Like forex trading, it’s important to remember that stock trading is a risky investment, so you should only invest what you can afford to lose.
To start stock trading, you’ll need to open a brokerage account. There are a lot of different brokerages out there, so do your research and find one that fits your needs. You’ll need to deposit some money into the account to start trading, and you’ll also need to decide what type of account you want. There are two main types of accounts: individual and joint. An individual account is just for you, while a joint account is for you and another person.
Once you’ve opened an account, you’ll need to decide which stocks to buy. There are a lot of different resources out there to help you with this, including financial websites, magazines, and even TV shows. You can also talk to your broker about what stocks might be good for investing in. Just remember that no one can predict the future, so always do your research before investing in any stock.
And like with forex trading, patience is key in stock trading. Don’t try to hit a home run with every trade; make small profits over time, and you’ll be better off in the long run.
Pros and cons of each
Pros of stocks
-Potential for higher returns over the long term (if you know how to play the long game).
-Some stocks, called dividend stocks, pay regular dividends to shareholders. These payments can provide a cushion against a drop in the stock price, generate extra income, or be reinvested to purchase more shares. For example, let’s say you own 100 shares of XYZ Corporation stock. XYZ is a dividend stock that pays $1 per share each quarter. If the stock price falls by 10%, your investment is still worth $900 (100 x $9 per share). But if XYZ did not pay dividends, your investment would be worth only $810 (100 x $8.10 per share). As you can see, dividend payments can help to reduce the risk of investing in stocks.
Cons of stocks
-Stock prices can rise and fall dramatically. In a volatile market, stock prices can fall 10% or more in a single day (compared to the 1% upward or downward movement, which is more typical in a more stable trading environment). So the risk can be great, and this can be extremely stressful, especially if you need to sell the stock to pay bills or meet other financial obligations.
-There is no guaranteed return on investment. This is something you will need to accept if you decide to invest in stocks.
Which is a better option for you
There is no easy answer to this question. It depends on a number of factors, including your investment goals, your risk tolerance, and your financial situation. Be sure to do your research and speak with a financial advisor before making any investment decisions.
Forex is good if: You have a day job and are looking for a way to make some extra income on the side. You’re okay with taking on a bit of risk, and you’re patient enough to let your profits grow slowly over time.
Stocks are good if: You’re looking for a longer-term investment, and you’re willing to accept the risks that come with it, especially with the uncertainty we’re currently experiencing in the market.