Using Forex to Achieve Financial Freedom

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Financial freedom has become an American cliché. Everyone wants it, and there is no end to the number of companies promising to sell you that dream. The question is: why buy that dream at all? Why not learn how to achieve the dream of financial independence on your own?

 

You’ll need education, of course, but there has always been an interesting contradiction in the late night infomercials, the wise words of gray-haired financial advisers, and radio and T.V. personalities. If someone had the secrets to success, and knew how to make a million dollars, why would they share it with you for $19.95 (or, for free in some cases)? The answer is: they wouldn’t unless there’s the potential to make more money selling the idea than implementing the idea.

 

The Only Ways To Achieve Financial Freedom 

There are only two ways to achieve financial freedom. You must either save and invest your money or you must start your own business. Every other way of making money leaves you in a very dependent relationship with an employer and keeps you in a “hand-to-mouth” existence.

 

Starting a business requires considerable skill and time not to mention money. You must be willing to commit long hours, and often nights and weekends, for many years before you realize any kind of meaningful profit. An easier way is to just hitch a ride on someone else’s business. In other words, invest.

 

Investing might also require long hours, but you get the benefit of an existing infrastructure. You can get away with much less knowledge about a company you’re investing in than a company you’re managing. When you buy stock, you’re becoming part owner in a company. Your ownership is limited though. In effect, your stock ownership represents the fact that you’ve hired a manager to run the day to day operations of the business. This is why stockholders get voting rights and can collectively fire CEOs. Still, investing in a company usually requires that you understand something about the management, the economy, and the company’s supply chain so that you can try to predict whether it’s a good investment for you.

 

Meeting Your Financial Goals 

Assuming that you want to achieve financial freedom through investing, you must set financial goals. How much money do you want to accumulate, and by when? If you want to retire by age 65, you have to assess your current savings and how much you’re putting away every month. If you need $50,000 a year in retirement, and you think you can earn 5 percent per year from your investments, then you’ll need a whopping $1,000,000 accumulated in your personal savings that you can adjust upward for inflation every year. If you try to use stocks to achieve this goal, you’ll have to invest for the long-term, and hope that the companies you invest in can return 8 to 10 percent every year for the duration of your retirement (to compensate you for inflation).

 

Enter Forex 

Another financial strategy to lower your risk and stabilize your income is to use forex for at least part of your income. Forex stands for “foreign exchange,” and the forex market is the largest, most liquid, and arguably the most volatile market in the world. It is estimated that the forex market has an average daily turnover of $4 trillion dollars. Buying and selling currency is extremely easy, and the volatility means that there is usually an opportunity to profit during a trading session.

 

You don’t have to use all of your savings to trade in forex. In fact, many individuals use just a small fraction (i.e. 5 percent or less) of their savings to invest in forex. Forex brokers help to facilitate your currency trades. Some examples of popular and reliable brokers include eToro, InstaForex, LiteForex, and Alpari. Alpari is especially good, since it allows “micro” trading with low minimum initial capital requirements.

 

Along with brokers, there are plenty of software programs to help you track currency trends in the market. These programs will even tell you when you enter and exit a position in the market, making trading very easy. The balance of your savings can then be invested in bonds, money market funds, bank CDs, annuities or some other interest-bearing investment.

 

Caution

While trading forex is easy, making money is not. Even with software programs that point out trends, entry, and exit points, you must set firm profit targets for daily trades. For example, if your daily profit target is $100, then stop once you’ve made $100. Don’t try to make more. If you set a loss target of $100, then stick to that too. Don’t try to go for “revenge” on the market.

 

The market doesn’t care how much you make or lose. In fact, one of the benefits of using trading software in forex is that it takes emotion out of the equation. Once you start trading emotionally, you risk losing more than you can afford to.

 

Author Bio:

Guest post contributed by Stacy Pruitt, a freelance forex strategy and finance writer. Stacy writes about advanced trading and also attempts to answer beginner investor’s questions, such as what is forex?

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Category: Financial freedom