Should You Trade Forex During Retirement?
If you are lucky, you find yourself reaching a golden age where you can retire from the professional world to enjoy a life of comfortable leisure. Though we all aspire to have physical health and wealth when we retire, it is all too common for retirees to find themselves wishing that they were more financially stable. For this reason, new retirees often ask themselves if there is something they can do that is not too difficult, stressful or time consuming to supplement their retirement income or capital. Forex trading might fit the bill, but there are several considerations that must be made before proceeding.
Most retirees would agree that the best thing about being retired is having lots of free time. Forex trading is something you can do at home and you can keep one eye on the screen even if you are busy with something else. So, it seems that regarding time, trading during retirement can work very well. Of course, if you plan to be very active playing golf, volunteering, travelling or visiting your grandchildren, that is something to take into account – you may not be available during the most ideal trading times to make Forex trading into a serious hobby or pursuit.
Financial Pressure & Risk
It is well known that the easiest psychological situation for traders is when there is little or no pressure to make profit immediately or regularly. This is an area where the exact circumstances of your retirement will matter. If you are well capitalized and can be relaxed about when profit arrives, you are in a strong trading situation and should be able to remain psychologically healthy which could stop you making any expensive or emotionally destructive mistakes.
Alternatively, if you are trying to make an additional regular or semi-regular income to supplement your retirement income and you truly need this money, you are putting yourself in what could likely be a very bad situation. At this stage in your life, you want to leave you IRA (Individual Retirement Account or non-U.S. equivalent) alone. It is especially dangerous to put yourself under this kind of emotional, physical and financial pressure during retirement as if you suffer bad losses, you probably won’t have a chance in life to recover from it. This is truly the number one factor you should be considering.
It must be emphasized that risk factors must to be taken extremely seriously at this stage in your life. Capital preservation must be the number one priority!
Emotional and Physical Health
You might not be at your peak physical health by the time you retire. Even though it is more than likely that you have all your wisdom and intelligence intact, you must be brutally honest with yourself and question how precisely you are going to be able to use technology under pressure. After all, trading is very unforgiving in the sense that even small errors can be very expensive, and cannot be reversed.
The good news is that there are some steps you can take in this area to minimize the risks. Firstly, you can trade using a slower system, perhaps relying upon daily, four-hour or hourly charts, which should enable events to unfold at a much more relaxed and manageable pace. This might reduce the room for errors to creep in. Secondly, you might also have a companion or helper who could provide a second pair of eyes to cast a look at your operations in the market. Thirdly, it is worth asking your broker about built-in safety measures that might be available for your protection. For example, some brokers have a feature where if you enter an unusually large trade size, it asks you to reconfirm the trade before proceeding. This type of safeguard can protect against “fat finger” mistakes. It is worth asking your account manager whether he (or she) could implement something informally for your account, for example by requiring telephone confirmation to make a trade over a certain size.
Forex Trading Strategies for Seniors
If you have weighed the pros and cons and have decided to go ahead, you need to decide what kind of trading strategy you will be using.
A trend-following strategy could be ideal as these are long-term strategies that don’t require a lot of physical effort or emotional stress.
If you insist upon taking advantage of the fact that you are master of your own time and you wish to look at shorter time frames, you might consider only trading major session opens. This could be 8am to 10am London time, New York time or Tokyo time, depending upon which time zone you are located in. Usually it is the London and New York opens that are the most fruitful. I once read a very convincing trading journal by a retired couple who decide what to trade that day and in what direction just before 8am London time, then they look for trade entries between 8am and 10am before continuing with their day. There is no reason why this couldn’t be the basis of an excellent and profitable Forex trading strategy for seniors.