The global financial market is fast and incredibly diverse, with each individual asset offering its own unique pros and cons from the perspective of investors. Take the forex market, for example, where international currencies are traded in pairs and as derivative assets (which means that investors can speculate on price movements rather than assuming ownership of an underlying instrument).
But should you trade alone or as part of a team? We’ll appraise the pros and cons of each option below, while asking which option is best for you.
The Pros and Cons of Trading Alone
- You’re Free to Make Your Own Decisions: If you’ve spent a great deal of time learning about currency trading and the mechanisms of the forex market, the chances are that you’ll have a keen sense of determinism and understanding. This can create clearly-defined strategies and decision-making processes, which enables you to trade effectively without the assistance of others. Ultimately, it’s this type of freedom that encourages many people to start forex trading in the first place.
- You’re Free to Experiment and Diversify as You Evolve: On a similar note, sole traders are free to experiment as they continue to learn, especially when utilising a demo account through their chosen trading platform. This simulates a real-time market environment that’s completely risk-free, and sole traders can use this to hone their strategies and test out brand new ideas.
- You’re Accountable for Your Success or Failure: As a sole trader, you and you alone are responsible for your own successes or failures. This can create much harsher lessons in instances where trades turn against you, while there’s little in the way of support to help you cope with sudden or sizable losses. However, this can also be highly empowering over time as it forces you to be accountable and take actionable measures to safeguard your capital more effectively going forward.
What are the Advantages and Disadvantages of Trading in a Team?
- You Can Make More Informed Decisions: While you may have the courage of your convictions and total confidence in your decision-making ability, operating as part of a team can expose you to opposing views that provide additional context and insight. This may encourage you to think twice and adopt a more balanced view overall, leading to more informed decisions that deliver higher profits over time.
- You Can Source Motivation During Difficult Times: Losses are inevitable when trading forex, whether you’re a sole operator or part of a wider team. However, working in a team can help to provide crucial support and motivation during such challenging periods, encouraging you to keep going and remain strong even after a sizable loss.
- You May Miss Out on Real-time Opportunities: The forex market is renowned for its fast-paced and real-time nature, while its innate volatility can be successfully leveraged by traders in some instances. However, attempting to make decisions via a consensus can take time, making it hard to capitalise on live market opportunities and almost impossible to execute scalping to day trading strategies.
So, Which Option is Right for You?
As we can see, there are pros and cons to both methods of trading, and you’ll need to factor in your own unique outlook and appetite for risk when choosing the right methodology for you.
As a general rule, however, we’d recommend starting out as a sole trader, as this enables you to grow as an individual while developing the type of skills and determinism that make you a more effective trader.
This would also increase the value that you can add as part of a team, making this a viable option (if it’s one that you choose to pursue) later in your career.