It seems like the pandemic made us think more about passive income and what it means and includes. People are struggling to keep their jobs, some are tired from being stuck at home, but the fact remains that we all need more money, especially for rainy days. The pandemic showed us first hand what it’s like when you don’t think in advance at all. It’s not like we expect something this big to happen, but having another income source accumulates regularly. You are not always thinking about it always, which is an excellent way of saving money and creating profit.
These days everyone includes and recommends trading as a good source of passive income. You can make it a passive income if you do enough research and are ready to remain patient even though the Forex market is very volatile. Deciding what you want to trade on is a different story since what you invest in will determine to some degree whether it can be a passive income or not.
Forex In A Nutshell
Forex stands short for Foreign Exchange, and it’s a decentralized trading platform, operating only on the internet. It works 24/7, excluding Saturday and Sunday, when you will have the time to revise your strategy and everything that happens that week so you can somewhat prepare for the next one. Forex focuses mainly on currency pairs and cryptos. There are pros and cons to both stock and forex trading, and we will discuss both so you can decide what would be the best for you and your lifestyle.
The Stock market principle is they operate using shares. It means if you are interested in a specific company (like Facebook), and they are on the market, you can buy a share of the company. Owning a small part of a big company isn’t such a bad thing. After all, if they have a good history, right perspective, and it looks like you can benefit from owning their stocks.
Pros and Cons of Forex and Stock Market
Forex volatility is attractive to traders because it relies on gaining profit depending on the price and its changes. Short-term fluctuations are better for advanced traders since it can be quite overwhelming to trade like that. While you can benefit from it, it’s not exactly the way to go if you want to have passive income. Long-term is the way in this case since you will not be obliged to check the market every day nor fret over every small change. You will naturally have to learn and check on your investment, buy or sell if something changes drastically, but practically, you can count on having a growing passive income. Some people decide to trade Ethereum rather than Bitcoin because Ethereum is more stable and doesn’t have a limit, while Bitcoin is far more volatile.
The stock market is less volatile, and it’s easier to observe. You should pay attention to politics if you are trading stocks because they tend to influence the prices a lot. Usually, around significant world events, the high-volatility period will occur. In any case, volatility is much lower, and you can consider it as passive income once you set everything up with your broker.
Even though passive income shouldn’t require constant attention, this doesn’t mean you should completely forget about it. Forex offers opportunities frequently since it works 24/7, but this includes creating a risk management strategy, sticking to your trading plan, and being patient when the market is too volatile (which is often).
Share trading has limited opening hours, and hours are changing depending on listed shares. As a trader, you can get extended trading hours, which means you will probably make decisions if breaking news happens (but usually occurs when the market is closed). It doesn’t mean you can’t create a passive income, but you have to develop a good strategy and research a lot about the company before you decide to buy shares.
Going long or short can be applied to both markets, but you will speculate both rising and falling on the stock market, and forex gives you insight mostly about falling markets.
Finding A Good Broker
Finally, working with a licensed and certified broker might be the most crucial step towards creating a passive income. Having an expert you can consult about your finances and which way you want to make them bigger (and a passive source of income) is one of the best things you can do for your finances. Be sure to check broker reviews before picking a particular broker, so you are reassured they have the license and certificate, meaning you prevent any scams. You don’t have to settle for the first broker you find. Talk to a couple of them and see if they truly understand what your goal is. Once you two understand each other, you will make a solid plan and create a stable source of passive income.