For many, trading in the foreign exchange (FOREX) market lends itself to solo or isolated activity. However, it does not have to be that way. It is possible to be a part of a support group such as an investment club. This approach may help to make your trading experience easier and can help you be more objective and successful in your trading. Here are some ideas to consider prior to starting a FOREX trading club.
Understand Reasons for Organization
Because trading tends to be an isolated activity, many traders do not realize the benefits stemming from associating with like-minded individuals. These benefits include sharing experiences; learning new strategies; keeping your ego in check; keeping your trading results in perspective; sharing costs for software purchases; keeping your interest level up; and, exerting group power in the event of issues with a particular broker.
Contemplate Potential Members
You should first try to include people who you can trust and who trust you. These can help you when the going gets rough. The members should also be persons who are willing and able to be active and contribute to the process of running the organization. The prospective members should also have at least a general interest in investing. Having members who are of sound judgment and are good at making decisions can benefit any organization, including a FOREX club.
Determine Level of Formality
Just because your organization is an investment club does not mean that it has to operate in a formal manner. Some clubs go the entire route and actually form a legal partnership, where all expenses, losses and gains are shared more or less equally and the appropriate tax forms filed after year end.
An alternative, however, would be having a club which is set up and operates informally. This means that everyone would likely trade their own account, rather than a joint account as with the more formal clubs. This has the obvious effect of limiting the internal paperwork otherwise necessary for most formal clubs. Beyond collecting dues and sharing software or book purchases, the administrative demands are minimal. Joining an existing club, formal or informal, should also be considered. A club may start informally and then transform to a formal club based on the desire of its members.
Form Mission Statement Early
At the outset, perhaps the first meeting, put all potential members at ease with a clear delineation of purpose and goals regarding the club. This helps to avoid confusion later and is invaluable in keeping everyone on the same page. Naturally, those that do not agree with the mission reserve the right not to join and, consequently, save time, money and frustration from being in a club that does not suit their purpose and goals. With an informal club, the purpose may be just to share the experiences of others and to learn more about the opportunity of FOREX trading. A formal club may actually set financial goals, determine criteria for brokers as well a currencies traded.
Sandy Robinson, J.D., Copyright 2007