Forex - Investing in spare time?

You can be profitable if you're good. But it's notoriously difficult for FX retail traders to do well. Whereas amateurs don't do that much worse than the pro's at picking stocks, 75% of retail FX traders lose money. In my experience, retail FX traders tend to get bullied by technicals at the expense of understanding the fundamentals behind them and are profitable...until they suffer a huge drawdown when the "candlestick patterns" get blown out by a macro policy shift.

It's also tougher to size positions because you need to use leverage to generate any meaningful portfolio exposure, and different currency pairs vary wildly in their volatility. So a lot of people have no idea how to manage the risk of an FX book in the first place.

For instance, the average retail account only lets you trade the USD versus other currencies. But if you let the USD become part of every trade you make, you run the risk of building up a massive USD exposure that could bite you. If you were a retail FX trader wants to generate exposure on non-USD pairs, you therefore sometimes have to have two-legs to the trade. For example, suppose you want to short the Ruble relative to the Euro. Most FX accounts wouldn't let you trade the EUR.RUB outright if your base currency is USD. So you would have to buy USD.RUB and then also go long EUR.USD by the same amount of USD. This lets the USD legs of each trade cancel each other out. You would have to do this for the underlying exposure to end up being long EUR.RUB.

Anyhow, the point is that managing the risk of an FX book is more complex than managing the risk of a book for most other asset classes because you are always trading a limited number of pairs. The return for the asset class as a whole is always 0 by definition.