How to make money using forex trading

Before you start trading, you should learn about the different types of markets available to trade, and which one you are most interested in following.

Huge forex bonuses

How to Make Money in Forex Trading: A Complete Guide for Beginners, how to make money using forex trading.

In addition to trading forex, you can also consider trading commodities, indices, and shares. The best way to learn about a market is to read about why others believe it’s moving and the different catalysts that might drive the price or exchange rate in a specific direction. For example, you might start with looking for a style of analysis that is generally provided by reputable brokers such as alpari. Your goal is to see what type of analysis they offer and what type of actionable ideas come from the analysis they provide. You can also look through a broker’s education section and see if they provide information about why the markets move. In addition to looking at a broker’s education section, you can scan the markets for websites that focus on financial markets education. The best way to determine if an economy is strong is to be able to evaluate countries financial information. This could include their employment information, their GDP, as well as inflation information such as the consumer price index. Most reputable brokers will provide you with a forex economic calendar where you can see what economists expect relative to history as well as the actual release. What is important about fundamentals is that each new piece of information can alter the direction of an exchange rate. If the economic data is greater than or worse than expected, an exchange rate will move to reflect the new information.

How to make money in forex trading: A complete guide for beginners

The foreign exchange market is the world’s most liquid market, with more than 5-trillion a day exchanging hands. The market is liquid 24-hours a day, 5-days a week, opening in the evening on sunday during north american trading hours and closing at 5-pm on friday evening during the same time zone. If you are a beginner and just dipping your toe into trading the forex markets, you should consider following the market and increasing your understanding of why exchange rates move before risking your hard-earned capital.

Learn about the financial markets

The financial markets allow investors, businesses, governments and central banks a place to transact in an open market, exchanging their risks to meet their financial needs. A corporate treasurer might need to exchange profits in euros into dollars, just as a speculator believes that the EUR/USD will rise. There are thousands of reasons why exchange rates and prices moved over a short-period of time, generating noise as participants look for an optimal price to enter or exit a position.

Before you start trading, you should learn about the different types of markets available to trade, and which one you are most interested in following. In addition to trading forex, you can also consider trading commodities, indices, and shares. The best way to learn about a market is to read about why others believe it’s moving and the different catalysts that might drive the price or exchange rate in a specific direction. For example, you might start with looking for a style of analysis that is generally provided by reputable brokers such as alpari. Your goal is to see what type of analysis they offer and what type of actionable ideas come from the analysis they provide. You can also look through a broker’s education section and see if they provide information about why the markets move. In addition to looking at a broker’s education section, you can scan the markets for websites that focus on financial markets education.

Learn to do your own analysis

There are two main types of analysis that forex traders generally focus on, which include fundamental and technical analysis. Fundamental analysis is the study of macro events that will alter the course of a currency pair. Technical analysis is the study of price action, including looking at momentum, trends and reversal patterns.

Fundamental analysis

The fundamentals surrounding the forex markets is based on the interest rates markets of each of the currencies that make up an exchange rate. For example, if you plan on trading the EUR/USD you want to have a gauge of where interest rates are likely going in the eurozone as well as the united states. In general, the stronger an economy, the more likely the central bank is to raise interest rates, which help drive up market interest rates. The reverse is also the case for a weaker economy where the central bank and market forces will likely drive interest rates lower.

The best way to determine if an economy is strong is to be able to evaluate countries financial information. This could include their employment information, their GDP, as well as inflation information such as the consumer price index. Most reputable brokers will provide you with a forex economic calendar where you can see what economists expect relative to history as well as the actual release. What is important about fundamentals is that each new piece of information can alter the direction of an exchange rate. If the economic data is greater than or worse than expected, an exchange rate will move to reflect the new information.

Technical analysis

Technical analysis is the study of historical prices. Although the past is not always a predictor of the future, different changes following specific studies can give you a gauge of where prices might move in the futures. Some of the more popular technical analysis studies include evaluating momentum. Momentum is the acceleration or deceleration of price changes. If you are interested in learning about technical analysis, you can look at your broker’s education section, or follow their technical analysis forecasts. There are also several websites that will provide you with education on different types of technical analysis tools. Some of the more popular include the MACD, the RSI, and stochastics.

Find good broker

Your forex broker facilitates the execution of transactions. While this is their most important function, there are many features a broker like alpari brings to the table which you should be aware of prior to depositing funds at that broker. First, do some due diligence. Look up reviews by your prospective broker and make sure there are no red flags. Fraud alerts or issues with withdrawing funds are the most important. You also want to make sure there is efficient customer service. You do not want to frustrate yourself by finding a broker who will not answer questions.

The next step is to evaluate the platform. Does the broker have an education section or generate technical analysis forecasts? Additionally, you want to make sure that your broker offers clients a financial calendar. Additionally, you want to find out about the leverage they provide to clients. Higher levels of margin will provide you the option to generate more revenue.

Start with a demo account

Most reputable brokers will offer you real-money accounts as well as demonstration accounts. A demo account is one where you are trading paper money, not real capital. Most good demonstration accounts offer nearly all the products that are available to trade will a real-money account. The prices will likely be in real-time or close to real-time. In addition, you will have access to most of the education and forecasting information your broker provides to real-money clients. Once you feel like you’re ready for a real-money account you can make the switch from a demo account to real funds.

Summary

There are several steps you should take before you start transacting in the forex market. You need to first learn about the financial markets and the type of information you can learn about prior to trading. Try to learn about both fundamental and technical analysis. Find a forex broker that you believe is trustworthy and provides a plethora of information. Lastly, use a demo account before you begin to risk real money.

How to make money trading forex - A beginner’s guide

To put it simply, the basis of making money trading forex sounds relatively easy: when the price is low, buy; when the price is high, sell.

However, supposedly up to 96% of traders lose money and end up quitting altogether. Conversely, other sources have suggested that actually, traders win more trades than they lose, but often their losses are larger than their gains .

So, making money trading forex can be… let’s say… complicated.

It really requires a mixture of the following:

Patience . You need to be patient to learn and patient to earn.

Understand forex . You need to know the ins and outs of the forex market.

Understand risk management . You won’t make money if you’re part of that 96%!

The ability to strategise . You need a plan if you want to be profitable.

If you don’t have any of those and do not have the time to invest in them, trading forex might not be for you.

The best way to learn all of the above is with a forex trading course. Trading education is currently offering a free forex trading education for beginners. Click here to find out more.

The basics

FX basics, how to make money trading forex

If you’re an absolute newbie, then it is highly likely that you don’t know what forex even is.

In that case, we should start from the very beginning.

The forex market shifts $5 trillion a day between traders, buying and selling currency pairs and is the largest market in the world.

A currency pair is the rate of exchange between two countries' currencies.

For example, at the time of writing this article, the exchange between the EUR (euro) and USD (united states dollar), which would be displayed as EUR/USD, was 1.1252.

That means that for one euro, you could buy 1.1252 of USD.

These rates are constantly changing , in most cases the last two digits, up and down. We call this fluctuation in price liquidity.

Traders are looking for opportunities to buy one currency at a low rate and then sell it for a higher rate.

That is basically how you trade forex.

How much money do I need?

Forex trading is a good choice for many traders because it requires less capital than other forms of trading/investing, such as stocks.

This is because of the way currencies are broken down. Most, with the exception of USD/JPY (united states dollar/japanese yen), are broken down to the fourth decimal, which is called a pip .

Most financial instruments cannot be broken down to such small figures.

Even if you’d actually prefer to trade stocks or another instrument, forex is a good place to start and help you understand the fundamentals of trading and potentially gain some capital.

Technically, you’ll need enough money to open a trading account, which can vary quite significantly depending on different brokers. Some brokers don’t require a minimum deposit, while others may require as much as £500 or more.

With the money you have used to open your account, it is best that you only risk about 1% on any trade . That money can go very, very quickly.

Remember, at the very beginning, it is more important to learn how to trade than to make a profit . If you lost money, investigate how it happened and make sure you don’t make the same mistake twice.

If you found this article by googling ‘ how to make money with forex ’ or anything like that, you are 100% not ready to start using leverage. Leverage is something you should leave until much later .

Likewise, you should keep in mind that big profits often require big investments .

You also need to think about fees as well. Unfortunately, that nice little profit you make when you trade might not be the entire sum of money you’ll actually make.

Though most forex brokers will not charge a commission on your trades, some might. There are also specific fees to bear in mind as well, such as swap fees , which are what brokers charge you for holding a position overnight.

Luckily, if you’re from the UK, you won’t have to pay tax on your earnings from forex trading. However, if you’re based in another country, you should check what the tax laws are on income gained from forex trading.

How much time do I need?

Before we talk about how long it will take for you to be ready to start trading and making money, we need to talk about having the right mindset .

Look at trading as a ‘business’ not a quick way to make money . No business is immediately profitable, especially if they are still learning when they start operating.

The best businesses need to have a business plan and that plan can take time to develop.

Persistence is key. Some traders only really start to make money after three to five years.

The real question is: how much time do you have? If you have a full-time job and other commitments, these, of course, will come first. You need to be honest with yourself about the amount of time you can devote to learning.

After learning to trade, finally, you can start practising.

Be mindful that not only might you sometimes lose money, you sometimes might not be able to find an appropriate opportunity to trade at all.

How much money can I make?

Look, you’re not going to become a millionaire overnight. Unfortunately, that’s something all forex traders need to accept.

As you would with a salary, you need to look at your profits over a long period of time , such as a month or a year.

As we said earlier, when you start trading, you should ideally be risking only 1% of your account per trade.

You need to think about how many pips you’ll gain on each trade.

To be honest, this is something you will need to figure out for yourself. Though most beginners will look to gain around 10 to 15 pips per trade as practice.

However, as you acquire more experience, such gains will not be worth your time. In fact, it is highly advised that you don’t waste your time agonising over such gains and instead look for larger, less time-consuming, profits.

For many traders, making between 50% and 55% is considered successful and profitable . Over time that small percentage builds up.

Win more than you lose. But don’t chase those losses !

Where can I make money trading forex?

Retail forex traders make trades via a broker in the form of a CFD (contract for difference).

Now, your mental image of a broker shouldn’t be of a guy in a suit, sitting at a desk and waiting for you to call him. We live in the 21st century after all.

Practically all brokers operate online . They utilise high-powered data connections to push through your order to an exchange where it will be fulfilled.

You place these buy and sell orders through a platform which can either be web-based, which is very popular these days, an application on your desktop or smartphone, such as MT4, MT5, ctrader, and some brokers can even enable you to make trades via a smartwatch.

There are numerous exchanges covering different time zones around the world. These exchanges allow us to trade forex, 24 hours a day, from sunday 6 pm till friday 5 pm, EST (united states eastern standard time).

Not all brokers are the same. In fact, they can operate in very different ways.

There are two primary types of brokers: dealing desk , which is often referred to as a market maker and non-dealing desk , which can be either STP (straight through processing) or ECN (electronic communication network), and there are also DMA (direct market access) brokers.

In most cases though, brokers will offer a mixture of the above, in the form of different account types.

While it may sound appealing to use a broker with more direct access to the forex market, choosing a broker should really be down to your preferences .

Strategy, strategy, strategy

Strategies are how you make your money.

Without a strategy, you can’t really say you are even trading. You may as well be gambling at a roulette table .

You can’t rely on just one strategy . In fact, many of them can only be used in certain circumstances, depending on the direction the market is heading. For example, trending upwards, trending downwards, or simply ranging .

You need to assess the market before setting up a strategy. Then, when you are able to confirm a change has emerged in the market, you need to put your strategy into action.

Strategies are also much more effective at making big gains . Without a strategy, you cannot expect to make large gains at all.

Popular trading strategies seek to make a profit from the changes and abnormalities of the market.

Another important part of strategising is that they can also be used to mitigate risks, which brings us to the next section.

Let’s talk about risk

This should always be at the front of your mind. It’s very natural to think about the rewards of successful trading, but we also need to plan for our losses as well.

We need to think about what we might lose should our plans fall short or even fail completely.

In forex trading, you can’t afford to not be prepared . Nothing should catch you by surprise.

To understand it, we need to understand our risk-reward ratio . In other words, how much are you willing to risk in order to get a reward?

Ideally, your risk should be low and your reward should be large , or at least larger than your risk. The further apart the two numbers are the better.

It really is possible to lose everything trading forex if you don’t understand the risks involved.

One of the best ways to prevent big losses is by using stop-losses and take-profit orders. These are orders you place on your trading platform that automatically exit a position when the price reaches a certain point.

Think of such orders as an insurance policy.

Key points

If you remember anything from this article, make sure it’s these key points:

You can make a profit if your wins are higher than your losses . 50-55% is successful and sustainable for most traders.

Strategising is how you make your money trading forex . Don’t start trading without a plan and an idea of how to make money in different scenarios.

Risk management can stop you from losing everything . With every trade, you should know how much you are willing to lose.

Getting an education

Wow, there cowboy! Were you just thinking of jumping right into forex trading after reading one little article? While we are flattered that we managed to convince you to get into forex trading, one article is not enough to start!

You need to educate yourself.

Before anything in this article is of any use to you, you need to know the basics.

Trading education is offering a free forex trading course, the ultimate guide to forex trading , and it is the best guide for beginners to make money trading forex , as well as professionals.

With our course you will learn the following:

Foundation in forex trading

Mechanics of forex trading

Advanced analysis in forex

Popular trading strategies in forex

Only when you understand the above will you really be able to make money trading forex.

Our forex trading education would normally cost you £2,500, but luckily for you, our partners are paying for it instead.

How to make money trading forex online

Chances are at one time or another, you’ve been asked by well-meaning friends to join the train of online forex traders. Or your interest has been piqued by the business and you’ve been told by numerous online sources that the best way to make money is trading forex online. Either way, it’s always important to understand the pros and cons of any venture you wish to embark on. Best believe it, it is not always bright and shiny in the online forex trading world.

Pros

It is easy to trade in online markets

You have access to a great amount of leverage making it easier for small retail traders to start their journey even with little capital

Con

Are the stories real? Can you make A living trading forex?

The internet today is rife with numerous forex trading victories. Are they just another cheap PR to get unsuspecting victims to embark on forex trading? The truth is there have been plenty of genuine forex trading success stories. But it all depends on you. How willing are you to work? How ready are you to learn the process?

Professional forex trader ezekiel chew has put down some seven noteworthy ways to become an excellent forex trader, beat the majority, and scale to impressive heights.

1. Learn the trade before you trade

Despite how exciting the process of trading may seem, it is always better you look, or in this case study, before you leap. That’s right. The better part of your excitement should be spent learning the art of trading.

Any tom, dick, and harry can open an account and start trading, but it takes so much more to make the money you dream of. Not to mention the tendency to be easily frustrated and to incur huge amounts of debt when you do not understand the process well.

How can you learn? A proper forex trading course is the best place to start your journey towards a successful forex trading path. They’ll teach you all the rudiments of trading independently and provide you with ample knowledge of trading strategies for the long run. You’re also sure to get follow on support when you embark on trading.

Make sure to be wary of scammers who promise quick success in a short period. A simple hack is that a good trading school will never promise such. They’ll only promise to teach you everything you need to know to trade effectively.

2. Set up A demo trading account

If you want to practice the trading process and get accustomed to the nitty-gritty involved, a demo account is an answer to your prayers. It enables you to practice forex trading on a “demo” capital, which is not real capital. This is because a demo account does not require capital to function.

Some of the perks are it helps you to get used to the trading interface and the process of placing orders on dummy trades. So when you do eventually start really trading, your boat would be smooth-sailing. A demo trading account provision is available on several trading platforms.

3. Beginning A piecemeal at A time

Trust us, you do not want to throw in a large amount of money at the initial stage of your trading quest. For one thing, a lot is at stake when you do, plus the emotional upheaval this may cause.

As a newbie, it’s best you start trading with a small amount of money and in the process, master the skill. You'll also have a lesser tendency to risk your account in the process. Leverage and margin also give you the ability to start really small. A good trading school will teach you all you need to know about leverage and margin.

4. Do not feel overwhelmed; price action is all that matters

Do not fall into the bandwagon of nouveau traders who clutter their chart with so many indices. Best believe it, at the end of the day, price action trading is all that matters. This cluttering of your chart also diverts your attention from what matters in the grand scheme of things, and you’re often rendered immobile from the numerous factors to consider.

And of a truth, technical analysis is not hard to decipher. It’s all about buying at very low prices and selling at a high price. The same way a trader would want to purchase goods in a store or from a manufacturer at low prices and sell to customers at a high price.

You will find that a good number of institutional traders do not care to crowd their charts with several indicators. They simply analyze prize levels and make a decision either to buy or sell within these prize ranges.

5. Find A forex trading strategy that works

We like to think that several indicators on a chart are like several stick-it notes on a refrigerator. You most likely placed them there to remind you of important things. But because they are many, they end up confusing and even frustrating you.

A good forex trading strategy that works need not be complicated. What is important is that it gives you an edge in the market. Look at trading in the long run. When your wins are more than your losses, you will be profitable. Finding the right forex trading strategy that is time tested through a series of successful backtesting is highly important.

Start off by mastering one strategy in a single pair. Swing trading strategies are one of them. Only move on to the next pair or strategy when you are profitable in a series of three sets of 20 trades. This way, you have a clear idea on whether or not you are profitable when compared to someone who is trading a range of different strategies and various pairs.

6. Trade within your limit

It is important to remember that a lot could go wrong with any trade at any given time. Do not be tempted to trade outside your accepted risk exposure in a week. Especially as a new trader, you could easily bankrupt your account in a short time when you trade above your limit.

Another advice is to count your losses and never keep a trade beyond the loss of its value. If chances allow, you ought to move to protective stop loss to decrease your losses. You also want to go the extra mile of protecting your profits by taking profits at strong levels.

One more thing: you should make use of trailing stops to protect winnings and at the same time creating an avenue for it to grow.

7. Keep track of your trading journey

There’s a reason why companies hire firms to audit their account. While your forex trading may not be the same as a company, they are both business ventures with the aim of making a profit. This way, you can determine how your trading has been going within a period of time. Your losses too should be accurately accounted for.

Keeping a record also serves as a practical lesson. Trading is essentially a lot of learning and a little doing. How fast you learn from your mistakes and apply your newfound knowledge will go a long way in projecting your profits and boosting your morale.

We understand that the art of forex trading can prove to be an emotional rollercoaster especially for the newly indoctrinated. However, it is important to take any losses with a grain of salt, for it is a part of the whole process of trading. Sometimes you win, other times you lose. What is important, however, is that you learn from your losses and wins too.

One strategy is to always make plans and be deliberate about those plans. Try to map out a clear cut pattern to attain any goal you set. Diligence and experience are what make a successful forex trader. And a right attitude to loss is what makes it a learning experience.

Some of the things you could include in your record taking include:

The date the trade was made

Screenshot of the chart of every trade

Explanation of where the trade was taken and reasons for the execution

Write out your performance in the trade

Write out how your performance makes you feel.

Creating a word document can help with all this.

How to make money in forex trading: A complete guide for beginners

Learn about the financial markets

Learn to do your own analysis

Fundamental analysis

Technical analysis

Find good broker

Start with a demo account

Summary

Best forex brokers in south africa 2020

A beginner’s guide to forex trading

In this beginner’s guide to forex trading we delve into the world of forex, bringing you all the information you need to know about how to trade in a simple and easy to understand format.

Forex trading has become more and more popular for people who are looking for ways to invest and meet their financial goals.

While forex is not the place to risk your pension fund or life savings, it is a way, albeit a risky one, to make profits from foreign currency moves and fluctuations. That is if you have the skill and patience required to trade in one of the most liquid markets in the world.

Navigating the forex market can be challenging and complex; from understanding the terminology and strategies of trading, to choosing the right forex broker and platform, there is so much you need to know.

We created this beginners guide to forex trading in plain english for you to easily understand the ins and outs of this financial market step by step.

Armed with the information in this guide you will be able to make an informed choice about whether to take the plunge into the forex market or not.

And if you have already made the choice to start forex trading, you will get the knowledge you need to begin the process in a considered way.

First let’s look at some essential definitions…

What is forex?

Forex is a shortened word for foreign exchange. The forex market is the place where currencies from all over the world are traded between buyers and sellers.

It may seem like currency is not really a big deal in the world, I mean, it’s just money, right? Yes, it’s just money but, on a global scale, there are very interesting relationships between currencies.

It’s very seldom that you would be able to take your local currency to another country and spend it there. You would have to take it to an exchange bureau, and they would give an equivalent amount of the local currency.

Hey! You’ve just joined the foreign exchange process!

The forex market allows these kinds of transactions to take place without needing anyone to get on a plane, go to another country and make the physical over the counter exchange.

Instead, these over the counter exchanges can now take place in the digital space. You can have access to a number of markets around the world all from the comfort of your computer or mobile.

Currency exchange is all conducted electronically, and all transactions occur over global computer networks between various traders in different locations around the world.

Just like you need an internet provider to be able to use the internet and get the benefits that come with it, you need a forex broker to access the foreign exchange market.

Why is forex so important?

As an individual you need to know the value of your country’s currency against other currencies so when you are purchasing a product or service say in dollars, you will know how much it will cost you in your home currency.

If you are travelling abroad, you will also need to exchange your home currency into the locally accepted currency of the country you are visiting, at the exchange rate governed.

Forex also facilitates international trade, for example an exporter or importer must be able to convert foreign currencies to be able to trade with each other.

Investors use the forex market to buy or sell international assets.

A final reason forex is so important is for investors and traders to buy and sell currencies to gain a financial advantage. This is the central goal of forex trading.

Why the forex market is so attractive

Making money is the goal when forex trading whether you are at beginner, intermediate or advanced level.

While forex trading carries a high risk, it is still very desirable, and this is why:

24-hour availability

The forex market runs 24 hours a day, five days a week. You can trade whenever you want, from anywhere in the world. No matter where you are and in which timezone the forex market is open for business.

Forex is a liquid market

A liquid market is where there are lots of buyers and sellers and the product being exchanged is in high demand. This means that you can execute a trade quickly and at a desirable price.

Narrow focus

Even though the forex market is a big one, it has basically eight currencies to trade in vs thousands of stocks to choose from in the stock market.

This means there is little confusion and it is easy to get a clear picture of what is happening.

The market can’t be manipulated

The immense size of the market means no one, not even the banks, have the power to influence or control the market for an extended period.

World’s largest financial market

In a single day, more money is traded in the forex markets than the entire GDP of japan: over 5.09 trillion USD is traded every single day.

Low cost

For some of the most liquid pairs, you can trade forex at a very low cost.

How does the exchange rate of a country get determined?

To be a successful in forex trading you need to learn how economies work and how different economies around the world are inter-connected.

Exchanges rates are determined by factors like:

Interest rates

Inflation rates

Current account deficits

Confidence

Government debt

Political instability and economic performance

Speculation

Interest rates

Each country has a central bank, for example the south african reserve bank, the federal reserve (US) and the bank of england, to name a few.

The role of a central bank is to support the stability of the economy of their country.

They hold massive amounts of reserve currencies, and they control monetary policy to influence the amount of money circulating in an economy, the rate of inflation and the interest rates charged on loans.

A central bank will lower interest rates during an economic slowdown to encourage consumer spending. When they do this however, their currency is weakened which is reflected in the exchange rate.

As the economy improves the central bank will increase interest rates and this makes their market or country attractive to foreign investors.

Lower interest rates make a currency less attractive whereas higher interest rates cause a country’s currency to appreciate. Because higher interest rates provide higher rates to lenders, thereby attracting more foreign capital, this results in a rise in the exchange rate.

Central banks will also intervene in the currency market to control inflation. Countries with lower inflation rates tend to see an appreciation in the value of their currency.

Inflation is the rate at which average prices of goods and services increase over time.

Inflation reduces the value of money. If there is high inflation it means that the purchasing power of a country’s currency has fallen, and the currency will depreciate in value.

Current account deficits

A current account deficit means that a country imports more goods and services than it exports.

An economy can run a current account surplus or deficit.

A current account surplus indicates that the value of a country’s net foreign assets (i.E. Assets less liabilities) grew over the period in question, and a current account deficit indicates that it shrank.

If an economy is running a current account deficit, it means that it is absorbing more than it is is producing.

A country which struggles to attract enough capital inflows to finance a current account deficit will see a depreciation in their currency.

Confidence

If there is a collapse of confidence in an economy or financial sector, this will lead to an outflow of currency as investors seek to limit their risk. This outflow of capital causes a depreciation in the currency.

Collapse in confidence can be due to political or economic factors.

Public debt

Public debt, also called sovereign debt, is how much a country owes to outside debtors. These can include individuals, businesses, and other governments.

Public debt is the result of years of government leaders spending more than they take in via tax revenues.

Political instability and economic performance

A country’s political situation and economic performance can affect the strength of its currency. A country that has less political turmoil is more attractive to foreign investors, resulting in increased foreign capital which leads to an appreciation of their currency.

A country prone to political instability may see a depreciation in exchange rates.

Poor economic performance also affects the value of a country’s currency. When a country experiences a recession, its interest rates are likely to fall, decreasing its chances to acquire foreign capital. As a result, its currency weakens in comparison to that of other countries, therefore lowering the exchange rate.

Speculation

If a country’s currency value is expected to rise, investors will demand more of that currency in order to make a profit in the near future.

As a result, the value of the currency will rise due to the increase in demand.

With an increase in currency value comes a rise in the exchange rate.

How to trade forex

Forex trading is all about attempting to speculate on the fluctuating currencies between two different countries. These two currencies are called ‘currency pairs’.

Every forex trade you will do will involve the purchase of one currency and the selling of another. You can only trade with pairs. When you buy a currency pair, you buy the base currency and sell the quoted currency.

The most traded currency pairs of all is the euro against the US dollar, which is represented as EUR/USD. The first currency set that appears in the forex pair is the base currency, this is the one that is bought or sold for the quote currency.

Major pairs

The most popular currency pairs are called major pairs and essentially make up 80% of the entire trading amount in the forex market.

Major pairs: EUR/USD, USD/JPY, GBP/USD and USD/CHF

The forex market is a market comprising probably a thousand or more currency pairs, for example US dollar and the rand, the EURO and the swiss franc, the japanese yen and the british pound.

In reality, however there are only eight major currencies that are actively traded on the forex market.

USD – the US dollar is the most widely traded global currency

GBP – great british pound

Euro – currency of the eurozone

CHF – swiss franc

JPY – japanese yen

AUD – australian dollar

CAD – canadian dollar

NZD – new zealand dollar

Minor currency pairs or crosses

Minor currency pairs also known as crosses, and are pairs that do not include the US dollar. This immediately makes them more volatile and less liquid than the other major currencies.

While the US dollar features in every major pair, crosses are usually more concerned with more of the ‘minor’ currencies such as the EUR, the GBP etc.

Some popular pairs in the crosses are:

EUR/GBP — euro/british pound

EUR/AUD — euro/australian dollar

GBP/JPY — british pound/japanese yen

CHF/JPY — swiss franc/japanese yen

NZD/JPY — new zealand dollar/japanese yen

GBP/CAD — british pound/canadian dollar

What do all these forex words mean?

You would have already discovered that the jargon in forex is quite extensive and whenever you’re trying to get up to speed you always have to pause to find the definition of the new word that you’ve just discovered.

Let’s take a look at a few of these to help get the ball rolling…

Spot forex

This involves buying and selling the actual currency, as opposed to instruments related to it.

You can buy a certain amount of one currency with another currency and later sell it once the value improves.

The acronym for contract for difference, are contracts that are used to represent movements in the prices of financial instruments. So, unlike spot forex, you can take advantage of price movements in currencies without actually owning the physical currency.

It’s important to note that all brokers and traders agree that cfds are part of the higher risk instruments.

A pip is the base unit of the currency pair. The units of measure are in intervals of 0.0001. Movements in prices of currency pairs are represented in pips. E.G. If the bid price in a currency pair moves from 1.16667 to 1.16677 then the movement is 1 pip (1.16677 – 1.16667 = 0.0001 (1 pip))

Spread refers to the difference between the purchase price and the selling price of any specific currency pair. You can expect to find low spreads amongst more popular currency pairs. If you’re looking to make a profit in forex, then you will want to make sure that the currency pair value must exceed the spread.

Whenever you want to open a trade, you will be required to keep a minimum amount in trading account. This is referred to as margin.

If you’re starting off as a forex trader, it is highly likely that you won’t have enough margin to make good profits. Enter: leverage

As a beginner in forex trading, it’s important that you understand this concept.

Leverage is the amount of funding that a forex broker can give to you in order to facilitate larger trade volumes. Leverage is like credit that you get from a bank.

It may sound very attractive for great gains, but you need to be wary that the losses will be just as severe if the deal is not profitable.

Therefore, make sure that you use leverage with caution. Make sure that you’re up to speed with your forex broker policies on zero and negative account balances.

What exactly happens in forex trading step by step?

Here a few steps involved in the forex process and a few key indicators and tools that you’re going to need to be conscious of.

Open an account

Your first step will be to open an account with a trusted forex broker. Most platforms allow you to setup an account very quickly and easily.

We advise you to upload all the right verification documents and follow the recommended process at the outset. This is very important when withdrawing funds as the best forex brokers will have verification procedures in place.

Price and quote

When you’re trading, you will see bid and ask prices:

Bid price – this will be your selling price

Ask price – this will be your buy price

You will notice that you can place trades that are referred to as “long” or “short”.

Long trade

This happens when you buy a currency with the expectation that its value will increase thus making a profit on the selling price.

Short trade

This happens when you sell a currency with the expectation that the value will drop, and you will be able to buy back at a later stage for a lower purchase price.

All currency pair trade values are based on the current exchange rates of the currencies in the pair. You will make profits by collecting the differences in the selling and buying prices (spreads).

You will find that the more liquid a currency pair is, the more movement is experienced. The more unpopular currency pairs normally have very little movement in a trading day.

Chart types

Charts are always a great way to represent data in forex trading as it easy to identify trends. As a forex trader, you will discover 3 main chart types: line charts, candlestick charts and bar charts.

Line charts

Line charts are the most basic chart type used by traders. The chart connects the closing price of currencies for the time frame that you’re viewing. It’s mostly used to map out a bigger picture for the trend with not much detail

Candlestick charts

Candlestick charts have been in use since the 18th century. They can show the open, high, low and close values of a specific time period. They are most often identified by the ‘floating box’ between the opening and closing prices, also known as the ‘body’ of the candlestick.

Candlestick charts seem to be the most visually appealing choice of the forex charts.

Bar charts

Bar charts (OHLC bar chart) are most useful to determine who is currently controlling the market – buyer or sellers. The bars in the chart form the basis of the candlestick chart.

Demo accounts

Can I have a test run before using my own money? The answer to that question is, emphatically, yes!

Not only are you able to, but it is recommended that you should. Some brokers offer new traders a feature called the ‘demo account’. This will allow you to get to grips with all the dashboards, graphs, indicators and jargon.

You will have the opportunity to spend ‘money’ on trades with data that is in sync with the live markets. This will make your transition into the forex world less frightening and is a sure way to build some confidence.

What strategy should I adopt?

Ok, so now that you’re up to speed with all the technical jibber jabber, the next thing to look at is how to use the tools that you’ve amassed to achieve the goals that you’ve set for yourself.

It’s important to align your strategy with the goals that you wish to achieve as the markets can facilitate a variety of outcomes.

You may think that it would be practical to just adopt what other people do, and that is a valid point, just always remember to stick to a strategy that will achieve your goal.

Forex trading strategies

Currency scalping

This is the strategy with the smallest profit returns. A ‘scalper’, as they’re endearingly termed, is a person who put through large volumes of small trades very close to each other (between a few seconds and a few hours). This strategy may prove to be quite practical to most traders.

Intraday trades

This is considered the more conservative approach for traders who are still beginners. Price trends are monitored over one hour or four hours. These windows are tailored more for the main sessions for each forex market.

Swing trading

This strategy adopts the longest trade windows ranging from a few days up to a few weeks. This strategy is best suited for traders who are trading on a part-time basis.

Forex hedging

Risk management technique in which a trader can offset potential losses by taking opposite positions in the market.

Forex martingale strategy

For every losing trade, you double the investment made in future trades in order to attempt to recover your losses, as soon as you make a successful trade.

Forex grid strategy

Uses buy and stop orders and sell stop orders to profit on natural market movements.

What are trading platforms, and which one should I choose?

A trading platform is a utility offered by forex brokers to assist you with your forex endeavours. It is important, when you choose a forex broker, to fairly assess the platforms offered as they will have a direct impact on your trading experience and, ultimately, your trading success.

Here are a few elements that you should consider when assessing trading platforms:

The platform that you choose needs to be trusted to deliver on its performance and reliability. Features need to work as advertised and downtime must not be a reality that you need to weather.

The trust and reliability of platform could be the main element that could prematurely shut or keep open any potential windows of opportunity

It’s no surprise that this indicator made the list. Cybercrimes are a reality in today’s tech savvy world.

Thankfully there are measures that have been developed to ensure that your information is protected.

Thoroughly inspect the security options offered by trading platforms and make sure that you are comfortable with the security that they are offering. Two-factor authentication is fast becoming the standard.

Independent account management

It may seem like a nice feature for your broker to sometimes get involved in managing your account, but you should always be the only authorised decision maker on any action on your account. These details are sometimes hard to find in the t’s and c’s so make sure to be thorough.

There are many platforms that do not have built-in analysis tools. This is not necessarily a deal breaker but be mindful that you would need to be switching between the platform and the analysis tool while trying to put through your trades.

It’s a great bonus if the analysis tools are included in the platform and have real-time data updates.

Are there risks involved in trading?

There are a few risks that you’d need to be cognisant of in forex trading and you will get up to speed as you go along but here a few to get you off the mark…

Leverage risk

Leverage may be an amazing concept with sizable profits but there is the glaring risk of equal and opposite losses.

Interest rate risk

A country’s currency value is heavily linked to their interest rate. An interest rate increase/decrease has a direct impact on foreign investment and, ultimately, demand and supply of that currency which will affect the exchange markets.

Transaction risk

This type of risk is influenced by all differing time zones from country to country. It most often occurs sometime between the opening and closing of a contract. Exchange rates can change before contracts are settled. The transaction risk becomes greater as the difference in time zone increases.

Now that this beginner’s guide to forex trading has provided you with some of the background and jargon of forex trading, you should be a little more comfortable to start your journey into the world of currency trading.

If you are still confused don’t worry the more you get knowledge, and the more you practice on a demo account, you will become a more confident trader. Like anything in life, practice makes perfect.

How much money can you make trading forex?

When I hold a live webinar, the most common question is, “how much money can I make with forex trading?”. This question is wrong. We recently wrote an article about forex trading and profitability.
I see that people are looking for fast income, and they are ready to gamble, to chase after the money! It is the wrong attitude. In trading trader looks for the opportunity – never chase after the money. So I try to make lower expectation and give you these answers :

Can you make money trading forex?

Traders can make money trading forex. However, forex trading is not profitable for retail traders based on all major brokers’ reports because 70%-95% of all retail traders lose money in trading every year. Retail traders making either risk too much, either over trade or create small profits on several positions but then holding on to a losing trade for too long, losing more than the initial investment. Institutional traders and traders from prop companies generate profits trading currencies and managing large portfolios. The best forex trader in prop companies can profit from 20%-25% with less than 5% maximum drawdown.

Now let we see the numbers:

How much money can you make trading forex?

Excellent traders can earn between 20% – 50% annually trading forex. Earnings depend on trading expectancy, position size, and consistency. For example, if an excellent trader manages $100 000, the maximum allowed drawdown is 5% ($5000), he can earn $20 000 annually.

In the prop company where I trade (leantacapital) average annual return is around 18%. The average position size is 0.5% per trade. The average drawdown is less than 8%. The junior trader who manages $200 000 and has averaged 20% annual return can earn up to $1000 per month (after all costs are paid).

So, it is tough to earn money as a trader. Consistency in trading brings stable and regular profits, week after week without much drawdowns and losses. It is hard to achieve stable returns. My equation is:

How much money can you make on forex = f (trading expectancy, position size, consistency)

So, your position size is correlated with your capital. More capital, more profits! In the end, we need to calculate your trading expectancy:

trading expectancy = [1+ (average win / average loss )] x percentage win ratio – 1

So if we have 1000 trades where 600 are winning and 400 are losing, we have :
percentage win ratio = 600/1000=0.6
average win = $6000/600= 10
average loss= $4000/400= 10 than:

Trading expectancy = [1+ (10 / 10 )] x 0.6 – 1 = 0.2

That means for each $1 that the investment trader will earn 20 cents in the future.

Warren buffet has a trading expectancy of around 20 cents for every dollar, and he is one of the richest men on the planet. His annual return last 50 years was around 20%. So if your trading expectancy 0.1 or 0.2 – it is not bad at all.

2) how much do fx traders make worldwide? Generally, retail traders lose their money. Around 85% lose their capital, and around 10% are break-even (do not lose and earn). These percents are different from broker to broker, but generally, only 2-3% of traders make any significant profit at all. The reason is not a type of asset. The problem is poor risk management, overtrading, and poor position managing.

Can forex trading be profitable?
Yes. If you trade smart any security, you can earn money either forex, stocks, commodities, bonds, etc.
Those who are interested in making fast money should always look for different options to make money fast. But in the trading industry, it is almost impossible to earn money fast. The trader needs years and years of hard-working, analysis, research to succeed in the trading business.

There are numerous ways to earn money, and earning through forex trading is no exception at all. The most important this is that it can be started with the least amount of money.

There are no good profits for new traders.

Forex trading is done almost twenty-four hours a day. One can do trading almost during the entire week. An experienced trader should do trading. It is considered the most volatile, and thus there are full chances of people losing money if they are not experienced enough. Thus, if you plan to go for it, you need to gather all the relevant information about it, learn, test, and practice.
New traders can be profitable for one or two months, but very fast, they will lose all money and blow out the account because of poor risk management and wrong position managing process.

Risk management

There is no doubt that you can earn a lot of profit through trading, but it is equally true that there are equal chances of you losing it as well. One should always keep the risk factor in mind. So, if you are new to forex trading, you need to keep risk very small at each trade you do. If you do so, you will not lose much of your money. High-risk trading is number 1, the biggest problem in trading for all new traders. My advice is that the new trader does not risk more than 1% of their portfolio. In that case, the max drawdown will be up to 15%.

Strategies in trading

It does not matter which strategy you are going to opt for. Risk and win are always associated with this form of trading.

Win rate – win rate is represented by the total number of trades you have won out of the total number. If, for example, you win 45 from 100 trades and your risk-reward ratio is 1/1. This means that your win rate is 45%, and your account will be losing its portfolio.

Risk/reward – this decides the amount of capital being risked to get a certain profit. For example, if the trader is losing ten pips and winning fifteen pips, the trader is more on winning than losing. Thus, one can say if any trader is winning, 50% is considered to be profitable. Making more money on winning is a vital component of forex trading, which every trader learns with time.

Leverage on trading

The leverage that is provided by the forex traders is in the ratio of 50:1. This leverage might vary based on the country in your trade-in. It is known that forex brokers do not charge any commission; they raise the spread between the bid and ask.

Slippage more than excepted loss

Slippage refers to the difference between the expected forex price of a trade and the forex price at which the trade is executed. Those who are new should be aware that slippage is an important part of any trade. Even when stop-loss is there, it results in more loss than was expected by you. It is commonly noticed in the fast-moving trade markets. Every trader needs to understand that part of losing money in trading will come from slippage.

Final say about forex trading

There is no doubt that how much money can I make forex day trading? If you are aware and have good knowledge of trading, you will earn pretty well. There are risks involved to try to figure out those as well.

You only need capital worth $500 to around $1,000 to get started, which is pretty ok. Using that money, you can not create income – only practice to trade on a live account. If the trader quit the job and start to live from trading, the trader needs to have at least 50K to 100K for a fresh start (my opinion). Do not forget that you do not invest too much money and do not put your hard money at risk just for the sake of earning a good profit. Be sensible and try to put in money that you can afford to lose. Many people have made a huge profit, but on the other hand, many have lost money as well. Try to gain knowledge and then go for forex trading after you are confident enough.

How much money can you make with forex? The best forex traders can earn from 15% to 60% per year based on deposit and risk level. Final advice: do not think about trading profit – think about the trading opportunity, good setup!

So, let's see, what we have: there are several steps you should take before you start transacting in the forex market. Below is a complete guide to starting trading forex. At how to make money using forex trading