How to Make Money with Forex Trading
Forex or foreign exchange is the world’s most widely studied and actively traded financial market. Its liquidity, volatility, accessibility, leverage, relatively low entry costs, and wide range of currency pairs make it a popular market among beginners and market veterans.
Since 2010, forex trading volume has increased 40% while daily turnover reached $6.6 trillion in 2020.
What is Forex? Forex trading refers to the exchange of different currencies by a network of buyers and sellers. Currency prices are traded with the intention of making money from the exchange rates’ fluctuating prices.
“Historically, numerous hedge fund managers have made a lot of money: for example, George Soros acquired £1 billion in income in 1992. So it’s possible, but it also means you have to do rigorous research and cover all areas before you proceed.”
If you’ve been contemplating the idea of trading forex, here are some reminders to help you get started.
#1. Learn as Much About the Forex Financial Market as You Can
Before diving into forex, take a step back and learn about the market. Take note of how it works, what the trading hours are, how you want to trade, and other pertinent details to determine if forex is indeed the right market right for you.
#2. Currencies Are Traded in Pairs
The forex market is always traded in pairs of which there are three types:
- Major pairs trade US dollars (USD) with another major currency such as but not limited to Euro or EUR/USD, USD/JPY or Japanese Yen, and British pound sterling or GBP/USD.
- Minor pairs refer to currency pairs that do not involve the USD such as EUR/JPY
- Exotic pairs that involve a major currency paired with a minor one such as USD and INR (Indian Rupees)
Major pairs have the most volume and volatility while minor and exotic pairs have less volume and thus less movement.
#3. Learn How to Analyze Charts
Technical trading is a trading style that relies on historical chart patterns to predict future prices. If you are interested in learning how to read charts, you will need to choose and learn a specific trading strategy. There are many styles and methods for this and you will need to do some research to find a strategy that suits your trading style and goals.
#4. Practice First — Don’t Go Live Right Away
As you learn a trading strategy, practice with a sim or demo account. A lot of forex platforms let traders create a practice account. Using a practice account will help you get a feel for the market and how price moves. This will also allow you to practice your trading strategy without putting real money on the line.
#5. Find the Right Broker
Once you’ve mastered trading with a sim account, find a forex broker who will facilitate your trades. There are a lot of considerations when finding the right broker such as fees, the currency pairs they offer, the trading platforms they work with, and customer service.
Forex is a Marathon Not a Sprint
Whether you are new to the world of trading or just new to forex, it pays to remember that trading requires patience. People have different learning curves. While some learners can learn to trade in a few weeks, some may need a few years.
You’ve chosen to embark on a deep subject matter with many players and many ways of playing. Even the best traders keep practicing and make it a point to keep learning regardless of how many years they’ve been trading.