How do you
make money in the Forex currency market?
Forex is the
global marketplace for currency trading. It is open 24 hours a day and offers
great liquidity so it becomes a good opportunity for its participants, who can
be from banks, large financial institutions and companies to small retail
investors. The Forex traders aim to make money by buying and selling these
currencies are traded in pairs , ie, crosses one currency against other (EUR /
USD, EUR / GBP, UDS / JPY, AUD / NZD, ... ).
The trading
currencies is not a new form of profit that has recently emerged as the
currencies are trading to Lake of history from the very onset of money. What is
much more recent is the ease of being able to trade Forex from anywhere in the
world through the Internet from a computer, tablet or mobile phone and the accessibility
for retail investors.
Today many
people are making money by trading Forex from home , either as full-time
professional traders or simply spending a few minutes a day to locate trading
opportunities and opening, monitoring and closing their positions.
A
significant number of online brokers have also emerged that allow traders to
buy and sell different currency pairs (and other instruments such as stocks,
indices, precious metals, raw materials, energy, ...) through their trading
platforms in exchange. from the payment of a small commission, called a spread
, which is based on a spread applied between the purchase price and the sale
price of each currency pair.
The first
thing you need to do Forex trading is to find a reliable broker and open a trading account
Most online
brokers usually offer a demo account that comes loaded with a fictitious balance
so that you can do tests, with the same conditions of a real account, but
without putting your money at risk . You can take advantage of this demo
account to learn and develop your own trading system and as soon as you are
ready you can open your real account and deposit funds to start buying and
selling the different currency pairs. The money you earn will be added to your
account balance and you can withdraw it when you see fit.
What
currencies can I trade?
1. What
currencies can I trade?
2. How do
you make money in the Forex market?
3. How do you
know when is the best time to buy or sell?
4. Take
heart!
As we
discussed before, the trader is in charge of buying or selling currency pairs .
There are many currency pairs, which depending on their trading volume are
often called major, minor and exotic. Some examples of major or major currency
pairs are GBP / USD (British Pound vs. US Dollar), EUR / USD (Euro vs. US
Dollar), USD / JPY (US Dollar vs. Japanese Yen) or USD / CHF ( US Dollar vs
Swiss Franc). Major currency pairs have a higher trading volume and the spreads
offered by brokers tend to be much tighter than those of minor or exotic pairs,
which in turn tend to have greater volatility.
In each of
the currency pairs, the first currency functions as the commodity to be bought
or sold and the second functions as money . For example, if you choose the GBP
/ USD pair and open a buy position, you would be buying British Pounds against
the US Dollar. It does not matter what is the currency with which you have
deposited funds in your trading account since the platform is responsible for
automatically transforming the amounts.
How do you make money in the Forex
market?
In Forex you
can make money with the price fluctuations of the different currency pairs and
you can do it whether the price rises or falls since you can choose 2 different
options when opening a position:
Go long:
open a buy position if you think the price is going to rise and then close the
position with a sell order.
Go short:
open a sell position if you think the price is going to go down and then close
the position with a buy order.
Buy low and
sell high or sell high and buy low is the goal of the millions of Forex market
participants. But, the million dollar question is:
How do you
know when is the best time to buy or sell?
There are
two methods of trying to predict the optimal time to buy and sell Forex:
Technical Analysis and Fundamental Analysis.
Technical
analysis :
It tries to
predict the direction of the price by analyzing its evolution and using graphs
with the different values it has taken, looking for formations, signs of
continuation or change in trends and being able to use a series of indicators
based on mathematical formulas, statistics,
Technical
analysis may seem a bit complicated at first, but it really is much easier than
you think.
If you want
to make money by trading you must learn technical analysis properly. If you are
a serious and disciplined person, you can learn in a few months .
On the
Internet there is numerous free documentation to learn technical analysis and
the most important thing is practice . You can find some useful paid courses
but most will make you lose your money without having learned practically
anything. You can also visit our website from time to time or subscribe to our
newsletter to receive our articles on trading automatically and not miss any.
We try to offer you useful and explained articles in the simplest way possible
to help you learn , avoid unnecessary mistakes and defend yourself in this
exciting world of trading.
- Fundamental
Analysis :
It also
tries to predict the direction and future price movements by analyzing the
economic and political situation that may affect each of the currency pairs .
Fundamental
analysis is usually used by investors who trade in Forex generally long-term but it can also be used by
traders who want to take advantage of moments of high volatility to make money
. These moments of volatility usually occur after the appearance of important
economic news and represent a good opportunity to obtain benefits in a short
period of time.
For example,
important news about the situation in a country like the United States can
cause important changes in the prices of currency pairs with the presence of
the USD (American dollar). A good economic figure of unemployment, an increase
in exports, the announcement of an economic stimulus measure from the federal
reserve, ... can make the USD stronger and therefore investors rush to buy it
increasing its value against to other currencies as well as the opposite situation
can occur when faced with a bad data.
Having an
economic calendar at hand is a good option to keep abreast of these news,
focusing especially on the most important ones since there are many throughout
the day that will hardly have an impact on prices.
The
professional and experienced traders can spot trading opportunities in forex
using technical analysis and fundamental analysis although most use technical
analysis . It is important that you learn to perform the technical analysis
correctly and that you gain practice and experience from the first moment. Over
time, technical analysis will be your greatest ally in detecting trading
opportunities and making money in Forex .
Cheer up!
Learning in
any facet of life always requires discipline and effort but it also represents
the path to success and the achievement of results.
Forex
trading can allow you to make a lot of money and you don't need absolute
dedication . You can combine your learning with your current professional
activity . Trading can eventually become your full-time job but it is highly
recommended that at least in the beginning you have another source of income
and that you invest only a small amount of money that you can afford to lose .
Make trading
as a desperate measure to get money or wanting to go too fast you will too take
risks without being prepared and you will lose your money much more quickly
than you think .
To drive a
car you must first learn the basics, start cautiously step by step and
practice. You will make mistakes that you must learn from and at times you may
find yourself overcome or feel uncomfortable. There are people who become
insecure or afraid to drive and abandon and others who with the experience that
only give the effort for a while and practice because they end up enjoying
driving and even making it their passion. Something similar happens in trading.
If you want, you think you can start without learning, if you think it will be
very simple, if you do not accept that you are going to make mistakes and are
not willing to learn from them, if you risk too much, ... you have all the
ballots to lose money that you invest, think that trading is not for you and
look for excuses.
Forex can be
a very profitable investment , after a time of learning and practice , if you
act in the right way and if you manage to be disciplined and consistent .
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