Forex for a trader
Can you make money with forex

Can you make money with forexHow to Make Money Trading Forex. In the forex market, you buy or sell currencies. Placing a trade in the foreign exchange market is simple: the mechanics of a trade are very similar to those found in other markets (like the stock market), so if you have any experience in trading, you should be able to pick it up pretty quickly. The object of forex trading is to exchange one currency for another in the expectation that the price will change. More specifically, that the currency you bought will increase in value compared to the one you sold. *EUR 10,000 x 1.18 = US $11,800 ** EUR 10,000 x 1.25 = US $12,500. An exchange rate is simply the ratio of one currency valued against another currency. For example, the USDCHF exchange rate indicates how many U. S. dollars can purchase one Swiss franc, or how many Swiss francs you need to buy one U. S. dollar. How to Read a Forex Quote. Currencies are always quoted in pairs, such as GBPUSD or USDJPY. The reason they are quoted in pairs is because, in every foreign exchange transaction, you are simultaneously buying one currency and selling another . Here is an example of a foreign exchange rate for the British pound versus the U. S. dollar: The first listed currency to the left of the slash (“”) is known as the base currency (in this example, the British pound), while the second one on the right is called the counter or quote currency (in this example, the U. S. dollar).

When selling, the exchange rate tells you how many units of the quote currency you get for selling one unit of the base currency. In the example above, you will receive 1.51258 U. S. dollars when you sell 1 British pound. The base currency is the “basis” for the buy or the sell. If you buy EURUSD this simply means that you are buying the base currency and simultaneously selling the quote currency. In caveman talk, “buy EUR, sell USD.” You would buy the pair if you believe the base currency will appreciate (gain value) relative to the quote currency. You would sell the pair if you think the base currency will depreciate (lose value) relative to the quote currency. First, you should determine whether you want to buy or sell. If you want to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price. In trader’s talk, this is called “going long” or taking a “long position.” Just remember: long = buy. If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called “going short” or taking a “short position”. Just remember: short = sell. The Bid, Ask and Spread. All forex quotes are quoted with two prices: the bid and ask. For the most part, the bid is lower than the ask price.

The bid is the price at which your broker is willing to buy the base currency in exchange for the quote currency. This means the bid is the best available price at which you (the trader) will sell to the market. The ask is the price at which your broker will sell the base currency in exchange for the quote currency. This means the ask price is the best available price at which you will buy from the market. Another word for ask is the offer price. The difference between the bid and the ask price is popularly known as the SPREAD . On the EURUSD quote above, the bid price is 1.34568 and the ask price is 1.34588. Look at how this broker makes it so easy for you to trade away your money. If you want to sell EUR, you click “Sell” and you will sell euros at 1.34568.

If you want to buy EUR, you click “Buy” and you will buy euros at 1.34588. Here’s an illustration that puts together everything we’ve covered in this lesson: How to Make Money With Forex Trading. Trading foreign currency is easy. Making money with Forex trading is not. Most Forex traders lose money playing the currency exchange game. Effective Forex trading requires the ability to manage risk and a thorough knowledge of the foreign currency market. If you want to be among those who profit from trading Forex, take the time to educate yourself before you risk money. How Forex Traders Make Profits. Currencies trade in pairs. For example, EURUSD means the euro-U. S. dollar pair. The second currency is quoted in terms of the first, or base, currency. EURUSD 1.2500 means one euro will buy $1.25 U. S. dollars. When a trader thinks the base currency will go up relative to the second currency, he "goes long" by taking a buy position. If he thinks the dollar will get stronger, he takes a sell position in the base currency. Suppose he goes long with the euro at $1.25 and the exchange rate rises to $1.30. The trader makes a profit because he gets back $1.30 for every $1.25 of currency he bought to start with. Understanding Forex Trading Risk.

Currency is traded on margin. For instance, a Forex broker may require only $2,000 to trade a $100,000 lot of currency. If the exchange rate moves just 2 percent in the trader's favor, she doubles her money. However, the market can just as easily go the other way and wipe her out. This is why Forex trading is so risky. Suppose a trader goes long on euros when the rate is EURUSD 1.2500. If the eruo falls to 1.2250, a 2 percent margin is gone and the broker will close out the trade, leaving her no way to recover from the loss if the market turns around. Limiting Forex Trading Risk. Traders must learn to manage risk to make money trading Forex. One basic tool is the stop-loss order. A stop-loss order is an instruction to the broker to close out a trade at a predetermined exchange rate so losses are limited if the market goes against the trader. Forex traders learn to use sophisticated combinations of trades to manage risk. Grid trading is one example. The trader takes simultaneous buy and sell positions in a currency.

When the exchange rate moves, it will be in a favorable direction for one of the positions. At a predetermined point, the trader cashes out the positive position, leaves the other position open and opens up a new pair of buy and sell positions. This process is repeated until the overall balance is in the trader's favor, at which point he cashes out at a profit. Practice Before You Play. Forex trading websites frequently offer free practice Forex accounts. A typical practice account allows you to use the site's trading platform to trade a fictional account for 30 days. You can become familiar with the charts and analytical tools traders use to follow and anticipate market trends and gain experience with trading strategies before risking real money. 3 Things I Wish I Knew When I Started Trading Forex. Your Forecast Is Headed to Your Inbox. But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk. Your demo is preloaded with ?10,000 virtual funds , which you can use to trade over 10,000 live global markets. We'll email you login details shortly.

You are subscribed to Rob Pasche. You can manage you subscriptions by following the link in the footer of each email you will receive. An error occurred submitting your form. Please try again later. Trading forex - what I learned. Trading forex is not a shortcut to instant wealth. Excessive leverage can turn winning strategies into losing ones. Retail sentiment can act as a powerful trading filter. Everyone comes to the forex market for a reason, ranging between solely for entertainment to becoming a professional trader. I started out aspiring to be a full-time, self-sufficient forex trader. I had been taught the 'perfect' strategy . I spent months testing it and backtests showed how I could make $25,000-$35,000 a year off of a $10,000 account. My plan was to trade forex for a living and let my account compound until I was so well off, I wouldn't have to work again in my life.

I was dedicated and I committed myself to the plan 100%. Sparing you the details, my plan failed. It turns out that trading 300k lots on a $10,000 account is not very forgiving. I lost 20% of my account in three weeks. I didn't know what hit me. Something was wrong. Luckily, I stopped trading at that point and was fortunate enough to land a job with a forex broker. I spent the next couple of years working with traders around the world and continued to educate myself about the forex market. It played a huge role in my development to be the trader I am today. Three years of profitable trading later, it's been my pleasure to join the team at DailyFX and help people become successful or more successful traders. The point of me telling this story is because I think many traders can relate to starting off in this market, not seeing the results that they expected and not understanding why. These are the three things I wish I knew when I started trading Forex. 1) Forex is not a get rick quick opportunity. Contrary to what you’ve read on many websites across the web, Forex trading is not going to take your $10,000 account and turn it into $1 million. The amount we can earn is determined more by the amount of money we are risking rather than how good our strategy is. The old saying “It takes money to make money” is an accurate one, Forex trading included. But that doesn’t mean it is not a worthwhile endeavor; after all, there are many successful Forex traders out there that trade for a living. The difference is that they have slowly developed over time and increased their account to a level that can create sustainable income.

I hear about traders all the time targeting 50%, 60% or 100% profit per year, or even per month, but the risk they are taking on is going to be pretty similar to the profit they are targeting. In other words, in order to attempt to make 60% profit in a year, it's not unreasonable to see a loss of around 60% of your account in a given year. "But Rob, I am trading with an edge, so I am not risking as much as I could potentially earn" you might say. That's a true statement if you have a strategy with a trading edge. Your expected return should be positive , but without leverage, it is going to be a relatively tiny amount. And during times of bad luck, we can still have losing streaks. When we throw leverage into the mix, that's how traders attempt to target those excessive gains. Which in turn is how traders can produce excessive losses. Leverage is beneficial up to point, but not when it can turn a winning strategy into a loser. 2) Leverage can be a winning strategy to lose money. This is a lesson I wish I had learned earlier. Excessive leverage can ruin an otherwise profitable strategy. Let's say I had a coin that when heads was hit, you would earn $2, but when tails was hit, you would lose $1. Would you flip that coin? My guess is absolutely you would flip that coin. You'd want to flip it over and over.

When you have a 5050 chance between making $2 or losing $1, it's a no-brainer opportunity that you'd accept. Now let's say I have the same coin, but this time if heads is hit, you would triple your net worth; but when tails was hit, you would lose every possession you own. Would you flip that coin? My guess is you would not because one bad flip of the coin would ruin your life. Even though you have the exact same percentage advantage in this example as the example above, no one in their right mind would flip this coin. The second example is how many Forex traders view their trading account. They go "all-in" on one or two trades and end up losing their entire account. Even if their trades had an edge like our coin flipping example, it only takes one or two unlucky trades to wipe them out completely. This is how leverage can cause a winning strategy to lose money. So how can we fix this? A good start is by using no more than 10x effective leverage .

3) Using sentiment as a guide can tilt the odds in your favor. The 3rd lesson I've learned should come as no surprise to those that follow my articles. .. using the Speculative Sentiment Index (SSI). I've written many articles about this topic. It's the best tool I've ever used and is still a part of almost every trading strategy I am using, present day. SSI is a free tool that tells us how many traders are long compared to how many traders are short each major currency pair. It's meant to be used as a contrarian index where we want to do the opposite of what everyone else is doing. Using it as a direction filter for my trades has turned my trading career completely around. Learn from my mistakes. If I could tell my younger self three things before I began trading forex, this would be the list I would give. Utlimately though, if you are just starting out in the forex market, the best thing you can do is take time to learn as much as you can, starting with the basics.

Read guides, keep up to date with the latest news and follow market analysts on social media. Forex Trading Tips FAQs. How much money can you make trading forex? Due to the availability of leverage, forex traders can make a return on a single trade that is multiples of the margin they used to open the trade. However, leverage is a double edged sword in that big gains can also mean big losses. Therefore, reliance on excessive leverage as a strategy typically leads to destruction of your account capital over the long run. This is because it only takes one adverse market move to drive the market far enough and trigger substantial losses. Your expectations on a return on investment is a critical element. When traders expect too much from their account, they rely on excessive leverage and that typically triggers a losing account over time. View forex like you would any other market and expect normal returns by using conservative amounts of no leverage. Since forex is a 24 hour market, the convenience of trading based on your availability makes it popular among day traders, swing traders, and part time traders. Regardless of your style, use small (if any) amounts of leverage.

If you were to expand the list to a fourth thing learned when starting to trade FX, what would it be? I touched on leverage above. We researched millions of live trades and compiled our results in a Traits of Successful Traders guide . In the guide we touch on risk to reward ratios and how it is important. With humans being human, we also touch on the psychological element that goes along with trading and why we may still make poor choices even if we know what is right. Sometimes our biggest obstacle is between our ears. Do you have any useful guides for new FX traders? We have compiled a comprehensive guide for traders new to FX trading . This guide includes topics like why traders like FX, how do you decide what to buy and sell, reading a quote, pip values, lot sizing and many more. From my experience, learning how to decide what market to trade in FX is important. We also recommend the resource building confidence in trading which is found in the beginners tab of our trading guide resource section. You might be interested in. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. 10 ways to avoid losing money in forex. The global forex market does more than $5 trillion in average daily trading volume, making it the largest financial market in the world. Forex’s popularity entices foreign-exchange traders of all levels, from greenhorns just learning about the financial markets to well-seasoned professionals.

Because it is so easy to trade forex – with round-the-clock sessions, access to significant leverage and relatively low costs – it is also very easy to lose money trading forex. Here are 10 ways that traders can avoid losing money in the competitive forex market. 1. Do Your Homework – Learn Before You Burn. Just because forex is easy to get into, it doesn’t mean that due diligence can be avoided. Learning about forex is integral to a trader’s success in the forex markets. While the majority of learning comes from live trading and experience, a trader should learn everything possible about the forex markets, including the geopolitical and economic factors that affect a trader’s preferred currencies. Homework is an ongoing effort as traders need to be prepared to adapt to changing market conditions, regulations and world events. Part of this research process involves developing a trading plan – a systematic method for screening and evaluating investments, determining the amount of risk that is or should be taken and formulating short - and long-term investment objectives. 2. Take the Time to Find a Reputable Broker.

The forex industry has much less oversight than other markets, so it is possible to end up doing business with a less-than-reputable forex broker. Due to concerns about the safety of deposits and the overall integrity of a broker, forex traders should only open an account with a firm that is a member of the National Futures Association (NFA) and that is registered with the U. S. Commodity Futures Trading Commission (CFTC) as a futures commission merchant. Each country outside of the United States has its own regulatory body with which legitimate forex brokers should be registered. Traders should also research each broker’s account offerings, including leverage amounts, commissions and spreads, initial deposits, and account funding and withdrawal policies. A helpful customer service representative should have all this information and be able to answer any questions regarding the firm’s services and policies. 3. Use a Practice Account. Nearly all trading platforms come with a practice account, sometimes called a simulated account or demo account. These accounts allow traders to place hypothetical trades without a funded account. Perhaps the most important benefit of a practice account is that it allows a trader to become adept at order-entry techniques. Few things are as damaging to a trading account (and a trader’s confidence) as pushing the wrong button when opening or exiting a position. It is not uncommon, for example, for a new trader to accidentally add to a losing position instead of closing the trade. Multiple errors in order entry can lead to large, unprotected losing trades. Aside from the devastating financial implications, this situation is incredibly stressful. Practice makes perfect: Experiment with order entries before placing real money on the line. Once a forex trader has opened an account, it may be tempting to take advantage of all the technical analysis tools offered by the trading platform.

While many of these indicators are well-suited to the forex markets, it is important to remember to keep analysis techniques to a minimum in order for them to be effective. Using multiples of the same types of indicators – such as two volatility indicators or two oscillators, for example – can become redundant and can even give opposing signals. This should be avoided. Any analysis technique that is not regularly used to enhance trading performance should be removed from the chart. In addition to the tools that are applied to the chart, pay attention to the overall look of the workspace. The chosen colors, fonts and types of price bars (line, candle bar, range bar, etc.) should create an easy-to-read-and-interpret chart, allowing the trader to more effectively respond to changing market conditions. 5. Protect Your Trading Account. While there is much focus on making money in forex trading, it is important to learn how to avoid losing money. Proper money management techniques are an integral part of successful trading. Many veteran traders would agree that one can enter a position at any price and still make money – it’s how one gets out of the trade that matters.

Part of this is knowing when to accept your losses and move on. Always using a protective stop loss (a strategy designed to protect existing gains or thwart further losses by means of a stop-loss order or limit order) is an effective way to make sure that losses remain reasonable. Traders can also consider using a maximum daily loss amount beyond which all positions would be closed and no new trades initiated until the next trading session. While traders should have plans to limit losses, it is equally essential to protect profits. Money management techniques, such as utilizing trailing stops (a stop order that can be set at a defined percentage away from a security’s current market price) can help preserve winnings while still giving a trade room to grow. 6. Start Small When Going Live. Once a trader has done his or her homework, spent time with a practice account and has a trading plan in place, it may be time to go live – that is, start trading with real money at stake. No amount of practice trading can exactly simulate real trading. As such, it is vital to start small when going live. Factors like emotions and slippage (the difference between the expected price of a trade and the price at which the trade is actually executed) cannot be fully understood and accounted for until trading live. Additionally, a trading plan that performed like a champ in backtesting results or practice trading could, in reality, fail miserably when applied to a live market. By starting small, a trader can evaluate his or her trading plan and emotions, and gain more practice in executing precise order entries – without risking the entire trading account in the process. 7. Use Reasonable Leverage. Forex trading is unique in the amount of leverage that is afforded to its participants. One of the reasons forex is so attractive is that traders have the opportunity to make potentially large profits with a very small investment – sometimes as little as $50. Properly used, leverage does provide potential for growth; however, leverage can just as easily amplify losses.

A trader can control the amount of leverage used by basing position size on the account balance. For example, if a trader has $10,000 in a forex account, a $100,000 position (one standard lot) would utilize 10:1 leverage. While the trader could open a much larger position if he or she were to maximize leverage, a smaller position will limit risk. A trading journal is an effective way to learn from both losses and successes in forex trading. Keeping a record of trading activity containing dates, instruments, profits, losses, and, perhaps most important, the trader’s own performance and emotions can be incredibly beneficial to growing as a successful trader. When periodically reviewed, a trading journal provides important feedback that makes learning possible. Einstein once said that “insanity is doing the same thing over and over and expecting different results.” Without a trading journal and good record keeping, traders are likely to continue making the same mistakes, minimizing their chances of become profitable and successful traders. 9. Understand Tax Implications and Treatment. It is important to understand the tax implications and treatment of forex trading activity in order to be prepared at tax time. Consulting with a qualified accountant or tax specialist can help avoid any surprises and can help individuals take advantage of various tax laws, such as marked-to-market accounting (recording the value of an asset to reflect its current market levels).

Since tax laws change regularly, it is prudent to develop a relationship with a trusted and reliable professional who can guide and manage all tax-related matters. 10. Treat Trading As a Business. It is essential to treat forex trading as a business and to remember that individual wins and losses don’t matter in the short run; it is how the trading business performs over time that is important. As such, traders should try to avoid becoming overly emotional about either wins or losses, and treat each as just another day at the office. As with any business, forex trading incurs expenses, losses, taxes, risk and uncertainty. Also, just as small businesses rarely become successful overnight, neither do most forex traders. Planning, setting realistic goals, staying organized and learning from both successes and failures will help ensure a long, successful career as a forex trader. The worldwide forex market is attractive to many traders because of its low account requirements, round-the-clock trading and access to high amounts of leverage. When approached as a business, forex trading can be profitable and rewarding. In summary, traders can avoid losing money in forex by: Being well-prepared Having the patience and discipline to study and research Applying sound money management techniques Approaching trading activity as a business. What Is Forex and How to Make Money with It? Currency or Forex trading has received a lot of attentions in the past few years. However, let’s see whether it is what people really think, or it is something completely different. Forex is the knowledge and art of trading different currencies against each other and making profit through it. Each country has its own currency, and the currency of different countries can be bought and sold against each other. Forex traders are those who make money through buying and selling different currencies against each other.

Forex is not a new business, and its history is as old as the history of money. However, computer and Internet have enabled people to trade Forex from home and through the personal computers. There are two kinds of Forex Traders. Forex trading is different from the money exchange business. A money exchange business also deals with the currencies. But it is different from Forex trading and Forex traders are not money exchangers. Forex traders are those who buy and sell currencies against each other to make profit. They don’t to offer a money exchange service to people. 1) Retail Forex Traders: Retail Forex traders are the ones who trade Forex from home and through the retail brokers.

They are the ones who lose a lot of money and give up on Forex trading sooner than later. Most people think that it is possible to have a fixed monthly income through Forex trading, and so they start doing it from home. However, Forex trading looks easy at the beginning and when you look at the price charts. Indeed, there is no retail Forex trader who can make money consistently from trading the currencies from home and through the retail brokers. It is becoming harder and harder to make money through Forex trading and as a retail Forex trader. Brokers get greedier all the time and try to cheat their clients more. Indeed, I have never seen a consistently profitable retail FX trader who trade currencies through the retail brokers. By the way, I forgot to tell you who Forex brokers are. They are the companies that connect you to the currency market to enable you to buy and sell currencies through your personal computer and the Internet. 2) Professional Forex Traders. Professional Forex traders are the ones who either trade for the banks or the hedge funds and financial companies, or if they trade for their own, they do it through the bank accounts and with a reasonably big capital, not through the retail Forex brokers and with a small trading account. They don’t trade every day, because they only take the big trading opportunities to increase their wealth and capital. Indeed, currency trading is not a source of income for them. It is an investment opportunity to increase their wealth.

Learn more about these Forex traders: So, the first thing you have to keep in mind is that Forex is not what the brokers and Forex signal websites advertise over the Internet. Therefore, make sure not to waste your time and money on it, with the hope of creating a source of income that makes money for you every month, consistently. It doesn’t work like that at all. Forex trading can’t be as your main source of income and full-time job. Period. If you don’t believe this, you will be back to this article and this website after a while of wasting time and money. So make sure to bookmark this page to come back here when you remember me and this article after losing some money and wasting a lot of time. I hope you don’t rick too much. How Can You Make Money with Forex? Does what I explained above mean that you can never make any money through Forex and currency trading? No, I didn’t say that. Indeed, currency and stock markets are great investment opportunities. But please note that they are investment opportunities, not sources of income. It means, you can invest a portion of your capital in currency market to increase your capital, as you do the same with the real estate and stock markets. To do that, first you have to have a reasonable amount of capital that you can invest a portion of it in the currency market to increase your wealth and capital. This is how Forex trading and currency market can benefit you. Day Trading with Shorter Time-Frames.

If someone tells you that he makes money every day while sitting at the computer and trading the currencies against each other through the shorter time-frames, then you should make sure to ignore him, because he is lying. Now, As I mentioned above, Forex is a good investment opportunity that enables you to invest some money and increase your wealth and capital. What if you don’t have any money to do this now? If you don’t have any money and capital to invest in the Forex market, then you have to create a reliable and strong source of income to make money consistently. Forex can’t be this source of income at all. I explained why. Therefore, if you are unemployed and you have no job and income, or you have a job, but your income is not enough and you want to make more money, and you think that Forex trading is the solution, you are wrong. I explained about the reasons above. What you have to do first, is creating a reliable and strong source of income. When you made enough money, you can invest a portion of it in the currency, stock and real estate markets to make more money and increase your capital. If you aren’t ready to do that now, then stay away from the Forex market, because you can’t make any money through it with a small $500, $1000 or even $10,000 account with a retail Forex broker. This is the most important piece of advice we always give to our website’s followers. Now, if you are ready to start from the beginning and establish a reliable and strong source of income, I suggest you to read the below articles to understand what I mean by a reliable and strong source of income: The below article explains how our investments strategy works. If followed properly, it can make a lot of profit in long-term in the Forex market. This is the strategy you have to follow when you have already earned enough money through the reliable and strong source of income I talked about it above: A Short Term Investment Strategy That Makes You a Millionaire. Don’t Trust the Fund and Account Managers. There are some people who claim to be skillful and profitable Forex traders. They offer you to give them some money to trade in the currency market and return some profit or interest to you every month.

These are the ones you should avoid as well. Many of them are scams. The ones who are not scams, don’t know what Forex trading is in long-term. They have been lucky to make some profit for a short while. Therefore, now they think they are professional Forex traders who can double and triple the accounts every month. What will happen is that they will wipe out the whole account and all the money will be blown up. So, if you are looking for making money through Forex, make sure not to give your hard-earned money to anybody. Also you don’t risk your money to trade Forex on your own. For Newbie Forex Traders. For a newbie, Forex and currency market is nothing but a money sucker. It only wastes your time and money. That is it. Now, if you are really after making money and getting rich, you can follow a clear and straight-forward wealth building strategy: A Wealth Building Strategy to Create Wealth from Nothing. Forex market can make you richer only when you are already rich. Now you know what Forex is and how professional Forex traders make money.

Therefore, you won’t make any mistakes and you won’t lose any money in this market. You are lucky if you have found this article before risking any money in Forex trading. I know some people who haven’t been as lucky as you. They lost their shirts before they learn that Forex trading was not what they thought. Make sure you follow us on this site, if you are serious about getting rich without losing any money and wasting any time. In this below 23 minutes video, we have talked about the history of trading at the beginning. Then we have explained about the currency trading basics. This video covers the below topics: The currency market and the world of exchange The modern exchange The modern stock exchange The history of Stock Exchanges What is liquidity? Rating of quality The agreed minimum quantity which can be traded which is “LOT” in currency trading. Different kinds of exchange: Commodity, Stock, Currency International transactions: US Dollar, Euro, British Pound, Japanese Yen, Swiss Franc What is “Foreign Exchange”?

Who works on the currency markets? Central banks of countries, Financial companies and brokerage houses, Private individuals like forex traders The markets working days and times Currency pairs Point or Pip Margin and Leverage Trading platforms Bid and Ask prices Spread Long and Short Positions Stop loss and target (take profit) orders. Here is the video: How Do You Make Money through Forex Trading? You buy or sell a currency against another one when you come to this conclusion that their value is going to change against each other and consequently your trade will make profit for you. For example when you buy EUR against USD, it is because you think that the EUR’s value is going to go up against USD after a while. Therefore, (1) you pay USD to buy EUR and then (2) you hold the EUR you have bought for a while (3) to wait for the EUR’s value to go up against USD. Then (4) you sell the EUR you have bought to collect the profit you have made. For example, you buy €100,000 against USD when the EUR to USD rate is 1.0590. Therefore, you have to pay $105,900 to buy €100,000: 100,000 x 1.0590 = 105,900. You expect the EUR’s value to go up against USD and you are fortunate enough to see that it really goes up after a while and let’s say it reaches 1.0690. Therefore, you decide to sell the EUR you have bought to collect your profit. As the rate is now 1.0690, you will receive $106,900 when you sell the €100,000 you had bought: 100,000 x 1.0690 = 106,900. Therefore, you have made a $1,000 profit: 106,900 – 105,900 = 1,000. It can be the other way round if EUR’s value goes down instead of going up. For example, if it goes down and reaches 1.0490, and then you sell the EUR you have bought, you will lose $1,000 because you have paid $105,900 to buy €100,000 while the EUR to USD rate was 1.0590. Now it is depreciated to 1.0490, and so, you will receive $104,900 if you sell your €100,000: 100,000 x 1.0490 = 104,900. Therefore, you lose $1,000: 105,900 – 104,900 = 1,000. This is how you can make or lose money through Forex trading. How Can You Buy and Sell Currencies Against Each Other? 1) There are some brokers who facilitate the trades for you by providing a trading platform software that can be installed on your computer, and connecting the software to currency market. They charge you some fees for each of the trades you do. To make the work easier for, brokers pair the currencies against each other and create currency pairs. There are a lot of things you have to learn about the brokers before you open an account with them.

Many of them are not reliable and can make you lose money. So be careful. 2) You can trade the currencies against each other through a bank account as well. Now that I have almost explained what Forex is, I’d like to explain what Forex is not. Some people have some wrong impressions about Forex trading. Forex Is Not a Get-Rich-Quick Scheme. If you become a professional Forex trader who can make profit consistently, you can make a lot of money from Forex trading. But you can do that only when you become a consistently profitable trader who knows a lot of things about trading and knows how to manage and limit his risks. It takes time and effort to reach this level. You cannot start making money through Forex trading overnight and just by following a friend who is also a beginner and probably has been able to make some successful trades on a demo or a small live account.

A Forex trader is called a consistently profitable Forex trader if he can make money consistently for several consecutive months and years. He should be able to repeat his success, not that he doubles his account through one successful trade and then keep losing money. No doubt that even a professional trader loses money sometimes, but the difference is (1) his losses are much smaller than his gains, and (2) he can easily recover his losses. Additionally, (3) the number of his successful trades is higher than the losing ones, and he can repeat this pattern over and over for several months and years. Keep in mind that trading can be risky and there are some people who have lost their shirt in trading. Most or all of the professional Forex and stock traders, have at least one good source of income and use the trading to increase their wealth, not as their main source of income. Indeed, they force their money to make more money for them through the ways like stock or currency trading or other kinds of investments. Therefore, don’t look at Forex trading as a main source of income. You have to have a good backup. Hope I have been able to explain in brief what Forex is. Keep following us on this website if you like to become a professional trader who also has some good and stable sources of income and uses the trading as a way to increase his wealth. Most of those who ask “How Does Forex Work?”, don’t care about the technical aspect of Forex trading.

They want to know whether it really makes money or not. People start learning how to trade Forex, because they want to make money. Many of them want to make a living through Forex trading and look for having a source of income through Forex trading. They want to become full time Forex traders who trade Forex to make a living. Some others look at Forex trading as an investment opportunity to increase their wealth. Now the question is whether Forex really works for these people or not. Before I answer this question, I’d like to explain a little about the technical aspect or Forex trading and how Forex works behind the scene. How Does Forex Work Technically? Forex or Foreign Currency Exchange is the business of exchanging the currencies against each other for the purpose of making profit. This is what Forex traders do. They buy and sell the currencies against each other to make profit when one currency’s value goes up or down against the other one. Some others, offer a currency exchanging service to those who need to convert a currency to another. For example, tourists have to buy the destination country’s currency. The money exchange agency charges some fees to exchange the currencies to each other for them. You can do this through the banks too, but the private money exchange agencies are used to offer better prices: How to Run and Manage a Money Exchange Business that Makes Money. Forex trading is not something new. Its history is as old as the history of money. But the way that retail Forex traders trade currencies now, is somehow new. It is done electronically and through the Internet.

It is almost 100% automatic and it needs no human touch to complete the exchanging process. To trade currencies against each other as a retail Forex trader, you have to open an account with a Forex broker. More professional traders, trade through the bank accounts that needs more capital. They buy and sell currencies against each other through a trading platform software, or through their online banking account. Here, I’d like to focus on this question that how does Forex work to make money for Forex traders. And, how Forex traders can make money with it and whether it is really possible to make money with Forex or not. How Does Forex Work to Make Money for Retail Traders? Theoretically, retail Forex traders try to predict whether a currency’s value will go up or down against the other currencies. If they conclude that the value of currency A is going to go up against currency B, then they will buy currency A against currency B. It means they pay currency B to receive currency A. In case they are correct and the value of currency A really and reasonably goes up against currency B after a while, they will convert currency A to currency B. The price difference makes some profit for them. This is how Forex trading makes money for Forex traders theoretically. Now the question is whether this process results in profit in reality and actually or not. Can the Forex traders make money consistently? Is Forex trading a good and stable source of income? Does it really make money as a full time job? There is no doubt that the currency market is a big opportunity to make money.

There are so many who make a lot of money through this market. However, to make money through currency trading, a retail trader has to have two things: He has to master a trading strategy. He has to have money to trade with and make more money (profit). Mastering a Trading Strategy. There is no special and clear way to master a trading strategy. While it is hard and complicated for most people, some others can do it after a while of learning and practicing. I personally believe that mastering a trading strategy and then making money as a professional trader has four stages: You have to choose a trading strategy and learn the related basics and technical parts. You have to demo trade the trading strategy until you become a consistently profitable demo trader who makes profit on the demo account consistently and consecutively. To make sure that you have reached this level, you have to repeat your success for 6 consecutive months at least. After becoming a consistently profitable demo trader, you have to try the same trading strategy on a small live account to make sure that you can repeat your success with real money too. To make sure that you have gained such an ability, you have to repeat your success at least for 6 consecutive months here too. You can trade with a bigger account to make a reasonable amount of profit. If you can afford, you can even trade through a bank account that needs more capital, because banks usually don’t offer any leverage. Nobody knows how long it takes to pass the first 3 stages and reach the stage 4. It is different from person to person. However, something which is clear is that nobody can pass these stages without spending enough time and energy. You have to spend time to become a consistently profitable demo and then live trader.

You have to practice with peace of mind. Now, it is time to refer to the beginning of this article that says “People start learning how to trade Forex, because they want to make money…” Whether you like to make a living through Forex trading or you want to look at it as an investment opportunity to increase your wealth, you have to be financially free while you are trying the master your trading strategy and pass the 4 stages I outlined above. Financial freedom creates the peace of mind you need to spend enough time on learning and practicing. When you are not financially free and you have to make money as soon as possible, you will not have the peace of mind you need to focus on learning and practicing, and you push yourself to start making money as soon as possible. Therefore, you will open a live account even before you become a consistently profitable demo trader. Then you will push yourself to make money with your live account. But, as you haven’t completed the learning stages yet, you will make a lot of mistakes, and so, you will lose money. Most traders wipe out their live accounts at least a few times. Unfortunately, many of them start trading with the money they cannot afford to lose. Finally, they give up after wasting a lot of time and money.

You can’t make money through trading, when you HAVE TO make money. This is one of the big differences that trading has with the other money making opportunities: Trading Strategies Don’t Work If You Don’t Choose the Right Living Strategy. How Does Forex Work Practically? Therefore, we can say that making money through Forex trading has two main stages: Mastering a trading strategy Having enough money to trade and invest. According to what I explained above, both of these stages are dependent on “money”. You have to have money to master your trading strategy. Then, you have to have enough money to open a reasonable live account. You can start with a small account, but it takes you a lot of time to turn it into a reasonably big and professional account. Therefore, having a good and strong source of income is a must. This is how Forex works. It is not only with Forex. It is the same with any trading and investment opportunity, be it currencies, stocks, real estate and… Forex Trading as a Full Time Job to Make a Living With.

Forex or stock trading can’t be known as full time jobs that you can make a living with. They are good and strong investment and money making opportunities, but you shouldn’t look at them as full time jobs. The first and the most important reason is that making money through trading is not just dependent on you, your abilities and activities as the trader. It depends on the markets too. Sometimes the markets become too slow for several months, and so, you can’t locate a trade setup to make money. Sometimes the markets become too volatile and cause some big losses. You need to have a good and strong source of income and a reliable backup to support your trading venture, otherwise you will be in trouble. While Forex trading is a great opportunity to make a fortune, it is not a business that you can make a living with in long term. It is the same with stock trading and real estate investment. They can help you increase your wealth and grow your capital dramatically. But it is too hard to rely on them as the main sources of income under the normal conditions. It is great that you are after making money through Forex trading. But you should consider the facts I explained above to avoid wasting any time and money. As I explained above, having a good and strong source of income is a must for those who want to learn to make money through Forex trading, and also for those who have already mastered their trading strategies. That is why we not only teach our followers the trading techniques, but also help them to establish a good and strong source of income. This is how Forex works.

Just before you go, did you check This System? Make sure to do it now, otherwise you will regret. Making money in forex is easy if you know how the bankers trade! How to make money in forex? I’m often mystified in my educational forex articles why so many traders struggle to make consistent money out of forex trading. The answer has more to do with what they don’t know than what they do know. After working in investment banks for 20 years many of which were as a Chief trader its second knowledge how to extract cash out of the market. It all comes down to understanding how the traders at the banks execute and make trading decisions. Why? Bank traders only make up 5% of the total number of forex traders with speculators accounting for the other 95%, but more importantly that 5% of bank traders account for 92% of all forex volumes.

So if you don’t know how they trade, then you’re simply guessing. First let me bust the first myth about forex traders in institutions. They don’t sit there all day banging away making proprietary trading decisions. Most of the time they are simply transacting on behalf of the banks customers. It’s commonly referred to as ‘clearing the flow”. They may perform a few thousand trades a day but none of these are for their proprietary book. How do banks trade forex? They actually only perform 2-3 trades a week for their own trading account. These trades are the ones they are judged on at the end of the year to see whether they deserve an additional bonus or not. So as you can see traders at the banks don’t sit there all day trading randomly ‘scalping’ trying to make their budgets. They are extremely methodical in their approach and make trading decisions when everything lines up, technically and fundamentally.

That’s what you need to know! As far as technical analysis goes it is extremely simple. I am often dumbfounded by our client’s charts when they first come to us. They are often littered with mathematical indicators which not only have significant 3-4 hour time lags but also often contradict each other. Trading with these indicators and this approach is the quickest way to rip through your trading capital. Bank trader’s charts look nothing like this. In fact they are completely the opposite. All they want to know is where the key critical levels. Don’t forget these indicators were developed to try and predict where the market is going. The bank traders are the market . If you understand how they trade then you don’t need any indicators.

They make split second decisions based on key technical and fundamental changes. Understanding their technical analysis is the first step to becoming a successful trader. You’ll be trading with the market not against it. What it all comes down to is simple support and resistance. No clutter, nothing to alter their trading decisions. Simple, effective and highlighting the key levels. I’m not going to go into the ins and outs of where they actually enter the market, but let me say this: it’s not where you think. The trendlines are simply there to indicate key support and resistance. Entering the market is another discussion all together. How to make money in forex? The key aspect to their trading decisions is derived from the economic fundamentals.

The fundamental backdrop of the market consists of three major areas and that’s why it’s hard to pin point currency direction sometimes. When you have the political situation countering the central bank announcements currency direction is somewhat disjointed. But when there are no political issues and formulated central bank policy acting in accordance with the economic data, that’s when we get pure currency direction and the big trends emerge. This is what bank traders wait for. The fundamental aspect of the market is extremely complex and it can take years to master them. This is a major area we concentrate on during our two day workshop to ensure traders have a complete understanding of each area. If you understand them you are set up for long term success as this is where currency direction comes from. There is a lot of money to be made from trading the economic data releases . The key to trading the releases is twofold. First, having an excellent understanding of the fundamentals and how the various releases impact the market. Secondly, knowing how to execute the trades with precision and without hesitation. If you can get a control of this aspect of trading and have the confidence to trade the events then you’re truly set up to make huge capital advances. After all it is these economic releases which really direct the currencies. These are the same economic releases that central banks formulate policy around. So by following the releases and trading them you not only know what’s going on with regards central bank policy but you’ll also be building your capital at the same time.

Now to be truly successful you need an extremely comprehensive capital management system that not only protects you during periods of uncertainty but also pushes you forward to experience capital expansion. This is your entire business plan so it’s important you get this down pat first. Our stringent capital management system perfectly encompasses your risk to rewards ratios, capital controls as well as our trade plan – entry and exits. This way when you’re trading, all your concerned about is finding entry levels. Having such a system in place will also alleviate the stresses of trading and allow you to go about your day without spending endless hours monitoring the market. I can tell you most traders at banks spend most of the day wandering around the dealing room chatting to other traders or going to lunches with brokers. Rarely are they in front of the computer for more than a few hours. You should be taking the same approach. If you understand the technical and fundamental aspects of the market and have a comprehensive professional capital management system then you can. From here it just takes a simple understanding of the key strategies to apply and where to apply them and away you go. Trust me you will experience more capital growth then you ever have before if you know how the bank traders trade. Many traders have tried to replicate their methods and I’ve seen numerous books on “how to beat the bankers”. But the point is you don’t want to be beating them but joining them. That way you will be trading with the market not against it. So to conclude let me say this: There are no miraculous secrets to trading forex. There are no special indicators or robots that can mimic the dynamic forex market.

You simply need to understand how the major players (bankers) trade and analyse the market. If you get these aspects right then your well on the way to success. Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.



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