Forex trading is an easy yet complex process that some people may be fearful of due to the masses of numbers and graphs that go hand-in-hand to understanding it. To become a successful trader it takes not only a combination of skills but experience too. If a person wanted to become a doctor, they would not be able to do so just by reading a few books and forum posts over a period of a month. The same can be said for forex trading. This article will take a look at what forex is and if it can make you money.
What is it?
Forex is a shortened handle for foreign exchange, also shortened even further to FX. It is the trading of currencies from around the world. The FX market is a decentralized market that works on a global basis where every one of the currencies trade. The market for foreign exchange is the largest in the world with an average day of trading seeing as much as $5 trillion exchanging hands. Unlike stock markets with set opening and closing times, the FX market never sleeps – a person is able to trade 24 hours a day.
A person who trades on the forex market essentially sells a particular currency in favour of another for profit, increasing their purchasing power. An example would be if the Euro was expected to weaken, a trader would sell their Euro in order to by USD. If the USD then strengthens, they have increased buying power, able to buy more Euro thus making a profit. Traders do this by utilizing websites such as CMC Markets.
Steps to making money from forex trading
Stop procrastinating – The first step is always the most important step in any journey. Simply starting on your path to becoming a successful trader gets you closer to achieving it. Avoid procrastinating on the idea for too long and just start, even if it is just through a demo account. These accounts use fake money so that you can practise your skills. They can be a great way to get over your procrastination. Starting and then continuing to apply yourself to the task will greatly help your success.
Practise your skills – Once you have started to trade, even on a demo account, it is important to keep practicing. While using “fake” money is not as stressful as the real thing, every ounce of experience will ultimately work in your favour. Practise makes perfect and it is no different in the world of foreign exchange trading. Try new strategies and work on staying with those techniques until you are ready for the real thing.
Trade on a demo account as you would on a real account – Trade wisely, If you trade with much more money on a demo account than you intend to use on a real account, then it will not help you learn. Ideally, you want to transition from a demo to a real account seamlessly. To achieve this, use the strategy you’ve chosen with the same amount you intend to use.
Gather information – In the field of FX trading, no one knows everything. It is a continual learning experience. The more informed you are, the less likely you will make mistakes. Furthermore, when you make a mistake, and everyone does, review the decisions that led you to that outcome. Every bad experience is one that you can learn from if you persist.
Formulate a strategy – When dealing with money in an often volatile situation, emotions can get the better of someone. For this reason among others, a trading strategy is important to make money from the FX markets. There are many basic strategies that one can follow, but the key is to choose one that you feel the most comfortable with. It may be processes to discover which one will suite you best, such as a swing trader, scalper or positional trader, but with time, you will discover which one is the right one for you.
With the ability to trade from anywhere in the world with a device or computer and an internet connection, it is an attractive idea for many people. It is not a get-rich-quick method by any means, but with time and effort, rewards can be gained.