Would you like to know how to make money in Forex? That question is asked by day traders every single day.
Forex is the biggest financial market in the world. When you look at the market, you’ll find that it’s run by large corporations and day traders like yourself.
The difference between the corporations and the day traders? Only 4% of day traders make money. The others lose money and quit trading.
As a beginner trader, you’re going to need to know how you can escape the bottom 96% of traders and make it into the upper echelon of day traders.
Keep reading to learn the basics of Forex and top strategies used by the pros.
What is Forex?
Forex stands for foreign exchange. It’s also known as FX in trading circles. That’s how currencies from all over the world are traded.
You might have traded on Forex and not even known it. Have you ever traveled outside the country? You probably had to exchange money, whether for a Euros, Pounds, or Dollars.
That’s part of Forex trading and there are $5 trillion traded every day.
When you exchange money, you sell the currency you have and you buy another currency. Everything is bought and sold in pairs.
The value of each currency fluctuates and depending on the timing of your trades, you can either make money or lose money.
For example, if you think the US Dollar is going to decline further, then you can sell it now and exchange it for a currency you think will increase, like the Euro. This trade will show up as USD/EUR, wince they’re in pairs.
Forex Trading Goals
If you want to know how to make money in Forex, you have to start with your trading goals. After all, if you don’t set goals, Forex is just another expensive hobby.
When you first start out, don’t set dollar amounts. Since there’s so much to master in the process, set goals according to learning different processes.
Once you get more experience, then you can set goals based on financial results.
You Need a Good Broker
In order to start trading, you need to sign up with a broker or financial institution. They’ll have the trading platform available to make trades in Forex.
When you pick your broker, you need to have 24/7 access to the trading platform. Forex is always running and trades are always being made. Remember, it’s always 5 pm somewhere.
The trading platform you choose is going to play a big role in your ability to learn how to make money in Forex.
It’ll be different from trading cryptocurrency software, and there are plenty of platforms to try out. Most brokerages do have demos to test, and it would be wise try out a few before settling on one.
You’ll want to be sure that you choose a broker that offers the types of accounts you want, how you can withdraw money and what the deposit is.
Some brokers offer no deposit bonuses, where you don’t need to make a deposit, but you’ll get a small bonus if you meet certain requirements.
Learn Different Forex Trading Strategies
Once you have your broker account set up, you’re going to want to practice and play with different trading strategies before you start trading for real. These are the most common Forex trading strategies that you’ll hear other traders talk about.
#1. Analysis Trading
Analysis trading is the process of looking at and analyzing data to try to predict currency trends. There are two ways to analyze data: technical analysis and fundamental analysis.
With technical analysis, you look at currency trends. If a currency has been slowly going up, you determine if it will stay on that runes or not. With this type of analysis, you assume that traders buy on emotional factors rather than data.
A fundamental analysis looks at the economic fundamentals of a country. The unemployment rates and GDP are typical indicators traders will use to see if a currency is overpriced or not.
#2. Momentum Trading
With momentum trading, traders will examine the ups and downs in a currency. They’ll look at the number of trades and the price of the currency.
If a currency is trading up or down, a trader will assume that momentum will continue. If that momentum starts to shift then the trader assumes the trend will reverse.
#3. Position Trading
If you want to make a long-term trade, position trading is for you. You take your fundamental and technical analyses and figure out a currency’s trend over several months or several years.
This is all about the long game. Currencies go up and down several times a day and you will if you be patient and wait through down moments where you’d be tempted to sell.
Pick Your Account Type
When you start trading on Forex, you have three account options. They are standard trading accounts, mini trading accounts, and managed trading accounts.
You’ll need to know what the risks are for each account type. Some are better in situations where you’re going to spend a lot of time trading, and others are good if you plan to invest small amounts of money on the market.
The Success Mindset
If you want to make money trading in the Forex market, you’re going to need the right mindset for it. Anything revolving around money can be emotional for people, and it’s not uncommon for people to buy and sell solely on emotion.
How do you take the emotions out of trading? Have a system in place that you can stick to. Know how much you can trade, how much risk you can take, and how much loss you can withstand.
When you make a trade, you have to know why your strategy and goals are and stick to them.
Otherwise, you might as well be playing slot machines at the casino.
How to Make Money in Forex
Learning how to make money in Forex is one of the skills traders would love to have.
It doesn’t happen overnight, but with time and practice, you can be a skilled Forex trader. You need to know the strategies in play and when to apply them.
For more great tips on making money online, check out our blog.