Have you ever endured an endless conversation with an old friend who appears to have gotten rich overnight? Or perhaps you’ve recently spied your colleague opening a few trades in between meetings? Maybe you’ve just spent hours listening to inspirational speakers talk about how they left their day job to take on full-time trading and never looked back. Either way, if you’re interested in making money, you’ve come to the right place!
If you’re one of the millions of people who have experienced any of those situations, getting stuck into Forex trading would naturally seem like a no-brainer. The good thing is that trading can be an exciting and independent way to generate income. Even better is the fact that anybody can become a trader, as long as they’ve got a computer and an internet connection! In this article we’ll explore some of the ways in which people can really make money trading Forex, and why so many individuals are choosing to do so.
Before we begin, it’s crucial to note that earning money through Forex trading requires you to work hard and to work smart, too. The world of Forex trading can be complex to understand as a beginner, but with the right amount of dedication and focus, you’ll be able to reach your goals in no time.
How to Make Money Trading Forex
One of the frequently asked questions by newcomers is how traders actually make their money from price movements that are usually rather small. As you may know, all Forex Currencies are traded in pairs, meaning that you buy one currency while selling another. The prices of both currencies in each pair are given as quotes, and the changes in value are measured in pips.
Now, let’s put this into perspective. The value of one pip is equal to the fourth decimal place of a currency quote. So, how can traders profit from such minuscule price changes? Leverage! Trading with high-leverage is, in fact, one of the main pull-factors to Forex trading, allowing traders to open larger positions with less capital.
While it’s highly possible to profit from trading Forex, careless traders may also end up losing money. During periods of high market volatility, in particular, a trader’s positive trades can easily be turned on their heads in an instant.
Luckily, there are several tools that can be applied to help manage your risks (without having to be glued to your screen 24/7). When opening a position, traders can input a ‘Stop Loss’ order and/or a ‘Take Profit’ order to automatically control their risks.
With a Stop Loss, the trader can determine the maximum amount they are willing to lose before their trade closes automatically. With a Take Profit, the trader can set a target amount which, once reached, will close the position and send the profit to the trader’s account balance instantly.
Keep a Trading Journal
There are several ways in which traders can keep track of their successful trades, as well as the ones that didn't go quite according to plan. Keeping a trade journal is one way to monitor all your trading activity and continue to improve your performance.
A trading journal is only as good as its contents, so it’s up to each trader to decide how detailed and consistent they would like to be. You may prefer to write down your trading plan and reflect on how well you managed to stick with it, or simply write down all your profits and losses for a given period. You could also keep a written record of all the emotions you experience with each trade, if you’re interested in analyzing the psychological aspect of your trades.
Whichever method you choose, the information you gather in your journal will be useful to look back on as you continue to learn and grow as a trader!
Ready to start earning?