The foreign exchange or Forex market is one of the largest markets in the world, playing a pivotal role in the economy. Each day, about trillions of dollars, exchange from one currency to another, and this essential exchange helps governments, businesses, and whale investors’ profit, and so can you.
Ultimately, the foreign exchange space is where all governments, international investors, and institutions can do business with each other. This opens up a marketplace for small retail investors like you to grab a tiny percentage of the trillion-dollar market volume.
Can you Make Money Trading Forex?
It was the year 1996 when Forex online trading platforms became mainstream. The internet has made it very accessible for the average person today to trade on the Forex market. Nevertheless, trading markets do not promise unequivocal wealth. If that were the case, every retail investor that has ever entered the market would have been profitable.
The chances of being rich will however increase if you are a day trader with skills that edge above any other trader. Expert traders can read charts and indicate an uptrend that few people can spot. This allows them to make a trade entry that rarely faces a loss.
This however requires an extraordinary level of skill and sufficient experience in the market. So, for beginners, the chances of instantly making a huge profit are scarce, but if you play the right cards, make the right entries, and exit on a trade, it is entirely possible to make good money trading Forex.
To ensure that your entry into a trade manifests money, you must spend time learning about the market and getting familiar with the bullish and bearish cycles of the market. A safe piece of advice, in this case, would be to enter the market with money that you are willing to lose for the sake of crucial experience.
Traders that have a much higher chance of being profitable in this market are giant investors, or institutional investments that have pockets deep enough to bear a loss, and experience significant gains.
Below are some of the trading routes that you can take in the Forex market as a beginner.
The Spot Market
The spot market is a term that traders use for immediate transactions. In the Forex market, this means purchasing a particular currency instantly and selling at a profit. This type of day trading can help you bag a hefty amount of money.
You must realize that currencies fluctuate all the time, and this rise and fall of their value is beneficial for the trader. Retail traders and investors profit out of this volatility by buying when the value drops and selling at a higher price, just as you do with stocks.
At the end of the day, a particular currency is just like any other commodity, with demand and supply being the key influence on it. Keep in mind, however, that when trading Forex, you are not just trading a product; you are essentially exchanging 2 currencies against each other.
A currency pair quote defines the value of one currency against the other. Therefore, if the difference between a particular currency pair rises, investors can sell that currency pair and make a profit.
When you trade on margin, you only need to enter with a small percentage of your total investment in a trade. This amount is the margin requirement, and so, margin trading is like borrowing funds from a broker, as you do in stock trading.
However, unlike margin trading in stocks, investors cannot borrow funds for Forex trading. You will have to transfer funds into the Forex account before placing a trade. The margin requirement of Forex varies depending on the size of a trade, and currency pairs.
Currency pairs trade in standard units, known as lots. Standard and mini lots are the two most common lot sizes. The margin requirements for a currency pair can be as low as two percent and this leverage associated with currency pairs can produce massive gains for day traders, but it also presents a big risk for a loss at the same time.
Apart from these techniques, you can find other trading options on Forex that can make you money, such as financing, and long, short techniques. Either way, in any market, learning about the indicators is crucial before you invest in a certain pair. The Forex market presents a unique set of risks and benefits, and your education can ultimately determine how well you can avoid the risks and make money.