Forex is the global market for currency trading. It is open 24 hours a day and offers great liquidity, making it a good opportunity for its participants, who can be from banks, large financial institutions and companies to small retail investors. The Forex traders aim to make money by buying and selling these currencies are traded in pairs, ie, crosses one currency against other (EUR / USD, EUR / GBP, UDS / JPY, AUD / NZD,…).
Trading currencies is not a new form of profit that has recently emerged as the currencies are trading to the Lake of history from the very onset of money. What is much more recent is the ease of being able to trade Forex from anywhere in the world through the Internet from a computer, tablet or mobile phone and the accessibility for retail investors. Today many people are making money by trading Forex from home either as full-time professional traders or simply spending a few minutes a day locating trading opportunities and opening, monitoring and closing their positions.
An important number of online brokers have also emerged that allow traders to buy and sell different currency pairs (and other instruments such as stocks, indices, precious metals, raw materials, energies, …) through their trading platforms in exchange. from the payment of a small commission, called a spread, which is based on a spread applied between the purchase price and the sale price of each currency pair.
Most online brokers usually offer a demo account that is loaded with a fictitious balance so that you can do tests, with the same conditions as a real account, but without putting your money at risk. You can take advantage of this demo account to learn and develop your own trading system and as soon as you are ready you can open your real account and deposit funds to start buying and selling the different currency pairs. The money you earn will be added to your account balance and you can withdraw it whenever you see fit.
What currencies can I trade?
As we discussed before, the trader is in charge of buying or selling currency pairs. There are many currency pairs, which depending on their trading volume are often called major, minor and exotic. Some examples of major or major currency pairs are GBP/USD (British Pound vs. US Dollar), EUR/USD (Euro vs. US Dollar), USD/JPY (US Dollar vs. Japanese Yen) or USD/CHF ( US Dollar vs Swiss Franc). Major currency pairs have a higher trading volume and the spreads offered by brokers are usually much tighter than those of minor or exotic pairs, which in turn tend to have greater volatility.
In each of the currency pairs, the first currency functions as the commodity to be bought or sold and the second functions as money. For example, if you choose the GBP / USD pair and open a buy position, you would be buying British Pounds against the US Dollar. It does not matter which is the currency with which you have deposited funds in your trading account since the platform is in charge of automatically transforming the amounts.
How do you make money in the Forex market?
In Forex you can make money with the price fluctuations of the different currency pairs and you can do it whether the price rises or falls since you can choose 2 different options when opening a position:
Go long: open a buy position if you think the price is going to rise and then close the position with a sell order.
Go short: open a sell position if you think the price is going to go down and then close the position with a buy order.
Buy low and sell high or sell high and buy low is the goal of the millions of Forex market participants. But, the million-dollar question is:
How do you know when is the best time to buy or sell?
There are two methods of trying to predict the optimal time to buy and sell Forex: Technical Analysis and Fundamental Analysis.
– Technical analysis:
It tries to predict the direction of the price by analyzing its evolution and using graphs with the different values that it has been taking, looking for formations, signs of continuation or change in trends and being able to use a series of indicators based on mathematical formulas, statistics…
Technical analysis may seem a bit complicated at first but it really is much easier than you think.
If you want to make money trading you must learn technical analysis properly. If you are a serious and disciplined person, you can learn in a few months.
On the Internet there is numerous free documentation to learn technical analysis and the most important thing is practice. You can find some useful paid courses but most will cause you to lose your money without having learned practically anything. You can also visit our website from time to time or subscribe to our newsletter to receive our articles on trading automatically and not miss any. We try to offer you useful and explained articles in the simplest way possible to help you learn, avoid unnecessary mistakes and defend yourself in this exciting world of trading.
– Fundamental Analysis:
It also tries to predict the direction and future price movements by analyzing the economic and political situation that may affect each of the currency pairs.
Fundamental analysis is usually used by investors who trade in Forex, generally long-term, but it can also be used by traders who want to take advantage of moments of high volatility to make money. These moments of volatility usually occur after the appearance of important economic news and represent a good opportunity to obtain benefits in a short period of time.
For example, important news about the situation in a country like the United States can cause important changes in the prices of currency pairs with the presence of the USD (American dollar). Good economic data on unemployment, an increase in exports, the announcement of an economic stimulus measure from the federal reserve, … can make the USD stronger and therefore investors rush to buy it increasing its value against other currencies, as well as the opposite situation, can occur in the face of a bad data.
Having an economic calendar at hand is a good option to keep abreast of this news, focusing especially on the most important ones since there are many throughout the day that will hardly have an impact on prices.
Professional and experienced traders can spot trading opportunities in forex using technical analysis and fundamental analysis although most use technical analysis. It is important that you learn to perform the technical analysis correctly and that you gain practice and experience from the first moment. Over time, technical analysis will be your greatest ally in detecting trading opportunities and making money in Forex.
Cheer up!
Learning in any facet of life always requires discipline and effort, but it also represents the path to success and the achievement of results.
Trading Forex can allow you to earn a lot of money and it does not require absolute dedication. You can combine your learning with your current professional activity. Trading can eventually become your full-time job but it is highly recommended that at least in the beginning you have another source of income and that you invest only a small amount of money that you can afford to lose.
Make trading a desperate measure to get money or wanting to go too fast you will too take risks without being prepared and you will lose your money much more quickly than you think.
To drive a car you must first learn the basics, start cautiously step by step and practice. You will make mistakes that you must learn from and at times you may find yourself overcome or feel uncomfortable. There are people who become insecure or afraid to drive and abandon and others who with the experience that only give the effort for a while and practice because they end up enjoying driving and even making it their passion. Something similar happens in trading. If you want, you think you can start without learning, if you think it will be very simple if you don’t accept that you are going to make mistakes and are not willing to learn from them if you risk too much, … you have all the ballots to lose money that you invest, think that trading is not for you and look for excuses.
Forex can be a very profitable investment, after a time of learning and practice, if you act in the right way and if you manage to be disciplined and consistent.
