This is a quick and easy guide to making money on currency trading. Forex trading is easy and inexpensive, and you can do it from home via the internet.
Currency speculators rarely want to use actual local banks for currency trading. An online forex broker is cheaper, easier to use and more specialized.
The purpose of buying and selling currency is of course to make money. We will soon show you how to make money in the forex market, but first we briefly review some important concepts.
Currency is primarily a means of payment for one or more countries. Currency in the United States is the US dollar, the UK is the pound, which is in most countries in Europe is the Euro currency.
Exchange rate is the value of one currency in relation to another. For example, we say that a dollar is worth 6.1829 Swedish crowns. Changes in exchange rates occur all the time – two minutes later, $1 is worth 6.2049 Swedish crowns.
Currency exchange deals with currency pairs, i.e. two different currencies paired. USDEUR is a currency pair – this is the US dollar (USD) and euro (EUR), which is two currencies. Currency trading is always in pairs: You buy one currency and selling another. For example, if you have euros, you can use those euros to buy dollars.
Forex means “Foreign Exchange”, synonymous with currency trading.
Currency Broker (Forex Broker) is the service that you use to trade currencies. It could be a bank or a specialized foreign exchange services. There are many good foreign exchange brokers to choose from, such as eToro social trading, and Trade Rush – they are inexpensive and easy to use.
To make money in forex trading, you need to buy a currency which rises in value relative to the currency you bought. For example, you can open a foreign currency account at eToro in euros, and then “toggle” the euro against the dollar. You make money if the US dollar rises in value (exchange rate of the dollar rises against euro).
Learn to make money in forex trading: it’s easier if you get some experience. If you are using eToro you get an education in how to trade currencies, and you have the technical tools to analyze how the probability of a currency will evolve. Forex trading is ingeniously simple when using these tools. Your account manager will teach you what to do to make money in forex trading.
Forex trading offers currently one of the best opportunities to earn a lot of money in no time. Not even the stock market and the commodities market can be compared.
If you are good at currency trading, there are ample opportunities to make money and get rich. Everything is easy when you’re good at something, but as with everything else it requires little effort to reach a level where you would expect to make money.
Here’s a mini-glossary of terms that are common in currency trading. It’s probably an advantage to have knowledge about these words before you start speculating in foreign currency in a foreign exchange broker.
The base currency is the first currency in a currency pair. Copy USDGBP – which is the US dollar vs British pound). Here USD is the base currency.
Gearing is a term that tells how much you have acted in relation to how much you bet. If you put $1,000 of your own money, and you shift in the amount of $100,000, then switch to 100x or 100 times. Your deposit that you risk is $1,000, while the total amount you spend is $100,000, and as a backup for your total amount is $1,000. This is often expressed 1:100.
Leverage is another term for gearing, and means exactly the same thing.
Limit is the highest or the lowest price you are willing to sell or buy at. You specify an automatic buy orders with a maximum of 112.2 USDJPY for example. This means that there will be a trade if the exchange rate goes above 112.2. A customer order that you specify the limit of 112.1 USDJPY means that you are not willing to sell below this level.
Margin is a term used to explain that you are dealing with more money than you have coverage. You just put in a set amount that serves as security for the total amount you spend. In currency trading, we talk about trading on margin. The concept is related to the gearing and leverage.
Pip is the smallest price change one currency expressed in 1 / 100th of a percent. 5 pips in Swedish crowns can be expressed as 0000500. If a currency pair EUR / USD is trading at a price of 1300 (EUR 1 = USD 1.3) and the price rises to 1.3010, then the price rose by 10 pips.
Spread is the number of signals between the purchase price and sale price. Spread is the most forex brokers make their money. They make money on every currency purchases and sales abroad made through their networks. For example, if a broker pays 1.3600 to buy or sell, so the broker can allow you to buy at 1.3605 or sell at 1.3595, giving a spread of 5.
Stop-Loss is a tool to limit the risk. You can limit your risk significantly by using stop loss. What you do is put in stop-loss orders on the exchange rate falls below a level that you are no longer comfortable with. Let’s say that if the dollar against the USD goes down to below 5.5000 will put the stop loss at 5.4999, and if the interest rate drops so low it will be automatically entered into a sales order so that you do not get to further down the exchange rate would fall further. You can also do something similar to ensure profit, it is then called “take-profit” and here, put a limit on how much the interest rate can rise before an automatic sell orders are entered.
Currency exchange rates and currency pairs are fundamental expressions of currency trading. An exchange rate is always expressed as a rate between two currencies. For example, it is not possible to just look at the exchange rate of the British pound. One must see it in relation to something, that is, in relation to another currency. We can look at British pound (GBP) against the US dollar (USD). Then we have a value, and this is expressed as USDGBP, to USD ($) and GBP.
Currency Broker is a service that makes it easier for individuals and companies to conduct currency trading. Today it is common to use a broker online. See list of good foreign exchange broker and read testimonials before you choose which broker to stick with.
Now that we are done with the basic terms, it’s time to move on to seeing a blueprint of your perspectives with Forex. Stock trading is quite simple. All you need is a good strategy. Here we go through some very simple strategies used by the world’s leading investors.
To start trading, you need money, and an online brokerage account. What you need this to start with stock trading:
Money, also called capital or investment capital. This is what you use to buy stocks. If it’s saved money or the last salary or money you have borrowed does not matter. Experts often do not recommend to trade currencies and implement speculative investments with borrowed money, because you can get in a difficult financial situation if you lose on your investment and do not pay back the borrowed money.
Online Forex broker: You should choose an online broker. With an online broker you will find information about all of the requirements for documentation and so on.
To open a share account with your broker to obtain a license to trade currency. These are things your broker will tell you more about.
Knowledge of the trade is also important. If you have no idea or explanation of a certain currency will rise or fall in value within a certain time period, it may be as well to give up the trade, or at least try to learn more about the stock first.
One of the main principles of stock trading is to minimize losses and maximize profits. There will be times when you’ll go wrong, so do your best to ensure that this error is marginal impact on your wallet. Here is a warning for you: the times you are right, you have to go up as long as possible, but do not be greedy.
Find a successful role model in Forex trading and follow in their footsteps, but do so reasonably. Apply common sense when borrowing someone else’s strategy. Ability to play by the ear makes a learned and experienced Forex trader richer than his or her competitors. Mingle with people who are in the know and who are willing to teach you. Remember that although Forex trading is associated with considerable risk taking, currency trading is not a game of chance. It is not about gambling, but about creating a safe buffering zone that can protect the finances that you cannot afford losing.
What makes Forex better than stock trading.
The stock market is weird. Here are some key findings:
Not everything that goes up comes down again. If you bought shares of Microsoft 25 years ago, or Google 10 years ago, you would probably never see the share price coming down to that level again. With all of the shares, it pays refusing to sell before you plan to use the money.
Not everything that goes down, comes back up. Never insist on holding a stock because you think it needs to come up again. Just as some success continues upward year after year after year, there are companies that are struggling and going down and further down, until they reach the bottom – and the company is in bankruptcy. You can lose your entire investment.
Forex trading has many advantages over stock trading: Forex market is the largest financial market in the world, and liquidity is excellent for most currencies in relation to the ordinary shares. You have bought or sold during the second you want it, there is no waiting.
It’s fun to watch the fluctuations in the foreign exchange market, than to just limit yourself to one company. In any case, this is a common reason for going from stock trading to foreign exchange, it is simply more dynamic, liquid and yielding.