“Earn by playing forex!”, “Profit up to 100% per day on the foreign exchange market!”, “Teach to work on the forex market!”. – the Internet is full of such ads. Is it really possible to make money on Forex and what does it take? Read the article.
How Does Forex Work and Can I Make Money?
In order to make deals on Forex, you must transfer a deposit to the dealer’s account. All your trading operations – conditional “purchases” and “sales” of currency – are reflected online in the program. Your task is to try to predict how the exchange rate of the quoted currency will change relative to the base currency. If you have correctly predicted the movement of the exchange rate, the dealer credits money to your account – your deposit increases.
It is as realistic to make money on Forex as, for example, playing on the stock market. Legal trading platforms operate under strict and transparent rules. They must comply with the laws on the securities market, standards for operations on the forex market, and rules of interaction with clients. If you are able to make accurate predictions about how the situation in the currency market will change, you can make good money.
Rules of Successful Trading
If you decide to trade forex, it is better to stick to the following rules:
Rule #1: Don’t Take Large Leverage
Forex is traded with leverage. This means that a forex dealer is willing to give you a virtual equivalent of credit. Let’s assume that your deposit is $100. A Forex dealer is ready to give you a leverage of 1:10. That is, you will be able to open a trade for $1000. If you want to open a $3000 trade, you will need to leverage 1:30. In other words, your potential gain but also the risk of losing money increases in the same proportion as the leverage. Therefore, choose a leverage between 1:05-1:15 to start with.
Rule #2: Limit the Deposit
You can’t trade all the time, losses are inevitable. Let’s imagine that your deposit is $100 and you decided to open a deal to “buy” the euro for $5000. For this purpose you took leverage 1:30. But the euro went down against the dollar and fell in price by $0.1 during the day. That is, your losses could have amounted to $300. But a forex dealer will not let you lose more than that on your live trading account and will immediately close the trade and zero out your account.
Rule #3: Use Stop Losses
Forex programs usually allow you to limit your losses on a trade. This option is called a stop loss. Suppose your deposit has grown to $1000. And you don’t want to lose it all in one unsuccessful trade. Then set a stop loss – instruct the forex dealer to close the trade when the loss reaches, for example, $100. This way you can save the remaining $900 of your deposit.
Start Guide
Once you’ve learned the theory, now you can move to the next steps.
1. Choose a Forex Dealer
The most important thing is that it must be licensed. If you have no license — it’s either outright fraudsters who will 100 percent rip you off or companies that are illegally operating in the country.
In addition to the license, it is worth clarifying a few other things:
- Is it possible to hold a preliminary training before going to trading?
- How convenient it is to install an application – on your computer or phone;
- How does a good demo version help you understand the process work and test your strategies?
- Whether technical support works well: how quickly consultants respond; whether there is a hotline or online chat;
- The size of the minimum deposit (there is the probability of losing this amount, so choose options with a small minimum deposit to begin with).
2. Practice on a Demo Account
There is no reason why you can’t try out different trading strategies using a virtual account before you start risking real money, even if you are already good with the theory. There are programs that analyze the technical indicators of currency movements and also help in building trading strategies to help the players. One of the platforms that we can advise and which offers a user-friendly interface for this purpose is mt5 web.
3. Open a Real Account
You can now open a real account. There is no guarantee that your strategy that is tried out on a demo may work as well on a real account. It will take some more time and some more money to refine it and develop your style. Simply using several strategies at once, will reduce your risks.
Forex trading can be as profitable as trading on the stock market if you follow strict and transparent rules. If you are confident in your abilities, you should definitely give it a try.