The big question that a lot of new traders like to ask is, “Can you make a living from Forex trading?” as much as you would want the answer to be in the form of a yes or no, it is not that simple. It is one of the questions where the answer depends on a lot of different factors. In fact, your failed or successful trades are quite a subjective matter too. You could ask the same question about any other profession and the answer will not be a plain yes or no. For example, you can ask someone, “Can you make a living from working as a doctor/software engineer/store owner?”
Any person who has been associated with any of those professions and occupations will tell you a lot of different things about how you can before nodding or shaking their head in response.
A Few Things to Know about Forex Trading
There are a few things that you have to know about forex trading before you take the decision of jumping into the serious business. Familiarize yourself with these things and then take a well-informed decision.
It Is as Simple as It Is Complex
When people call Forex trading easy and simple, they are referring to the core concept of this type of trading. Of course, there is no rocket science involved in it. You have to pick a pair of currency, predict the movement of the currencies in the coming times, and purchase of sell one of the currencies to profit from the price difference. If you think the price of a currency is going to go up in the coming days, you buy it today, and sell it tomorrow for more money. If you think the price will go down, you sell it today so you can avoid selling it in future when its price is much lower than today’s price point.
However, when you go into the details of Forex trading, things can become difficult as well. You have to learn about margin trading, leveraging, hedging, stop loss, and a lot of other concepts to do the safest trades. Social trading, algo trading, bullish market, bearish market, etc. are other things you have to know. In short, you have to do some learning before you can start trading profitably.
You Can Do It from Home
Today, you have the option of doing Forex trading from the comfort of your home. In fact, you can do it on the go as well. Almost every online broker now has a mobile application that’s designed to make your trading experience user friendly. These mobile trading platforms allow you to keep an eye on the market at any time of the day so you can execute your trades when you are sure about their profitability. All of the trading can now be done from home. From trading on a demo account and depositing funds in your account to withdrawing funds and getting the necessary training, everything comes to you now.
You Can Trade CFDs
CFDs provide you with a way of trading commodities, indices, cryptocurrencies, fiat currencies, etc. without actually owning them. This type of trading is based on contracts that you buy or sell based on your speculations. The whole trading process is quite similar to buying and selling stocks. The only difference is that you never own the underlying financial asset. What you need to know here is that when you go for CFD trading, you can trade almost any financial instrument that you can think of, not just the currency pairs.
Forex Is an Active Market
There are not many financial markets that can come close to the dynamics of the Forex market. In this market, you are exchanging one currency for another currency. While other markets can be less volatile and inactive at times, forex market continues to move up and down. Such movement enables traders to profit from trades on any given day. More importantly, when the price movements are small, you can benefit from short-term trades. Political conditions, foreign visits, international relations, etc. are some of the many factors that can affect the value of currencies. It also implies that you have to be on top of everything to do profitable trades.
You Don’t Have to Quite Your Job to Trade Forex
When discussing the question whether or not you should make a living from Forex, you might overlook some other important factors. For example, many people have this impression that they will have to quit their current jobs to trade in the Forex market. Some might even be under the impression that they need to have a lot of money to even start trading in the first place. That’s not the case at all. In fact, the beauty of Forex trading is that it never compels you to quite your current job. At the same time, trading in this market is so affordable that even a student can do it with some savings.
If you visit the online Forex brokers, you will notice that they have many different types of accounts for you to choose from. The initial deposit you need in your account decides how easy it is going to be for you to start trading. In many cases, you can start with an initial deposit of just $100. In fact, some of the biggest online Forex traders let you open your account with just $1. How they try to facilitate is by giving you big leverages so you can control big trades and make enough profit to fund your account with just your trades.
In short, you just have to make sure that you follow any legal age requirements if they apply to your region before opening your forex trading account. When it comes to learning the art of trading, you will always find ample training material from online brokers to help you learn the basics of Forex trading.
Tips to Trade Forex Safely
Here are some tips to help you trade Forex safely and avoid the common mistakes that new traders often make.
Keep Your Emotions out of the Way
The first thing you have to learn while trading is keeping your emotions out of the way. You might not realize it right now but it is one of the most difficult things to do. Even the best and most seasoned traders of the world have hard time keeping their cool. Bearing loss in a few trades can often cause you to worry about things. Not that you will lose all your money in a handful of trades, but you might go on a wild journey of making emotional trades to recover the money you have lost. That’s where you end up making a huge mistake.
Minimizing Risk Is the First Priority
To many new traders it seems that the biggest concern while trading Forex is making profit on trades. While that remains an understood point, profitability should not be your only focus in Forex trading. That’s because when you are focusing on profits and ignoring other factors, you can get greedy. More important than profitability is minimizing your risks whether you are a new trader or a professional of many years. There are dozens of different ways that you can try to minimize your risks. You can set stop loss values to prevent your trades from going into big losses. You should also look into hedging practices to know how to prevent yourself from going into losses.
Leverage Is Not All about Profits
One of the first things you will notice when you open an account with an online broker is the leverage. Most brokers offer you a huge leverage to help you trade big lots. Leverage is like help that you are getting from your broker. You have to contribute only a small part of the entire trade amount while the rest of the amount comes from your broker. This way, you are able to control trades that are otherwise not possible with the funds you have in your trading account. Leverages can be mouthwatering for new traders. When you see that a broker is offering you a 1:1000 leverage, it is hard to ignore it.
However, what you don’t realize is that leverage works on both sides: profit and loss. It amplifies your profits and losses both. If you end up completing a profitable trade, your profits will be hugely amplified because of the leverage. However, the exact opposite will happen if your trade fails and you incur a loss.
Learn from Professionals All Along
Do not try to be the one man army when you are in the world of Forex trading. A lot of new traders might feel like learning everything on their own but that’s not the right way of going about doing things in the practical world. Even if you spend days using the demo account of the broker, you will never be able to learn every trick of the trade. Not to mention, a demo account is just what it is i.e. a way to practice trading. You are still completely free of any obligation and pressure when you are practicing. The real pressure comes when you have real money on the online.
For those reasons, you want to keep your ego aside and learn from those who have been in the Forex market for many years. First, you can take advantage of the training material made available to you by your broker. Secondly, you can use many features on your trading platform to copy the trades of the best traders. Copy trading or social trading are different terms used for new traders when they follow in the footsteps of seasoned traders.
Using these options, you can see what the professionals are doing and you can mirror their trades to stay profitable and avoid the risks. In addition to that, many trading platforms have the automation options. You can set your strategies and automate them. Every time the market meets the criteria that you have defined, your trades are executed automatically.
Choose Your Broker Wisely
It does not matter how good of a learner you are and how much passion you have in you to trade currencies, the first step to this journey is finding the right broker. By finding the “right” broker it means a lot of things. The first thing you have to ensure is that your broker is a legitimate entity. Just like any other walk of life, bad guys exist in this world as well. You have to do a proper research before you trust someone with your money. Here are a few things to look at:
- Make sure your broker is licensed to offer their services to you.
- Read the fine print and see how transparent they are. The best terms and conditions will be in easy language so you can understand them.
- There has to be a legal entity that audits the Forex broker that you are considering. Oftentimes, you will find that information on the website of the broker.
- Welcome bonuses are great along with some big leverages. However, when things start sounding too good to be true, take a look at the reviews from other customers online.
- Always confirm the spreads. Some brokers charge you no fees but their spreads are their way of running the business. Choose the broker with the tightest spreads.
- Try the demo account to get a hang of the trading platform. Some brokers have their own trading platforms. You want to make sure that the platform is user-friendly and that the information on it in near real-time.
Should you make Forex trading a source of your livelihood? That’s depends on you because it is your choice at the end of the day. You have to do a lot of things accurately and precisely to be profitable enough to have Forex trading as your only source of earning. When it comes to the experts, they want you to invest only a certain part of your savings in this market so if it does not turn out to be the way you expected, you have enough money to go a different route.