Is Forex Trading Profitable?
Discussion on Important Terms
Forex trading can be profitable when a trader approaches it as a business and with an awareness of the risks involved. Attempting to get rich quickly by investing a small amount does not always work, as only 90% of traders make a profit. However, forex trading is interesting and even a 40% success rate can bring a decent profit. This article aims to present the ins and outs of forex trading. While trading can be a lucrative leisure activity, it is important to come with caution and proper knowledge.
A Brief About Forex Trading
Forex Also known as Foreign Exchange or FX, the currency market is a fundamentally unorganized market, which is called in English ‘ Over The Counter ‘ (OTC). Today it is the largest financial market in the world with a daily average volume negotiated around 5 trillion dollars.
The Forex market is decentralized and does not have a physical location. Unlike the stock exchanges, which are organized with market clearing or ‘clearing house’, the forex market is a free market that is not regulated or private in nature in which there is nobody clearing and settlement intermediating between the parties and guarantee fulfillment of the obligations agreed upon by them. Each operation is closed between a particular contract between the parties.
The currency market is in operation 24 hours a day for 5.5 days a week, started to operate on Sunday afternoons with the opening of the market in Australia and ended on Friday with the closure of the United States (New York)
How does Currency Trading Work?
In the past, currency trading was an activity that international tourists did. When a person travels to another country, he has to exchange his currency for the local currency at the current exchange rate of the moment.
However, at present, currency trading is a type of investment that has gained great popularity. Now traders can speculate on the variations in the exchange Backend Rates of two different currencies. When a trader speculates a currency pair will go high for a time period then he buys the pair. Below is a trading example of our forex signal on GBPUSD which shows the risk-reward ratio accurately.
Risk Reward Ratio – To trade profitably traders should consider the risk-reward ratio very well. For example in the above trade by following our signals in the trade reward is almost double of risk. So our analysis should be supported by the high reward to make a profit consistently – More Trade Examples HERE
How To Calculate Forex Profit and Loss
In selling and buying currency needs to know the following terms
BID: is the selling price of the currency The bid is the maximum price at which the market is willing to buy (hence it is also known as the demand price). Therefore it is the price that you will enter if you sell.
ASK: is the purchase price of the currency The ask is the minimum price at which the market is willing to sell (therefore it is also known as the offer price ). Therefore, it will be the price that you will enter if you buy.
Spread: is the difference between Bid and Ask. The brokers who do not charge commission are often called “fixed spread” as they maintain a fixed spread most of the time.
More than 85% of global Forex transactions occur in only 7 currency pairs known as the major pair are – EURUSD, USDJPY, GBPUSD, AUDUSD, NZDUSD, USDCAD, and USDCHF.
Let’s say that you think that the EUR will increase the value against the USD, your pair is the EUR / USD if you think that the euro will fall in value against the US dollar, you sell EUR / USD. If the purchase price of EUR / USD is 0.70644 and the selling price is 0.70640, then the spread is 0.4 pips. If the transaction moves in your favor (or against) then once you cover the spread, it could be a gain or loss in your operation.
The calculation of profit and loss is quite simple. Suppose you have a position of 100,000 GBP / USD currently trading at 1.3147. If prices move from GBP / USD 1.3147 to 1.3162, then they jump 15 pips. For the 100,000 GBP / USD position, the 15 pip move is worth $ 150 (100,000 x .0015).
Investment in Forex Market
When we talk about investing in Forex, we have to take into account the situations that vary in terms of the market, investments, fluctuations, technical analysis, and fundamental knowledge of the market as the global financial system is going from one moment to another or day by day.
In addition to this knowledge, we have to be an investment attitude and you have to learn to trade forex in a disciplined way. Forex trading should not be taking as quick money-making a scheme. It is also highly recommended to find out a regulated broker who has a good market reputation as well as good platforms. Brokers should have a physical place and be regulated and registered.
What is required in trading forex
To start trading forex first need a good platform to buy and sell the currencies. There are various types of platforms provided by forex brokers online those are MT4 and cTrader. Jtrader among them MT4 is widely used. It is recommended to choose a broker and must try in a demo account first.
Profitable Trading Strategies.
You can not get success in online trading without forming a trading strategy. An investor can not develop such strategies by himself. There are many factors that need to be taken into account. A strategy can be a technical analysis based a fundamental analysis base or a combination of both. There are many trader trades on a purely technical analysis basis. So make a unique strategy to apply in different types of markets.
Capital
To start trading forex, you need to have some capital to invest. The amount required varies depending on the broker and the trading platform you choose.
Trading platform
You need a reliable trading platform that allows you to access the forex market and execute trades. There are many different platforms available, so it’s important to choose one that suits your needs.
Broker
You also need a reputable forex broker who can provide you with access to the market and offer support and guidance when needed.
Algorithmic trading tools
For investors who make a trade continuously and invest a lot, you need to use a specific application. This projects the algorithms that determine the fluctuations of different assets.
The trader’s calculator
It is a useful application for investors who trade all types of assets. The most important thing it allows the ability to do the full calculations. It allows for calculating the commission of the broker, swap, and pip. This application gives the possibility of presuming precisely what should be a sum to invest.
Forex Dashboard
It is a type of tool that allows following the fluctuations of money in the global market. At PreferForex we provide access to premium member areas where the dashboard displays our forex trading signals and updates. Here is also an exclusive chart analysis that shows the way for the next market move.
Forex calendar
To trade online beneficially you have to know the important economic data release date and time. An important economic event like US Non-Farm Payroll (NFP), Federal Bank Rate Detection, or any Meetings. Any Central bank rate event, Country GDP, or Trade balance the influence forex market vastly so a trader needs to keep in touch with the forex market calendar like forex factory.
Forex Trading VPS
Some traders trade by Expert Advisor (EA), a kind of program for the trading terminal that needs to keep open the trading platform all the time. Then required forex VPS. This is just a virtual computer that runs all the time in a data center with a non-interrupted internet connection.
Overall, trading forex requires a combination of knowledge, capital, technology, and discipline. With the right approach, it can be a lucrative way to make money in the financial markets.
Forex Market Analysis
There are mainly two types of analysis required in the forex market 1. Technical Analysis 2. Fundamental Analysis.
1. Technical Analysis
The technical analysis starts from the basis that markets tend to follow a pattern and that history always repeats itself cyclically. That is why in this type of analysis historical prices of currencies are used to predict future movements. In the forex market, it is prone to develop very solid trends, which is why, in this sense, it is considered appropriate to carry out technical analysis.
2. Fundamental Analysis
Fundamental Analysis is based on the Country’s economic picture geopolitical status, Growth in GDP, Country’s export-import goods trade balance, employment, manufacturing, and consumer trends central bank interest rate, which drives supply and demand in the market is essential to consider for market long-term investment.
In this video, we have shown an analysis and how it works
Trading Forex Profitably
How much money a forex trader can make? Investing in forex is the new way to take advantage of your currencies with Forex you will have your own business, you will be your own owner, and you will be able to invest according to your income, you will only have to be aware of the fluctuations of currency and what is very important, if you accessory well, you will have a profit margin.
The Forex market is 12 times larger than futures markets and 27 times larger than the stock market (shares). Also, the daily trading volume of the Forex market is about 53 times higher than the New York Stock Exchange. Deutsche Bank is the largest currency distributor in the world with more than 21% market share. There are more than 170 different currencies in the world today that make up the Forex market. Forex is the only market that works 24 hours a day. The Forex market is the most liquid market in the world.
Do not invest all the money in one place
You need to approach someone you trust to know the best options you have learned to invest in and know what you think about them after this do not invest all the money in a single action. It is convenient to talk with the investment representative to put some money in a mutual fund and another in bonds, so you can keep an investment afloat if for some reason the other does not work, it is better “Do not put all the eggs in a single basket”
Risk of leverage in Forex
For example, if a trader makes a deposit of $ 1,000 in his trading account and uses a leverage of 2: 1, he can make transactions of up to $ 2,000.
Most brokers offer leverages of up to 50: 1, and many beginners make the mistake of using the highest leverage possible, without measuring the consequences. Although leverage may seem an attractive tool to multiply earnings, it actually involves high risk.
As a beginner, it is best of using leverage very cautiously before learning at least a few high-probability strategies.
Forex can make a big change in your lifestyle. You need strategies that are not vulnerable to losses. You can obtain a sufficient profit with good management rules. Most importantly you need to be aware of the currency trading risk, but with your knowledge make out good profit from it.
