Is Forex Trading Profitable?
Discussion on Important Terms
Forex Trading is profitable when a trader takes it as a business and aware of the risk. Especially if a trader tries to be rich quickly by investing a small amount then it does not work always. So here says only 90% of traders make a profit. But forex trading is so interesting that a 40% successful trading rate can bring a decent profit. We try to present the ins and outs of forex trading in this article. Trading is a lucrative and leisure activity.
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 are nobody clearing and settlement intermediating between the parties and guarantee fulfillment with 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 ending 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 traveled to another country, he had 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 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 a trading example of our forex signal on GBPUSD here 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 here reward is bigger almost double of risk. So our analysis should be supported by the high reward to make profit consistently – More Trade Example 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 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 have to learn trading 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 has good platforms. Brokers should have a physical place and are regulated and registered.
What required in trading forex
To start trading forex first need a good platform to buy and sell the currencies. There are various types of the platform provided by forex broker online those are MT4, cTrader. Jtrader among them MT4 is widely used.
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 or a fundamental analysis base or a combination of both. There are many trader trades on a purely technical analysis based. So make a unique strategy to apply in different types of markets.
Algorithmic trading.
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 calculating the commission of the broker, swap, 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 also an exclusive chart analysis that shows the way of the next market move.
Forex calendar
To trade online beneficially you have to know the important economic data release date and time. The important economic event like US Non-Farm Payroll (NFP), Federal Bank Rate Detection, or any Meetings. Any Central bank rate event, Country GDP, Trade Balance the influence forex market vastly so a trader need to keep in touch with the forex market calendar.
Forex Trading VPS
Some traders trade by Expert Advisor (EA), a kind of program for the trading terminal where 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.
Forex Market Analysis
There 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, manufacture and consumer trend central bank interest rate, those drive supply and demand in market it 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 it 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.