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In 2022, the U.S. dollar had dominated the list of the most traded currency pairs, with the euro and the dollar being the most common forex transactions in that year.
In order to profit from forex, you can consider trading these currencies to earn money.
What advantages and disadvantages does forex trading have? How do you trade in forex and how do you profit from it? What strategies can help improve your chances of profiting in forex trading?
This article discusses the various strategies you can use to improve your profitability in forex trading. This article also tackles the pros and cons of trading forex.
Learning the different strategies and using them in forex trading can help improve your chances of being a successful forex trader.
Taurex is an online trading platform offering opportunities in forex and other financial markets like commodities, indices and cryptocurrencies.
Is Forex Trading Profitable?
Forex can be profitable if you do your research, implement strategies and practice your trading. The following sections can guide you in managing your profitability in forex.
Hypothetical Scenario
You have $5,000 in capital funds and a 55% win rate on your trades with only a 1% risk on your capital. Your total risk per trade is only $50 ($5,000 x 1% = $50).
You can place a stop-loss order five pips away from the price you bought the asset and set a target price eight pips away. A pip is a unit of measurement based on a forex pair’s minute price movement.
In this case, your potential reward for each trade should be 1.6 times the risk (8 pips ÷ 5 pips = 1.6).
Trading Leverage
Leverage allows you to boost your trade’s profitability even when you have limited capital. Some forex brokers offer substantial trading leverages, especially for major currency pairs.
Example: You have $5,000 in your account and trade forex using 50-to-1 leverage. You can take positions worth up to $250,000 ($5,000 x 50 = $250,000).
Trading Currency Pairs
Each currency pair has risks, so the levels at which you set your stop-loss orders and target prices can differ between pairs.
If each pip of movement is worth $10 and you set your stop-loss at five pips, your risk per trade is $50 ($10 x 5 = $50). If you place your target price at eight pips, each winning trade can be worth $80 ($10 x 8 = $80).
Example: Out of 100 trades, 60 of them are profitable. You can earn $4,800 ($80 x 60 = $4,800).
Meanwhile, if you have 40 losing trades, your loss is $2,000 ($50 x 40 = $2,000). Your profit should be $2,800 ($4,800 – $2,000 = $2,800).
Slippage Larger Than Expected Loss
Finding several good trades every day is challenging, if not impossible. In such cases, slippage can happen during trading.
Slippage is the difference between a trade’s expected price and the price at which you execute it. This event is most prevalent during periods of high volatility and can happen anytime.
Slippage can result in more significant losses than expected, even when you use a stop-loss order. When you calculate your profit, consider including slippage in your computation. For example, deduct a 10% slippage from your net profit.
“Do I Need a Lot of Money to Make Good Forex Profit?”
The amount of capital you have and the leverage your forex broker provides can affect your earnings.
Your profits in the forex market are usually presented as a percentage of your deposit rather than being calculated in dollar amounts.
For example, a 1% daily profit may not be substantial if you are a novice trader with a small deposit. However, that percentage can be worth millions or billions of dollars for leading traders, such as those from world banks managing large deposits.
Can You Make a Living in Forex Trading?
Some sources suggest that the failure rate in forex trading is as high as 95%. With such a high failure rate, you may find it challenging to earn from forex only.
While making a living from trading forex is possible, many challenges and risks can keep many would-be traders from being profitable. Like many professions, forex trading requires skills and experience to improve your chances of success.
How Is Trading Forex Profitable?
Getting a good understanding of how the forex market works can help improve your profitability. This concept can also apply to trading in other markets.
If you have the knowledge and skills to start trading forex, you can apply these using a reputable broker and trading platform. Spend only what you can afford and be careful not to go beyond your means.
You should also learn about investing in other financial instruments. For example, forex can comprise 20% of your total investment. This method is called portfolio diversification, which many successful professional traders widely use.
An Example of a Forex Trader
You are a parent of two children and working as an accountant earning about $70,000 annually. After calculating your essential needs and household expenses, you realise you need extra income– an additional $500 monthly–to cover your children’s future.
After researching, you discover that forex trading may provide the additional profit you need. After computing how much you can set aside for forex, you find that you can only spare $300 a month. Still, trading without breaking the bank is possible. You can increase your trading power by opening an account on a platform offering leverage.
Use Leverage to Pump Up Numbers
Leveraging is borrowing money from your trading company to use on a trade. For example: You use your spare $300 for forex trading, and the company offers a 100-to-1 leverage. Your trade potential becomes $30,000 ($300 x 100 = $30,000) instead of only $300.
Choose the Right Forex Broker
Not all brokers are the same. Some brokers provide better leverage and tighter spreads, while others offer lower commissions or trading fees. Research the right broker that fits your trading needs.
Taurex offers forex trading with leverage ratios as competitive as 1-to-1,000 and minimum account balances as low as $100. We have about 51 forex pairs to provide you with as much flexibility in currency trading.
Research
Before you trade, research the currency pairs you want to buy and sell. Know the market’s sentiments and other factors affecting your chosen currency pair’s performance.
Use maths to determine the expected returns. Traders who are also accountants may find this task relatively easy. Even if you’re not an accountant or maths expert, your trading broker should have the tools to help you with those calculations.
Use Tools at Your Disposal
Research the trading styles and tools that can help you become more profitable. You can use these tools to detect buying and selling signals, trends, and momentum to help you decide when to enter or exit a position.
So, Were You Able to Succeed?
Your trading success depends on whether you achieve your goals or not. For example, since you need an extra $500 monthly for your children’s education, you can consider yourself successful if you earn at least this much monthly from forex trading.
Now, What Should You Expect?
Your circumstances may differ from the example provided above. However, from the scenario, you should know how to plan for trading forex.
Regardless of your situation, consider the following activities to help you become profitable in forex trading:
- Spend time searching for a forex broker that fits your needs
- Allocate the first month to learn about trading strategies and testing them with a demo account
- Make your first trade based on news pieces and facts detailing the market’s direction
- Have realistic profit goals and do not risk too much of your capital to achieve them
By following and repeating this pattern, you may be one step nearer to achieving financial freedom and turning forex trading into a full-time job.
How Forex Leverage Affects Your Profits
In the forex market, leverage is a handy financial tool traders can use to help raise their market exposure above their initial deposit amount. This way, you can trade more, even with a limited deposit.
Example of Profitable Leveraged Forex Trade
Suppose you have a $100 deposit and a 200-to-1 leverage. Your total buying potential increases to $20,000 ($100 x 200 = $20,000).
If you enter a position worth $20,000 and sell when it gains 3%, you earn $600 ($20,000 x 3% = $600).
In comparison, entering a position with $100 only and gaining 3% gives you $3 ($100 x 3% = $3).
Example of Unprofitable Leveraged Forex Trade
Using the same $100 deposit and 200-to-1 leverage, you enter a position worth $20,000 but the value decreases by 2% before your stop-loss order triggers automatically. Your loss will be $400 ($20,000 x 2% = $400).
Key Takeaways
Here are some significant takeaways about profitability in forex trading:
- Many retail traders turn to forex looking for quick profits.
- Some traders lose considerable amounts of money. Even the most aspiring forex traders can fail.
- Leverage can lead to outsized profits or substantial losses if not managed well.
- Platform malfunctions, counterparty risks, and sudden volatility bursts can be challenging to would-be forex traders.
- Unlike other financial instruments like stocks that trade on exchanges, forex pairs trade in OTC (over-the-counter) markets with no central clearing firm.
How to Profit From Forex Trading and How to Trade on Forex
The following sections provide tips to help increase your potential to profit while trading on forex.
A Stop-Loss Should Always Be Used
Always use a stop-loss order regardless of what trading strategy you employ. Your trade may encounter a sudden reversal, so a stop-loss can help you prepare for the unexpected.
What Is a Stop-Loss?
This trading parameter enables you to specify your trade’s closing price. Stop-loss closes the position automatically at that amount when the actual price hits this level.
Once you place a stop-loss, you can be at ease knowing you will not lose more money than expected.
Keep Your Emotions Aside
Forex trading is an exciting activity that combines analysis and discipline although your emotions can get in the way of making logical decisions. Here are the key points to remember:
- Do not get angry at the market
- Do not worry about your losing positions
Instead, you should understand the market, rely on your analysis and follow your established rules. Doing so can improve your chances of profiting from forex.
Stay Tuned Into the Current Market Issues
Staying updated with the latest news releases is one way to help you improve your forex trading profitability. Many market moves happen because of significant events like news and announcements or the expectations of such releases.
Even if you are a technical trader relying on charts and patterns, you should still pay enough attention to real-world events. These events can be key drivers of market movement.
How Many Hours of Trading per Day Do You Need to Make Money on Forex?
Some day traders have success trading forex for a few hours daily. Allocating more time for this activity can help you earn extra potential profits.
Trading Strategy for Profitable Forex Trading
Trading strategies can help improve your profitability in forex trading. The following sections explain how these strategies work:
Day Trading – Enter and Exit Multiple Forex Positions Within a Trading Day
Should you want to use the strategies of day traders, keep your position open for hours or minutes only. The objective is to close your forex position by the end of the trading day.
Due to day trading’s short-term nature, expect modest profit margins only. If you enter multiple positions daily and most become winning trades, your small profits can add up quickly.
Scalping – Attempt to Make Modest but Frequent Gains From Small Price Movements
Scalping involves entering and exiting positions over a few minutes to make minute profits. A profitable forex scalping strategy may require you to enter dozens of positions daily. Ideally, you should end the day at a profit when you generate a surplus in winning trades.
If you want to scalp trade forex successfully, consider taking advantage of short-term consolidation trends. For instance, you can place a buy order at the lower end of the range and a sell order at the higher end. You must also enter stop-loss orders on both sides to help avoid significant losses.
Swing Trading – Trade Forex With More Flexibility Over Several Days or Weeks
If you’re a beginner, swing trading may be one of the best strategies for forex trading. Unlike scalping or day trading, swing trading provides more flexibility because you can keep a forex position from a few days to several weeks.
As such, you have no immediate pressure to close your position before the end of the trading day.
Swing trading focuses mainly on short- to medium-term trends. The objective is for the swing trading position to remain open for as long as that trend remains.
Positional Trading – Long-Term Forex Trading Strategy
Traders rarely discuss forex and long-term trading in the same sentence. But some forex traders look into the positional trading strategy involving both concepts when approaching the market. If you want to employ this strategy, you can keep your forex trades open for months or even years.
50-Pips a Day Forex Strategy – Aim to Make Daily Gains of 50 Pips
This strategy aims to create a forex trading profit by generating 50 pips’ worth of gains daily. If your currency trading generates a profit of five pips, you must trade more to achieve 45 more pips within the day.
This strategy of generating 50 pips in a single day is unlikely to be sustainable in the long run. So consider closing your positions based on existing trends and individual analysis instead of aiming for a daily profit target.
Daily Chart Forex Strategy – Capitalise on Daily Pricing Trends
This strategy focuses on daily chart movements. Your first step is to pick a suitable pair and change the candlestick chart’s time frame to daily. Doing so will display the price and trending lines at the end of each trading day for an extended period.
Candlestick charts are technical tools that incorporate data for several time frames into single price bars. You can use these charts to build patterns that help you predict an asset’s price direction.
This strategy’s objective is to assess the trends from the daily price movements of your chosen forex pair. You can achieve this objective by using technical indicators to help identify whether the pair’s daily trend is approaching a valid support or resistance level.
Copy Trading – Mirror the Trades of an Experienced Forex Trader
If you are trading in the forex market, having experience is usually better than relying on theory only. A beginner without experience buying and selling currency pairs, consider using a copy trading tool.
This tool can help you by letting you mirror an experienced forex trader’s buy and sell positions. Doing so enables you to access a fully automated forex trading process without requiring technical or fundamental analysis.
Margin Trading – Enter Higher Value Forex Positions With Leverage
Many online forex brokers offer leverage to let you enter positions with more buying power than the money you have in your account. If your balance contains $50 only, a 50-to-1 leverage can provide you with a position of up to $2,500.
Leverage can be helpful when you need a balance large enough to make a worthwhile forex trade.
Forex Signals – Semi-automated Way of Trading Forex
Third-party analysts who scan forex markets will usually offer signals to members who subscribe to these analysts for a fee. If you are one of those members, you can receive trading suggestions from the signal providers.
The best forex signals are those that contain all of the information you need to place a trade with an online broker. For instance, one analyst may distribute up to five signals daily to premium members. These signals may contain the forex pair to trade, entry price, take-profit orders, and stop-loss orders to place.
Win Rate
Your win rate is the number of successful trades out of a given total. If you place 100 trades and have 55 winning ones, you have a 55% win rate. Most day traders consider a win rate above 50% an ideal goal.
Risk/Reward
The risk-reward ratio is how much capital you risk to attain a particular profit. If you lose 10 pips on losing trades but earn 15 on winning ones, you are profiting more from the winners than you are losing.
A high win rate for trades means you have more flexibility with your risk-reward ratio. Meanwhile, a high risk-reward ratio means you can have a lower win rate and still be profitable.
What Is the Average Profit for Trading on Forex?
There is no definite answer to how much you can make on forex trading because there are several parameters to consider. For long-term operations, a professional trader with a starting capital of around £1,700 ($2,113) may obtain monthly performances of 5% to 7% on average, excluding drawdown periods and taxes.
Intraday or scalping operations may increase your profit margin significantly. Such strategies require better technical training and more discipline. Still, if you prefer a scalping strategy, you can earn more even with a modest capital investment.
Tips for Profitable Forex Trading
To have a better chance of profiting from forex trading, keep these tips in mind:
Choose a Reliable Broker
Aside from choosing a legitimate broker, consider their expertise, the trading instruments they use, the account types you can open, the risk diversification opportunities they offer and the leverage ratios they provide.
Learn Risk Management
In order to succeed in trading forex, having proper risk management strategies is essential. One way to win in forex is by having a long-term outlook.
Proper risk management also allows you to recover even when you experience losses. Part of risk management is not relying too much on leverage, especially when you are still starting. This way, you can preserve your capital and avoid burning through your money quickly.
Don’t Overtrade
The internet contains plenty of forex trading information that may immerse you in overly complicated strategies that can cause you to make numerous mistakes. If you are a beginner, consider sticking to swing trading or similar techniques that only require making a few trades at a time.
Take Time to Prepare Yourself Mentally
Remember to consider the level of mental capacity needed for your forex trading to work. As a trader, you must understand that not all your trades will succeed. Losing money is part of the job. Prepare yourself mentally for several losses while you continue working methodically towards a profit.
Learn All the Time
If you do forex trading as an occasional hobby, you will likely lose money all of the time. To make this activity more profitable, prepare to dedicate a substantial amount of your time to this job. Develop a mindset that learns from every trade and treat forex trading as a school and business opportunity.
What Is Forex?
Forex, or foreign exchange marketing, is exchanging one currency for another. Some traders and industry players also refer to forex as the FX market.
What Is Forex Trading?
You can define forex as a network of buyers and sellers exchanging currency with each other for a price. This kind of trade is how individuals, central banks, and companies convert one currency into another.
“What Should I Know Before Trading Forex?”
Prior to getting into forex trading, ensure to do your research on the trading broker you want to work with, the trading platforms to use, and the profit amounts you plan to earn. Make sure you don’t make large deposits before knowing what to do. This way, you can reduce your risks of losing your money quickly.
How Does Forex Trading Work?
Forex involves trading currencies in pairs like EUR/USD (Euro to U.S. dollar) or GBP/USD (British pound to U.S. dollar). When you trade forex, consider whether one currency’s value will rise or fall against the paired currency.
Political, economic and geopolitical events and trade flows can influence a forex pair’s value and affect the currency’s supply and demand. This situation creates volatility, giving you new trading possibilities daily.
As a forex trader, you can take advantage of these possibilities by being receptive to market news releases and trade forex based on the presumed market attitude.
Foreign exchange is a global marketplace where investors, banks, institutions and even tourists trade national currencies. This market is open 24 hours daily to all individual traders, institutions, investment firms, hedge funds and retail traders.
How Does the Forex Market Work?
Forex trading works between two parties in an OTC market and is run by a worldwide network of banks. You can find these banks in four primary trading centers in various time zones:
- London
- New York
- Sydney
- Tokyo
Advantages of Forex Trading
The following sections discuss the benefits of engaging in forex trading.
It’s Easy to Learn Forex
You do not need to spend years or get a degree to learn forex. In order to become a currency trader, you can complete basic training in three months. But to gain complete expertise, consider dedicating about two years of learning forex.
By combining your forex technical analysis skills and fundamental marketing analysis, making money in forex should become more attainable.
It’s a 24 Hours Running Game
The forex market is open 24 hours daily, five days a week, providing opportunities for full and part-timers to engage in forex trading. There is no opening bell, so you can trade whenever you want.
You can trade on your preferred schedule, like after your morning rise or returning home from work, and complete your order’s execution anytime. Some forex trading platforms let you transact from your phone, allowing you to execute forex trades anywhere.
Amazing Leverage
Leverage allows you to control a much bigger contract value, even with a small deposit. This feature enables you to earn substantial profit while keeping the risk capital to a minimum limit.
For example, with a 100-to-1 leverage, a margin deposit of $50 can let you buy and sell $5,000 worth of currencies ($50 x 100 = $5,000).
Rising and Falling Prices Bring Profit Potential
The forex market does not have restrictions on directional trading (buying and selling on the market’s up and down movements). You can purchase a currency pair if you believe it will increase in value and sell the pair if you think its value will decrease.
Furthermore
Past performance does not guarantee future results. Investing involves a risk that incorporates the possible loss of principal. The total value of your trade and when exactly you close your position can determine the profit or loss you make.
Margin trading can give you a chance to generate huge profits from numerous small investments. But the same practice can also amplify losses exceeding your initial deposit.
No Commissions on Most Accounts
Some brokers do not include trading commissions on most accounts. If they do, these costs are generally low if you trade in large volumes.
Additionally, forex has no exchange or clearing fees because there is no central clearing institution. The majority of retail brokers generate their revenue via the spread. The spread is the margin between the bid prices for potential buyers and ask prices for potential sellers.
Low Transaction Costs
The transaction costs are generally built into the forex price market as the spread. This cost is your payment to the broker for facilitating the forex trade.
Some brokers charge a commission based on the transaction amount’s percentage or a flat fee. Overall, forex transaction costs are relatively lower than several similar trades.
Low Barrier to Entry
Barriers to entry are obstacles or costs that exist to prevent new competitors from entering an industry.
The forex market has a low entry barrier, meaning a newcomer can come, earn, and even dominate regardless of the presence of established traders and other industry members. As forex has a low barrier to entry, this market is continuously growing, thriving, and spreading.
High Liquidity
Liquidity is an asset’s ability to get converted into cash quickly. If you trade stocks or commodities and convert them to money anytime, you can say that they have high liquidity.
Forex has high liquidity, meaning you can conveniently move huge amounts of money in and out of currencies with small spreads.
You Can Go Long or Go Short
Having a long position in an asset means you own that security. You can maintain a long position if you expect the asset’s price to rise.
Meanwhile, a short position means selling an asset you do not own. If you sell short, you expect the asset’s price to decrease in value. When the price drops, buy that asset at a lower price and make a profit.
The Costs of Transactions Are Low
The forex price market’s spread usually includes the transaction costs, meaning forex brokers earn from the spread as their payment for facilitating the trade.
Disadvantages of Forex Trading: There Are Many Hurdles to Overcome
Although forex trading is an excellent opportunity to earn money, this activity also has risks that you must manage to become successful. The following sections discuss the cons of trading forex.
Unexpected Events
Unforeseen developments affecting a country’s currency can potentially reverse trends and losses can run into hundreds of millions of dollars in forex trading, affecting any trader from small retail investors to large banks.
For example, when the Swiss National Bank lifted the Swiss franc’s cap against the euro on January 15, 2015, the franc soared up to 41% against the euro that day.
This surprise event wiped out the capital of three brokerages, rendering them insolvent and causing losses in their retail trading accounts.
Excessive Leverage
Leverage can give you a boost in your buying power if you do not have enough capital. Leverage can also cause you to lose significantly if your trade goes the other way.
If you have $50 with a 100-to-1 leverage, you can trade assets up to $5,000 (50 x 100 = $5,000). This boost opens an opportunity for a bigger profit than if you only traded $50. But if your trade loses value and you exit your position, you can suffer a substantial loss.
Asymmetric Risk to Reward
If you are an experienced forex trader, you can minimise your losses by offsetting them with substantial gains when your currency call proves correct.
However, the opposite can also happen, such as when you make small profits on several positions but hold on to a losing trade for too long, causing you to incur a significant loss.
Platform or System Malfunction
Suppose you have a large position that can bring you significant profit but cannot close the trade because your trading platform is malfunctioning. Your computer system may also crash due to a power outage or disconnection from the internet. Such events can cause you to lose money or opportunities in trading.
No Information Edge
Large forex trading banks usually have extensive trading operations in the currency world and have an edge in getting information. Such knowledge can include commercial forex flows and covert government interventions not ordinarily available to the retail trader.
Currency Volatility
High leverage ratios can also mean your trading capital can get depleted quickly, especially during periods of unusual volatility. These events can happen suddenly and cause market movements before most individual traders can react.
OTC Market
The forex market is not centralised and regulated like stock exchanges or futures markets. This feature means your forex trades do not go through clearing organisations that can guarantee your transactions. This non-guarantee can lead to counterparty risk.
A counterparty risk is a probability that the other party in a trade transaction may default on their contractual obligations and not fulfill their part of the deal.
Fraud and Market Manipulation
Forex market manipulation is a rampant challenge that has involved prominent industry players. For example, in May 2015, five large banks were fined nearly $6 billion for trying to manipulate exchange rates between 2007 and 2013. The fines levied on these banks totalled almost $9 billion.
One way that these institutions manipulate the markets is through stop-loss hunting. The organisations will coordinate price rises or drops to where retail traders will likely set stop-loss orders.
When the price action triggers these orders automatically, the event can create a waterfall effect of traders selling as the price movement triggers each stop-loss point, creating large profits for the market mover.
Unrealistic Expectations
As you explore forex trading and compare it to other investment opportunities, earning 10% returns each year may be an excellent result. If you consider such gains acceptable, you should expect similar figures from forex trading instead of setting unrealistic goals like earning a 100% monthly profit.
Try to keep your expectations grounded in reality and not treat forex trading as a get-rich-quick type of investment.
Lack of Practical Knowledge
Suppose you go into trading because the broker or platform promises you riches. This misleading marketing strategy can cause you and many naive and impatient individuals to take unnecessary risks and trade without enough practical knowledge, causing you to lose money.
If you’re a beginner trader, you may feel pressured to put more money into your account because of promises of greater returns. Remember to start with a small deposit, develop your own strategy, and be patient.
Choosing Wrong Platforms
Another reason for losing money in forex is your choice of a trading platform. Selecting the right platform for your trading needs can be challenging because you want to avoid unregulated companies and brokers that charge too much.
Taurex offers forex opportunities using MetaTrader 4, one of the world’s most trusted trading platforms that gives you customisable trading indicators and an intuitive interface.
Lack of Understanding
One significant mistake you can make as a beginner is diving head-first into forex trading without understanding how it works. Forex can be profitable, but you must dedicate enough time to study it deeply before trading.
While the basic concept of forex trading is to convert one currency to another at a specific exchange rate, you also need strategies to help improve your profitability.
Wrong Strategy
Suppose you have studied and have access to various strategies for forex trading. These strategies work well for some trading scenarios but may not suit others.
Each trade is a different situation with certain characteristics. Factors like your time, risk tolerance and even your personality can affect your trade differently daily. You must find and use a strategy that works best for your particular circumstance.
Not Having a Forex Broker
Currently, there is no exact number of forex brokers worldwide but sources estimate at least 1,500. Depending on your trading practice and needs, only a few brokers can help maximise your profits by providing various tools, invoice offers, and discounts.
Not Setting a Stop-Loss Level
Setting a stop-loss level helps ensure that you do not lose more money than you can tolerate, especially when a specific trade does not head towards the direction you want it to go.
Trading Forex vs. Trading Stocks: Which Is More Lucrative?
The next sections discuss whether forex or stocks are less risky than the other.
Is Forex Riskier Than Stocks?
Forex involves a different trading style than how many people trade stocks. These individuals purchase stocks and hold them for months or years, whereas in forex trading, you buy and sell currencies by the minute, hour and day. Forex time frames are also shorter, and price movements have a more significant effect due to leverage.
Is Forex Safer Than Stocks?
Trading forex or stocks has risks, so there is no definite answer as to which financial instrument is safer.
Forex trading involves more volatile assets, so you may find it relatively riskier than stock market trading. Forex is also less regulated than stocks, making currencies a more speculative market.
Using proper risk management techniques like stop-loss and limit orders, you can minimise the risks to your finances when trading forex.
Want to Make a Profit? Avoid the Forex Scams
To ensure that your finances are safe and you have a hassle-free trading experience, choose a legitimate broker licensed by the appropriate financial authorities. This way, you are less likely to lose your hard-earned money, especially when the broker you select closes down.
So, Can You Do Forex Trading?
Anyone can do forex trading, but it takes learning and training to profit from your first trade. Your profitability can depend on two factors:
- Your trading strategy
- The amount of risk you are able or willing to take
You can perform forex trading on the margin, meaning the number of trades you can do can be greater than your deposit amount. Through leverage, you can trade more than the money you own.
The Most Profitable Forex Traders in History
The following individuals are notable traders in history who have enjoyed significant success in the forex market:
George Soros
George Soros is a financial businessman and one of the world’s most famous forex traders. He started his career in post-World War II London after escaping from Nazi Hungary.
He worked in several other firms before establishing his company in 1970. His rise to international fame began in 1992 when his trade shattered the Bank of England and gave him a $1 billion profit.
Andy Krieger
Andy Krieger left the Salomon Brothers, an American investment bank that merged with Citigroup, in 1986. He became a successful trader, wherein his work in the Banker’s Trust earned him $700 million compared to the usual $50 million. His performance demonstrated the trust his employers had in him.
Among Krieger’s largest wins was his short-selling of the New Zealand dollar, a currency he considered vulnerable due to a worldwide financial asset panic.
Bill Lipschutz
Lipschutz is a well-known forex trader who worked in Salomon’s foreign exchange division. He joined this company in the 1980s when the forex markets were starting to boom.
He earned $300 million for the company in only a couple of years, making his success quick. By 1984, he became the company’s principal forex trader and would remain in that position until 1990 before leaving the company to become a portfolio manager at other firms.
FAQs
- Is forex high-risk?
Forex trades are usually limited to single-point percentages but these trades have a high risk. You need substantial capital to turn a significant profit in forex, so many traders rely on high leverage to help increase potential profit.
Still, leveraged positions can increase your losses exponentially, especially if you have no stop-loss orders. There is a significant risk to consider when trading forex.
- Can I trade forex with $100?
Depending on your broker, you can trade forex with little capital, even $100 or less. You can also use leverage to increase buying potential, but you must do so carefully to prevent or minimise large losses.
- Is automated forex trading profitable?
Automated trading is occasionally profitable as it focuses on technical analysis-based aspects of forex trading.
Many of these bots (automated computer programs) scalp the market, meaning they cash in on small profits and set wide stop-loss orders. This process can cause substantial losses for a trading account during a losing streak.
Another significant disadvantage of automated trading systems for forex is that some of these systems are scams. The people making consistent profits with these systems are those who develop such systems.
You may have better profitability in forex by learning tried and tested strategies and developing your skills over time instead of relying on these automated systems.
- How much do forex traders make?
As of April 2023, the average annual salary of a forex trader in London is £71,333 ($88,653). Also, their average additional cash compensation is £94,227 ($117,105).
- What time does the trading day start on the forex charts?
If you are in London, trading opens at 8:00 AM and closes at 4:00 PM in the United Kingdom. Meanwhile, New York’s forex market opens at 1:00 PM and closes at 10:00 PM, U.K. time.
Tokyo’s forex market is open from 12:00 AM to 9:00 AM, U.K. time, while Sydney’s market starts at 8:00 PM and closes at 5:00 AM, U.K. time.
- Is there a monthly fee for forex?
Many forex brokers do not impose monthly fees. Instead, they charge you a commission per trade. Some brokers charge an inactivity fee if you do not trade for some time.
- Who controls the forex market?
Because the forex market is decentralised, no central authority controls the market. Instead, the market comprises a network of banks and other financial institutions. This feature makes forex one of the most liquid and volatile financial markets worldwide.
- Is forex trading good for beginners?
If you are a beginner, forex can be a decent trading choice. Given the right knowledge, you can start earning from this market. You can make enough by implementing the right strategies and risk management practices.
- What is the difference between a live and demo trading account?
A demo account is similar to a live one. Both use the same trading platform, charting, and instruments. The only difference is that you use virtual money to trade in the demo account, while in the live account, you use real money.
- Can forex make me rich?
After you have enough experience trading forex, you can become rich even within a relatively short period, depending on your financial goals and trading style.
- Can I be a part-time forex trader?
You can definitely work as a forex trader for whatever time you want. You can work in forex as an occasional, part-time, or full-time trader.
- What are the potential profit margins when trading forex?
Suppose you gain a 2% profit on a $100 deposit. Your earnings are only $2 ($100 x 2% = $2). To increase your profit margin, consider other options when trading. One such option is to apply leverage to your position.
- Is forex a good way for me to make money?
Forex can be a good way to profit if you prefer to speculate on the price movements of your chosen currency pair to see if it will rise or fall in value.
- How much can you make with $1,000 in forex?
How much you can make with $1,000 will depend on how successful you are in predicting the market, whether or not you use leverage, and the number of pips generated over a specific period.
- How can I get 50 pips a day?
While there is no secret to earning 50 pips of profit each day, you can start by learning how to read forex pricing charts and understanding the importance of technical indicators.
References
- Leading forex currency pairs in April 2022, by share of daily average turnover
https://www.statista.com/statistics/1203453/most-traded-currency-pairs/
- Slippage: What It Means in Finance, With Examples
https://www.investopedia.com/terms/s/slippage.asp
- Can Forex Trading Make You Rich?
https://www.investopedia.com/articles/forex/073115/can-forex-trading-make-you-rich.asp
- What Is a Candlestick Pattern?
https://www.investopedia.com/articles/active-trading/092315/5-most-powerful-candlestick-patterns.asp
- Counterparty Risk
