How to Start Forex Trading Online and Make Money
Are you interested in becoming a professional forex trader? Do you want to learn how to start forex trading as a beginner? Then below is an in-depth guide on how to make money online with forex trading; for beginners.
Though very risky especially for the less experienced, trading foreign exchange on the currency market (also called Forex trading) can be an interesting activity as well as great source of investment income. Currencies worth $5 trillion dollars are traded in the forex market per day. So, you can make a lot of money from the forex trading business without investing too much.
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If you are been looking to start a profitable business that you can run from the comfort of your home, then you should consider forex trading. One of the good sides of the business is that there are no formal requirements required to start trading forex.
Forex trading simply involves trading in currency. You buy a certain currency when its price drops and you quickly sell it once the price goes up. So, your aim is to make as much profit as possible from the fluctuations in the prices of currencies. Though the principle by which money is made is the same in forex trading, stock trading and commodities trading; both trading methods differ in the following major aspects:
- Stock trading involves buying and selling stocks, while forex trading involves buying and selling currency.
- The stock market is active for only certain hours of the day, but forex trading is done 24/7.
- Insiders and market makers can manipulate the stock market, but the forex market cannot be manipulated.
- Forex allows margin trading, which gives you the chance to buy thousands of dollars worth of a particular currency when all you have is less than $100. This is impossible in stock trading (point of correction, margin stock trading option is now being offered by some brokerage houses / banks).
With a little money, patience, a PC, and a reliable internet connection, you can become a forex trader. The ease of starting the business notwithstanding, you will need to know some things and follow certain steps, as forex trading is a very risky business. Here are the steps you should follow to become a forex trader.
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How to Start Forex Trading Online and Make money – For Beginners
1. Get the basic necessary knowledge
Forex trading is a little bit technical and it is quite difficult to learn on your own; though self learned video tutorials and courses are now available online. However I recommend you learn under the apprenticeship if an established forex trading expert. You should also attend seminars and read courses to further sharpen your skills.
It is also important you read books on business and economics as it will help broaden your insight; especially when trading forex with fundamental analysis. Some basic forex terminologies you need to know include the following:
- Base currency: The type of currency you’re spending or getting rid of. In other words, this is the currency you trade to purchase another type of currency.
- Quote currency: The currency that you’re purchasing with the base currency.
- Exchange rate: This tells you how much of the base currency you have to spend in order to purchase the quote currency (or vice versa).
- Long position: You take a long position when you want to buy the base currency and sell the quote currency.
- Short position: You take a short position when you want to buy the quote currency and sell the base currency.
- Bid price: This is the price at which your broker is willing to buy base currency in exchange for quote currency. The bid price is the best price at which you’re willing to sell your currency on the market.
- Ask price: This is also called the offer price. It is the price at which your broker will sell base currency in exchange for quote currency.
- Spread: This is the difference between the bid price and the ask price.
However, you must bear in mind that there are much more terminologies to learn than the few explained here. So, you will need to contact a forex trading expert, read books, or browse the internet for more information on the various terminologies used in forex trading. Examples of highly recommended books on forex trading include “Trade What You See” (by Larry Pesavento and Leslie Jouflas) and “The Secrets of Economic Indicators” (by Bernard Baumohl).
2. Get trading capital
You don’t need huge capital to start forex trading. This is because you can trade on margin, which means you can take buying decisions worth thousands of dollars with just $50 or even less. On the average, a forex broker needs about $300 to open an account and start trading.
It is highly recommended that you open your trading account with at least $1000. This will help you trade with a bit of a buffer in case of losses. But if you cannot afford this amount for a start, you can start with at least $300.
3. Choose a forex broker
A forex broker is the online platform through which you will access the forex market and do your trading. It is very important that you read the terms and conditions of any broker before you settle with them. This is because some brokers will offer certain options that will be helpful to some traders while being a disadvantage to other traders.
So, you should compare many brokers with respect to their terms and conditions, trading options, and user reviews, and choose the one that you think is most suitable for you. You may want to seek advice from a forex trading expert before choosing your broker.
4. Open a demo account
Once you have chosen a broker, it is time to open a demo account. This is a virtual account offered by the broker for a certain trial period (for example, 30 days), which gives you a feel of the broker’s trading platform and a chance to trade on the platform using play money.
Using a demo account helps you become familiar with the broker’s trading platform and tools. It will also prepare you for trading in the real market. So, don’t trade real money without having tested the broker’s trading platform with a demo account for at least 90days.
5. Practice well
Most online forex brokerage companies will allow you to create a free practice or demo account. This is a simulation of the real forex market that allows you to train with virtual money before you start trading with real money.
Forex trading is not the type that you will learn on the go. You have to train extensively to know when to make the right buying and selling decisions. As a recommendation, you should spend several weeks training with a free account until you can make profits consistently and have reduced your rates of losing to the barest minimum. To find free forex demo account, you can search the web.
Since the demo account is just like what you will have in the real market, you should take your time to do enough practice. Try to implement the various expert trading tips and tricks you have learned to see which works best. And try to develop your own trading style and ideas.
Master how to read charts and other indicators, and master which decision to take at what time. It can also be helpful to seek additional guidance from online resources as well as forex trading experts, as this will help you in the early days when forex trading could be very daunting.
6. Go Live
Set up a live forex trading account with a reputable forex broker after you have trained enough and built confidence with a demo account. Better yet, simply convert your demo account to a live account by depositing money as per the site’s instructions.
Most brokers offer mini and micro accounts, which means you can start trading forex with as little as $500. This amount will be leveraged into multiplied profits. Keep a note of the strategies that are fetching you huge profits as well as those that are not working for you. The secret to increased profits is to keep repeating what works (until it works no more) and to ditch what brings poor results.
Entering into the real forex market is usually a nervous and exciting experience. Granted, the demo account can prepare you for the technical aspects of forex trading, but when real money is involved, your emotions will come into play.
You will need to maintain self-discipline and do your best to stick with the same methods that worked for you while you were practicing with the demo account. Ignoring your emotions may be very difficult, but it’s possible. If you lose money after your first trade, do not give up. Rather, try to figure out what went wrong, fix it, and try again.
In conclusion, you must understand that forex trading is a constant learning experience. Trading mistakes can incur losses; huge ones at times. Even veteran forex traders lose money on occasions. But you will become a successful forex trader only if you learn from your mistakes and strive to avoid them in the future.
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