Making money in Forex trading sounds easy relatively. Buy at low price and at a high price, sell at high price is the easy way of making money. However, approximately 96 percent of traders end up quitting in trade by losing money altogether. Conversely, according to other sources, the percentage of winning transactions is more remarkable than losing, but often the losses may be more significant than the gains. That means vice versa continues to occur in trading, sometimes a trader may win, and sometimes he may lose.
So, a general saying is that money-making in Forex trading is not so easy; instead, it is complicated. It involves the combination of the following factors:
- Patience: A trader needs to be careful and patient to learn and to earn.
- Understanding Forex: A trader must need to know the Forex market’s ins and outs.
- Risk Management Understanding: If a trader becomes part of failed 96 percent, he will fail to make money.
- Strategy Making Ability: If a trader wants to be profitable, he must need a solid plan.
Forex trading might be inappropriate for a trader if he lacks any of the above factors. If he doesn’t feel about investing time in the above aspect, he should stay away from this trading. A course in foreign exchange is the best way through which a trader can learn all the above.
For an absolute newbie, knowing nothing about the Forex or the mutual funds is not surprising at all, and in that case, he should start to learn from the beginning. Two country’s currencies exchange rate is called a currency pair. For example, at present, the EUR (Euro) and USD (United States Dollar) exchange rates are 1.1252, and they would present as EUR/USD. It means that one could purchase 1.1252 USD for one Euro. However, this is not a fixed rate; instead, they are constantly changing.
In most cases, the ups and downs occur in the last two-digit. The trader termed this fluctuation as price liquidity. Traders wait for the low currency price to buy and sell it at a higher price. That is the basics of foreign exchange trading.
Minimum capital requirements
For many investors, a good choice is foreign exchange trading because it requires small capital compared to other investments. The reason for this less capital requirement is the broken down of currencies. Most currencies broke down at the fourth decimal, and it’s called pip. And other financial instruments cannot break down in such tiny figures.
Even if you aimed to trade other financial instruments or stocks, a good starting place for you is Forex. It will help you understand the trading fundamentals, and potentially, you will gain some capital.
Technically, you will require enough money to open an account for trading and depending on various brokers; the money amount can be different. Some brokers do not ask for a minimum deposit, while some require nearly £500 or more.
A good trick to reduce loss is that whatever the amount of your opening account, always risk only 1 percent of your balance on any trade. Keep in mind that at the beginning, learning to trade is more important than making money. If you lose from your transaction, investigate the issue for which the loss happened and be sure that you will not make the same mistake in the future.
How Much Money Can a Trader Make?
In foreign exchange, probably a trader can make more money than his savings account does, and it’s a guarantee! Look, overnight, a trader will not be able to be a millionaire. Unfortunately, this is a fact, and all traders in the FX market need to accept this fact.
But over an extended period, you will be able to make a profit, and surprisingly you will find that your account balance is growing exponentially. But this profit-making may take time, perhaps a month, half-year, or a year.