The Forex market is the most liquid and largest financial market, where everyone comes to be a professional trader. To become a successful and professional trader, we need The Ultimate Guide To How To Make Money With Forex Trading. This piece of content will cover everything about the basics of forex and how you become a consistently profitable trader.
The forex markets or currency markets are like any other financial market. If you are familiar with stock market trading and have any experience in trading stocks, you would be able to learn everything about forex quickly. However, I will discuss here how to make money trading forex without any previous experience. All you need to do is go through this piece of article attentively.
Suppose you analyze the market and find that price will change soon in your direction. In that case, you decide to exchange any particular currency against another. Here you expect your buying currency’s value will rise. The currency you sold will fall, and this whole action is called forex trading.
|You buy 10,000 pounds at the GBP/USD exchange rate of 1.3000||+10,000||-13,000|
|Four days later, you exchange your 10,000 pounds into US dollar at the exchange rate of 1.3500||-10,000||+13,500|
Here in this example of GBP/USD, the exchange rate dictates how many US dollars can buy one British pound.
What are Forex Quotes, and how to read forex quotes?
In currency trading, as we buy one against another, so Currencies are quoted in pairs, not single. That’s why we see EUR/USD, CAD/JPY, GBP/AUD any many more in the forms of pairs.
When we see a price like GBP/USD current price is 1.3110, which is called the forex quote.
Details about Base Currency and Quote Currency in currency pairs
In forex trading, you buy one currency and sell another, which means you exchange one against another.
Check out the picture below carefully.
Here the currency comes first, and AUD is the base currency.
The second quoted currency here, USD, is the quote currency.
That means you have to spend 0.7260 us dollars to buy one Australian dollar or AUD
When you sell AUD/USD, then you will receive 0.7260 us dollars selling
1 Australian dollar.
Actually, the base currency speaks for how much of the quote currency must own one unit of the base currency.
One more example
Suppose you buy USD/cad. This means you are buying “USD” and selling “cad.”
The question is, when will you buy USD/CAD?
If you analyze the market and find that the base currency here is USD will appreciate against CAD, then you will buy USD/CAD.
If you conclude that the value of USD will fall or depreciate against the Canadian dollar or CAD, you will decide to sell USD/CAD.
What is Long in foreign exchange market
In the above example, I discuss USD/CAD .your fundamental, technical, sentimental; all analysis shows that the US dollar will be strong. On the contrary, the Canadian economy is fragile now, so that the Canadian dollar will be weak against the USD dollar.
So you plan to buy US dollars against the Canadian dollars.
Here you are basically longing USD dollars. You are here taking a long position on USD/cad pair.
What is short in the forex market
Similarly, if your analysis speaks for USD will depreciate the value near future against the Canadian dollar, you will plan to short USD/cad pair.
Here you are taking a short position or selling the base currency.
Look at the picture below. You will better
understand the whole concept of long and short.
What is Bid price?
For trading, you need a broker. Brokers buy foreign currencies from us. At what price do forex brokers buy the base currency from us that is called the bid price.
When they buy the base currency from us, then they give us the quote currency in return.
Suppose you plan to sell USD/JPY pair at the rate of 103.36
Then your broker will buy it from you at the best available price at that time. And this best available price is the bid price.
Sometimes we notice the bid price is different from broker to broker. This happens because different brokers make a profit at different levels.
What is the Ask price?
The ask price is the opposite of the bid price. When you plan to buy any pair, then you need to buy it from your broker. That means your broker sells it to you. Suppose you plan to buy USD/JPY. At what price your broker sells USD/JPY to you is the asking price.
What is Forex Spread
Spread is the difference between the Bid price and the asking price.
Suppose in today’s GBP/AUD quote bid price is 1.8104 and the ask price is 1.8128
If you want to buy pound or GBP, then you have to buy GBP at 1.8128
And if you want to sell GBP, then you have to sell it at 1.8104
So here spread will be 1.8128-1.8104=24 pips.
Find a reputable broker
As in forex market regulations matters so a successful trader should find a trusted broker with good regulations. As a forex trader, you should only open a trading account that is a member of the national futures association (NFA) and is registered from the Commodity Futures trading commission (CFTC)
Before opening an account, traders should do a deep down study about the broker’s bonus offerings, leverage, commissions, spreads, taxes, and withdrawal policies.
Customer service should be another criterion to choose a good broker. As if the customer service is not sound enough, then as a trader, you have to face many problems, so find a broker whose customer service is fantastic.
Use a demo account first
Almost all the brokers today offer a demo account to practice your trading knowledge and trading experience with them. So before starting a live account and investing in it, try to practice on a demo account for a couple of months if you get satisfied with your trading knowledge and are convinced with your brokers’ overall support then trade with the
Use a clean chart when making trading decisions
It doesn’t matter whether you use an mt4, mt5, or c trader platform account. All your trading platforms will allure you to take advantage of various fancy technical analysis tools. Although many professional traders use technical analysis tools like rsi, stochastic, moving average. But most of the time, you will end up losing your hard-earned money if you don’t know the proper use of them.
Protect your forex trading account
If you want to make money on forex, you have to learn how not to make a loss. The very basics of making money are to focus on protecting your account. If you can protect trading accounts, you can gradually make money. For mastering protecting trading accounts, you need to master proper money management systems. Your trading success depends much on how you follow forex money management.
Placing and exiting a trade is an easy task. Even a monkey can place a trade. If you have a personal computer and internet connection, then placing a trade is just one click away from you. But placing a trade doesn’t ensure your profit, but managing trade does. Newbies focus on how to place a trade properly, but experienced traders focus on managing trade properly.
Many veteran traders don’t bother when they make losses. Rather when making a loss, they simply accept the small loss and move on from that particular trade. Professional and experienced traders always place stop loss in their every trade as they know loss is a part of this game. They don’t wait to make further losses. But newcomers and losers love to stick in any losing position and wait until they blow their whole account for loving just one position.
Again it is also recommended to run your profit. When you profit, then run it until a reasonable price and then close the position to enjoy the profit. Protecting your profit is also a good approach to gradually heavy your trading account.
Start small when going live
When you prepare a rock-solid plan, practice in a demo account for a couple of months, gain fundamental, technical, sentimental trading knowledge properly, It’s time to go for trading with real money. But trading with real money is a tough task.
When you start a live account for the very first time, then always start with as much low balance as you can. I know some crucial factors will peep into your mind like human emotions.
The same systems that made you a huge profit in a demo account can fail to profit in reality. Your plan, your trading knowledge, your trading systems all fail miserably in real accounts. This is because your human emotions make a problem here. In real terms, your emotions could be the major enemy for you.
Here comes the trading experience. There is no alternative to trading experience in a real account. So if you invest all your money or a huge amount for the first time, then you don’t have any more to trade when you make losses. And if you stop trading, then you can’t gain experience. To gain real trading experience, you have to learn from your loss. The more you trade, the more you will learn, and for trading more, you will have to save your money for the next live trading account. Only if you start from a small account, then you can exist in this business in the long run.
Treat trading as a business
If you want to survive here in the forex market for the long run, you must take trading as a royal business. Don’t try to speculate here. Speculators don’t have proper knowledge; rather, they enter and exit the trade to make a short-term profit with changing price movements.
When you treat forex trading as a business, then individual win or loss is not a major matter. Rather you will focus on growing your trading account. At the end of the month, how much money is added to the account is the matter. You’re here and there jumping on the trade and trying to make a daily return. But remember, daily win or loss does not play a vital role in the forex market.
So don’t get overwhelmed and excited seeing your huge daily return, or don’t get disappointed making losses in two or three consecutive days. Bad days in trading are normal. This is normal in every business. As forex trading is no different, so bad days will also come here.
Don’t get panicked, rather stick to your trading plan, believe in your trading system, manage your trade properly, and finally, you will succeed here. If you treat the forex market like any other market and treat forex like any other business, then forex will also give you profit like any other business.
The Bottom Line
Benefits to use high leverage and 24 hours market make forex a lucrative profession worldwide. If you do your homework, gather knowledge on trading, find a trusted, well-regulated broker, you can also make a living in this market.
But for earning a vast amount of wealth, you need to treat it as a business.
If you treat forex as a business and go through this piece of “the ultimate guide of how to make money with forex” then the probability of reaching success will be extremely high.
So don’t challenge your potential by wishing to get rich quick in forex.