The possibility of earning through
Forex trading is attracting more and more interest from savers and investors due to the interesting
business opportunities, but above all for the IT tools made available that allow you to act in total autonomy.
The attention is mainly focused on the stock market which allows you to act on a wide range of offers of any kind, but Forex trading follows rules that allow you to limit risks and maximize profits.
And so, this question arises spontaneously: "
Is it really possible to earn with Forex Trading?" Let's find out in this dedicated guide.
What is Forex Trading?
The
Foreign Exchange, from whose abbreviation the acronym
Forex is obtained, is active 24 hours a day, 5 days a week.
It is one of the richest markets, therefore potentially very profitable, which differs from others by the fact that operations are not carried out on the stock exchange, but are negotiated directly with the parties involved.
Forex Trading is nothing more than the buying and selling of currencies.
Central banks, companies, institutional investors, small savers and traders trade on Forex to meet different needs, including: investment, market stabilization, international trade or simply to speculate and generate a profit from the difference between the purchase and sale price.
Forex Trading: how currency pairs work
Transactions on Forex always involve the buying and selling of currencies, or "currency pairs" such as EUR/USD, EUR/CHF, EUR/AUD, etc. etc.
The currency on the right is the
secondary currency or
counter currency, while the one on the left is the
main currency or base currency.
In the examples mentioned above, the euro (EUR) is bought or sold obtaining in exchange a certain quantity of secondary currency, US dollar, Swiss franc, Australian dollar, etc., depending on the applicable exchange rate.
On Forex, quotations can be viewed expressed with two reference rates, e.g. EUR/USD 1.1457/1.1459.
The price on the left is indicated as the
"bid" price: this is the price at which a trader is willing to buy a currency pair.
The one on the right, on the other hand, is referred to as the
"ask" price, the price at which a trader is willing to sell a currency pair.
The
spread is nothing more than the difference between the bid price and the ask price: it represents the cost of the trading operation. In the example above, this differential is equal to 0.0002 or 2 pips (
percentage in point).
Forex contracts: what types can be subscribed?
The types of contracts relating to Forex trading operations can be ascribed to the following:
- Forward contracts which provide for a Forex contract in which a certain price is subscribed at which a currency is exchanged. This type of contract can be without expiration or have a deadline,
- Spot contracts executed "on the spot" through which the parties agree to buy and sell currency at the current market price,
- Future contracts which are binding for the parties and are required to fulfill the exchange contract by the expiration date.
Forex Trading Broker: how to choose it?
Traders who want to start understanding the potential and functioning of the Forex market can sign up for
Online Trading Platforms.
To choose the best Broker, you need to initially verify the
seriousness of the Broker.
Furthermore, it is good to assess whether the Broker gives the possibility to open a
Demo Account and if it provides a session dedicated to continuous training (webinars, seminars, video lessons, etc.).
Before actually investing money, it is always a good idea to check if the Broker is provided with regulations and read the
Reviews.
Another important element that affects the choice is that of the basic investment rules and deposit. There are traders who ask for a minimum initial investment and a payment of a sum as a guarantee of payment for operations.
Forex Trading: how to start making money?
Once the Broker has been chosen, all that remains is to concentrate on understanding how to obtain the hoped-for earnings.
The system to
generate profits is simple to explain, in fact, it is a matter of buying and selling foreign currency so that the difference between the purchase price and the sale price generates a plus for your finances.
If today you buy 114.00 dollars, you spend 100.00 euros as the ratio between the two currencies is 1.14.
Tomorrow maybe the scenario changes, leading the USA to enjoy greater trust and greater economic stability.
If the ratio between the two currencies is 1.00, you can sell the 114.00 dollars against a payment of 114.00 euros.
At the end of these operations, you can take stock and easily understand that you have spent 100.00 to then collect 114.00 with a profit of 14.00 euros equal to 14% of the invested capital, an
excellent margin.
Oscillations of this kind are not very frequent and are linked more than anything else to major world-resonating events.
For this reason, it is of fundamental importance to pay attention to
macroeconomic or
geopolitical news that can undermine or strengthen investor confidence towards a particular country.
The most widespread information can be found on traditional information sites, but it is better to turn to specialized newspapers and understand their language.
It all depends on how much you want to earn and what level of security you want to achieve before investing your money.
The tools made available by the professional sites of the main brokers allow you to set different parameters both to secure your capital and to operate without the trader's presence being necessary.
Forex Trading: setting a budget limit and sale limit
For example, you can set a
budget limit by automatically selling the purchased currencies before they risk causing losses.
Another example is the
sale limit, you can set the system so that it warns when a price has decreased to a limit below which you no longer wish to sell.
These are just some of the tools made available by brokers to allow everyone to operate with Forex Trading in full freedom.
The trader must approach this world with the awareness of having to learn to act and understand the markets, above all, it is important to carefully evaluate how much capital you decide to invest based on your spending capabilities.
It is good to remember that it is still an operation that can lead to both benefits and losses and that, therefore, you must be very cautious until you have become familiar with the market. At that point,
earning will be possible!
