Can one make money through Forex trading? This is the question you should be asking yourself before you even consider this venture.
What is Forex
Forex is short for foreign exchange.
The Forex market is the largest and most liquid financial market in the whole wide world. No other market comes even close to it, even the stock market in the US or Europe. Essentially, the Forex market is the market of the world, which obviously no one country can compare to it.
So just let that sink in for a while. The average trading volume of the Forex market is in the $5+ trillions of dollars as compared to other markets where it’s only in the single to double digit of millions of dollars. So if we ask ourselves, “can I make money through Forex trading?”, the definite answer is YES, potentially.
One very distinct and unique feature of this market is:
- There is no one exchange where all the transactions happen, meaning it is decentralized.
- Instead, the transactions happens electronically over-the-counter (OTC) between traders all over the world.
So you can imagine the vast opportunity to make money through Forex trading. Am I beginning to pique your interest?
Read on and essentially I’ve got a surprise free gift for you especially if you’re a newbie or even an experienced trader. I am sure you would find it definitely very useful.
Why is it the largest market
There are numerous reasons why the Forex market is so huge. Let me give you a couple of examples, and the first one relating to my personal life.
I live in Vancouver, Canada which is just a few kilometers north of Seattle in the United States. I usually drive down to our US neighbor just to relax and most of the time eat out.
You’re probably thinking, if I’m only after eating out I don’t really have to travel too far as there are plenty of good places here in Vancouver to eat out. That indeed is very true, however, there are also a lot of other restaurants, diners, fast food chains that can only be found in our neighboring country. Also, I have an adventurous appetite that kicks in every now and then, so I look for exciting and interesting food to indulge my taste buds.
- So whenever I go down to cross the border, obviously the local currency changes from Canadian dollars to US dollars. I usually prefer bringing some US cash with me whenever I go down so I would either stop by some bank or currency exchange and buy or exchange some USD with my CAD cash. That right there is exchange in foreign currency. I just participated in the Forex market plain and simple.
- Second example is related to companies or businesses. Let’s say for example a clothing manufacturer in the United States wishes to import wool from Australia, who is by the way the largest wool producers across the globe (just a trivia). The US clothing manufacturer will then have to pay their Australian supplier in their local currency, which is Australian Dollars (AUD). This means that the manufacturer will have to exchange the equivalent value in US dollars into Australian dollars in order to make the purchase. There again happens the exchange of foreign currency.
As you can imagine by now, there’s so much relevance and importance the Forex market has whether from an individual or a business and even from a nation or government standpoint. This is why by far it is the largest.
How to trade Forex
Depending on one’s experience in trading this is pretty straight forward. There are basically two sides of a trade.
- one is buying
- the other one is selling
In any market, whether stocks, options, futures, and for our focus on this article, the Forex market, these are always the two ways to take a position in any security or instrument of trading. In simple terms Forex trading is just similar to any other forms of trading. It’s a simple buy and sell transaction.
Programmed to buy
Now let me just mention, most of us have been programmed by our culture, our society and even by our upbringing by our families or from school. We have been taught that the way to invest is by buying and holding onto whatever security we are interested in. This buy-and-hold strategy is no longer an excellent strategy.
Just as most people tend to be on the buying or consuming side of various merchandise or products, so in trading most are comfortable just buying securities.
Various phases of the markets
All markets go through different phases all the time. Phases are determined by their trend.
The different trends of the market are as follows:
- It could be that the market that we are following is going on an uptrend, which is the first phase and usually the one that most people are familiar with. This is when we try to buy low then sell high making a profit of the difference. But again, just to reiterate, the intention is to sell it when the market moves higher and not just hold on to the instrument forever, because eventually the trend will change and enter into a different phase.
- The second phase is known as consolidation, which basically means that the market is neither going up nor down. It is just going sideways. So during this phase it is very difficult to take a position on the market because it really is no where. One feasible strategy that we can use during a consolidation phase is that we can try to scalp, or scalping. A scalper is a person who try to take advantage of fairly small moves. However, in order to get a decent profit, they tend to increase their position size.
- The third phase that a market goes through is the downtrend. This is when the strategy is to sell high then buy low once the market moves further down. Yes you read that right, sell high first then buy low next. The strategy is also known as short selling. This is not a fairly common strategy, especially to a newbie trader. I myself was not familiar with this the first time I got involved trading in the markets. But this is a fairly common trading strategy being used by professional traders and the “big boys” or those big corporations that are also participating in trading the market. It is also important to mention, not all markets across the globe allows traders to short sell. However, this is not the case for the Forex market. Short selling is very much allowed in trading Forex.
Can I really make money through Forex trading
The simplest and shortest answer to this is a resounding “yes”.
As mentioned in the previous section, we can make money two ways.
- First is we buy low then sell high, which is also known as “going long”.
- And the second is we sell high then buy low, which is also known as “short selling” or “shorting” or “going short”.
However, this is easier said than done.
If you are a newbie in trading, your odds of success is “extremely” against your favor. I would highly recommend getting some education first in trading. There are numerous professional traders out there who are more than willing to teach, coach and mentor any willing and interested student.
Remember the “big boys” that I mentioned earlier? These are BIG multinational corporations that are participating in trading the market or Forex who has extremely good financial analysts and experienced market traders that you will be competing against. They also have millions of dollars to play with so they can take a bigger risk appetite.
So if you are going to trade the market with very little understanding of what is going on, then you will get “massacred” so to speak.
But fear not there is still hope. In my own personal experience in trading, getting an education and training and essentially gaining some experience will help you become better and a profitable trader. Consistency, discipline and gaining a better understanding of price action and the market are keys to becoming better.
Check out my blog post on Forex trading for beginners for more insights into trading.
Also, I have not forgotten my surprise free gift for you. My free gift for you will definitely be useful to help you become a better trader.
Be careful of scammers
Now a word of caution as you sought for teachers, coaches and mentors that will help you become a better trader. Unfortunately, the Internet is full of scammers that will rip you off. They prey on people who wants to learn to trade Forex and make an extra income.
A lot of scammers are luring people using enticing words. They try to convince you to buy their course or service but the content or the course that they teach is not really worth it. The strategy that they teach doesn’t really make sense or doesn’t really work. They are just taking advantage of people’s desire to make money through Forex trading.
There is no “holy grail” in trading. It is basically getting the right education and training for yourself and gaining some experience. I suggest that you open a test or dummy account wherein you can try to execute some trades with “paper” money (not real money) and test your strategies.
There is also no one strategy that is perfect. You have to find the strategy that best suits your personality and/or style of trading, which you will eventually find out as you progress through your education and experience.
6 steps to become successful in Forex trading
There are certain things you can do to ensure that you become successful trading Forex.
- Educate yourself. I can’t emphasize this enough. Your understanding of chart patterns, various indicators, market sentiments and price action is very important. You can begin reading books about trading. Follow legit professional traders or someone you trusts who trades consistently profitable.
- Identify the strategies you will be utilizing. There are hundreds of strategies that you can learn. I suggest focus on one or two at the beginning. Then as you gain more experience you can add to your arsenal later on. But during your initial stages, make sure you master your strategy inside out.
- Backtest. This is essentially fool-proofing your strategy. Analyze historical charts and study if and how successful your chosen strategy will be. Likely you will find some elements or criteria that you’ll need to adjust or brush up to ensure higher chances of success.
- Paper trade. Once you’ve confirmed that you have a solid strategy, open up a paper account and start paper trading. You’re basically testing your ability to apply all that you’ve learned and also train your eyes and your mind to identify where the opportunity for your strategy would eventually play out. It’s easy to do backtesting because you’re already looking into the finished picture. It is a different story when the actual trade is unfolding. So practice, practice and practice. Give yourself three to six months paper trading before doing the real trade with real money.
- Journal your trades. This is still part of the learning process. Taking down notes and details of your trade, you can analyze further where you did good or where you made a mistake. Review your journal at the end of each month.
- Treat your trading as a business. By this I mean be serious about your trading. Take the time to invest in your education and your learning. Brush up on your skills. Think about it, if you own a business would you hire yourself given your current skills? As an employee, don’t we want to impress our bosses and do a really good job. Don’t we want to contribute to the success of the business or the company we work for. In the same manner, treating your trading as a business requires you to give your very best. Especially this time because you are your own boss.
I know I’m not really teaching you here on how to trade or any strategies to trade with. But these steps are very crucial to get you to your path to success. There’s no shortcut. This is not a get-rich-quick type of scheme.
Learn with me
One other thing that I’m looking forward to doing in the future is to build my own course based from my experience. It is in our best interest to have a community of traders that helps each other out. Just as the saying goes “iron sharpens iron”, so I would like to build a community of traders. It doesn’t matter if you’re a newbie, you’re welcome to join me. Subscribe to my mailing list and I will keep you posted once I get my course up and running.
In the meantime, here’s a good book that I have read myself that have helped me put my trading in the right perspective. Grab it, read it and understand it thoroughly. It can greatly help you as you start your journey in Forex trading.
Tip: You can actually subscribe to Amazon’s Kindle Unlimited for a 30-day free trial and get to read this as an ebook.
Surprise free gift
And finally as promised, I am giving you a surprise free gift. I guess I can no longer say it’s a surprise since I’ve been talking about it from the beginning. I will send you a free PDF guide that will help boost your success in Forex trading. Subscribe to my mailing list below to get the free guide.
Do not worry, I will not spam you with emails nor will I share your information to others in any way, shape or form.
I hope this has been informative for you and thank you for reading.
Feel free to ask questions or comment your feedback below.
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