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Published On: Tue, Dec 4th, 2018

Can You Make Money Trading Forex?

Everyone loves a ‘get rich quick’ scheme. The idea that you can earn a huge sum of money for almost zero effort is enormously attractive. Unfortunately, most schemes are a combination of smoke and mirrors and if it sounds too good to be true, it most likely is.

Forex trading is a strategy that sounds fantastic on paper. With one carefully placed trade, you can potentially make a lot of money. At least in theory. But how about in practice? Let’s find out.

photo/ Gerd Altmann

What is Forex Trading?

Forex traders buy and sell currency. They work with currency pairs, buying one currency in a pair and then selling it at a higher exchange rate to make a profit. All currencies are traded in pairs, so you need to pick a pair you are comfortable trading. Two of the most popular include GBP/USD and EUR/USD. It is best to stick with a currency you are familiar with, as it makes it easier to predict which way the markets will move.

Learning the Ropes

All successful forex traders need a solid combination of knowledge, experience, and the right psychological makeup.

Forex trading is not something you can do successfully without learning how it works. The good news is this isn’t all that difficult. There is a ton of information available online, or you could sign up for a forex course. But learning the technical theory behind forex is only half the battle. What it really comes down to is gaining hands-on experience. And to do this, you need to make trades.

To get started with forex trading, open a demo account with a reputable broker. Most well-known online brokers offer demo accounts. This gives you a risk-free opportunity to test your online forex trading skills in the world’s financial markets. Working with a demo account will give you plenty of useful experience.

As you get used to the different tools available with your trading account, you can accumulate experience and formulate a trading strategy. All successful forex traders have trading strategies. It’s their blueprint for making money. It is very important that you stick with a trading plan, or you won’t know what works and what doesn’t.

Are You Equipped for Forex Trading?

Knowledge and experience will only get you so far. Your personality type will also dictate how successful you are. Impulsive risk takers are far more likely to lose big sums of money compared to cool-headed, risk-averse types. It is very important that you stay disciplined. Working with a demo account will give you confidence in your ability to make money trading forex, but once you start trading with real money, you need to stay calm and stick to your plan.

Use stop losses and exit your positions once you reach your limit, even if you think you can still make more money. Leveraged forex trading is risky, so if you are not careful, you could lose a lot more than your original stake. Don’t be that person.

Start small and take your time learning how forex trading works. Slow and steady always wins the race.

Author: Madhusree Das

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