So is it really possible to make money on the Forex market ? The answer is positive. Although it is not easy to be a successful Forex trader, people from all walks of life do it every day. With the necessary resources and an understanding of the risks, Forex trading can be a profitable enterprise.
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Providing the right resources
Perhaps the most important thing that successful forex traders do is to secure the necessary resources from hasty entry into the market. The desire and predisposition of this is simply not enough to get a stable profit.
Let’s look at three prerequisites for potentially profitable Forex trading.
CAPITAL
No matter what type of investor you are, you will need a certain amount of capital to buy and sell currency on the Forex market. Although accounts can be opened for as little as £300, it is crucial that your balance is large enough to support the needs of your strategy.
If capital expenditures are too small, difficult market conditions become a challenge. According to forex brokers, accounts with balances of more than $ 2,500 can boast twice the profitability compared to accounts below this deposit amount.
Time
It takes time to achieve your financial goals. In addition to an active trading session, you need to spend hours preparing, building your strategy and evaluating your results. Despite the fact that there are alternative solutions such as automation and black box systems, even manual Forex trading takes a lot of time.
MARKET ACCESS
There are many different components of Forex trading that need to be optimized in order to enter and exit the market with maximum efficiency. To ensure high-quality access to the market, high-quality brokerage services, low-latency trading software and a reliable Internet connection are needed. In the absence of these inputs, the price of slippage or an unusually large spread between the buy and sell price can significantly reduce your potential profit.
For real Forex professionals, success largely depends on compliance with the above three factors. Without enough money, access with little delay or at the right time, making a living on Forex can be a huge challenge.
However, it is still possible to profit from currency trading without making a career. Many people prefer to work part-time in the market to try to earn some extra money. As long as the lowered expectations are fully satisfied with a comprehensive trading plan, replenishing your income through Forex trading may be possible.
Understanding the risks in the Forex market
The main rule of profitable Forex trading is to always respect and take into account risk. Being on top of your risk exposure is an elementary part of not becoming overly greedy and prematurely zeroing out your trading account.
Profit in the Forex market requires time, effort and capital; if large payouts are often made, the trader’s career becomes shorter. To illustrate this point, a 2014 Citigroup study reported on the length of time that profitable Forex traders typically continue to trade.
Investors who were constantly earning kept their positions open for 2-3 hours compared to 3-5 minutes for ordinary retail market participants.
Although the study covers short periods of time, it shows that profitable investors settle risks before entering the market. After that, they can allow winning trades and losing trades to continue according to their strategy.
So is getting a stable profit just a matter of staying in the market for a long period of time?
Not quite. Maintaining profitability depends on successfully understanding what your currency risks are and how to balance them with potential benefits. Understanding how the following three elements fundamentally affect currency risk is a key part of sound risk management:
LEVERAGE
The availability of leverage is one of the components of Forex trading, which attracts a wide range of participants. The ability to use more than 100/1 gives investors the opportunity to turn small amounts of capital into much larger profits. The relationship between leverage and risk is simple — the larger the position size, the higher the risk. Leverage can significantly increase your profit. It can also significantly increase your losses.
VARIATION
Another trump card in Forex trading is the internal volatility of the prices of currency pairs. In fact, volatility in the Forex market is fluctuations in exchange rates for a given currency pair over a certain period of time. When the rates become volatile, the risk profile of the currency pair increases. Although volatility is seen by many as a factor that increases opportunities, it can also include sudden losses of funds from your account.
Keep track of your income and expenses using the profit calculator.
Global currency markets are a dynamic atmosphere that can quickly change direction. As a result, the value of your open positions can fluctuate rapidly, which makes it necessary to keep at the level of unrealized gains and losses. Thus, such negative consequences as premature liquidation of positions, margin requirements and extraordinary losses can be avoided.
A great way to keep track of an income statement is to use a profit calculator. The profit calculator automatically compensates for profits and losses according to a number of user parameters. After entering the account currency, currency pair, opening/closing prices and applied leverage, the profit and loss account is calculated. This information can then be used to determine the entry/exit points of the market and determine whether the transaction deserves execution.
Resume
Although it is true that only about 30% of Forex traders earn money, people are still attracted to the market to achieve their financial goals. The difference between investors who make a profit and those who do not make a profit is multifaceted. Even in this case, successful Forex traders have the necessary resources and understanding of risk. Without these resources, it can be difficult to find the consistency needed to generate potential benefits in the long run.
It is important to understand that Forex trading is far from “getting rich quick”. Earning money on the Forex market is a serious matter that requires you to be informed, highly competitive and impartial in the face of adversity. If these functions are present, then Forex is a real path to financial goals.