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How to Make Money from Forex Trading

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  • How to Make Money from Forex Trading

    For anyone not familiar with the forex market, the concept of selling money for a profit may be a difficult one to grasp.

    But truth be told, the foreign exchange market is one of the simplest to understand its basics, though it can get very complex as you advance in your forex trading education and training.

    In most markets, traders buy (or produce) a product or service and sell it at a selling price that is higher than the trader’s buying price or production costs.

    That means that for most traders in every market to be profitable, they have to buy at low cost and sell at a high price.

    In a simple equation, this goes like this:

    Profits = Selling Price – (Buying Price + Costs)

    The forex market works on this very same principle to enrich forex traders.

    However, to achieve profits in the forex market, you do not have to only rely on buying low and selling high. You can also start by selling high then buying back at a lower price.


    Buying and Selling Money

    The most traded currency in the world is the American Dollar (USD) so it will form the basis for most examples in this article.

    Let’s say you have just arrived in Europe and you need €1,000 to cover your cab, hotel, and meals expenses for the few days you will be there.

    You go to a forex bureau and they tell you that one of your American dollars will get you €0.75. So to get €1,000, you give them $1,333.33.

    After your stay there and after a few such transactions minus your expenses, you find yourself remaining with €1000 once more.

    At the exchange counter, they tell you the rate is now $1 = € 0.78. So in exchange for your €1000, they give you US $1,282.05. In effect, you have just made a $51.28 loss.

    That is a simple illustration of how you sell and buy money. If you are a forex trader, your role is to take advantage of the fluctuations in exchange rates and profit from them.

    If the traveler in our example was a forex trader, s/he would have bought his euros at a lower price than s/he sold them.






    Forex Market Analysis

    Following our example above, you are probably wondering why the exchange rate shifted from $1 = €0.75 to $1 = €0.78 within that period.

    Like all other markets, the prices of currencies are influenced by market forces of demand and supply.

    The increase in the price of the euro in relation to the dollar in our example could have been a result of the following market fundamentals:

    An increase in the demand for the euro
    A decrease in the supply of the euro
    A decrease in the demand for the dollar
    An increase in the supply of the dollar
    A trader has to study the market and identify factors that may lead to these market forces happening.

    This will help him accurately predict future prices and use that prediction to either buy or sell currency in anticipation of making profits later.

    There are three types of forex market analysis: Fundamental analysis, technical analysis, and sentiment analysis.

    · Fundamental Analysis

    In fundamental analysis, a trader will analyze economic, trade, and political activities that may affect the price of a currency in relation to another.

    For instance, if there is an increase in the imports the US gets from Europe, there will be a higher demand for the Euro and this will lead to a higher currency price for the euro in relation to the dollar.

    Click here to read more on fundamental analysis.

    · Technical Analysis

    The forex market is a highly volatile and liquid market where currency prices change each and every second, 24 hours a day.

    Technical analysis involves predicting these price changes as they happen. A sustained price change in a particular direction becomes a price trend and following this trend is what gives most forex traders their profits.

    Click here to read more on technical analysis.

    · Sentiment Analysis

    There are times when many traders share a feeling for the future performance of one currency in relation to another.

    This shared feeling is referred to market sentiment. Sentiment analysis involves the study of the prevailing market sentiment and using that to predict future currency prices.

    Click here to read more on sentiment analysis.

    Currency Pairs

    When trading currencies, you use one currency to buy another currency. In our illustration, our traveler first used dollars to buy euros then later used euros to purchase dollars.

    This combination of two currencies traded against each other is referred to as a currency pair.

    As said before, the US dollar is the most traded currency in the world. There are 8 most traded currencies in the world and they are referred to as the currency majors.

    They are the American Dollar (USD), the British Pound (GBP), the European Euro (EUR), the Japanese Yen (JPY), the Swiss Franc (CHF), the Canadian Dollar (CAD), the Australian Dollar (AUD), and a recent addition to the Majors the South African Rand (ZAR).

    The currency pair majors are the EUR/USD, USD.JPY, GBP/USD, AUD/USD, USD/CHF, USD/CAD, and USD/ZAR.

    You can trade any currency of your choice against another. However, the majors offer the highest liquidity and offer the most profitability. Moreover, many brokers only offer the currency pair majors for trading.

    Spreads

    Earlier in the article we spoke of the buying price, the selling price, and the cost. The costs incurred by forex traders are known as spreads.

    A forex broker buys currency at a particular price, say EUR/USD = 1.3020.

    The broker will offer to buy from traders at EUR/USD = 1.3018 and sell to them at EUR/USD = 1.3022. These are referred to as the bid price and ask price respectively.

    The cost of buying and selling currency from a broker is referred to as the spread and is the difference between the bid price and the ask price.

  • #2
    I don’t know what other believe or feel about it, but for me, it’s through proper plans and steady approach that will help us gain maximum, if we are able to work through plans and proper way then we will always be able to gain huge rewards, but without that we will have hard time with things. I go with OctaFX broker where I get ideal conditions which help a lot with trading especially to do with their small spread from 0.1 pips to high leverage up to 1.500 plus much more, it’s all picture perfect.

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    • #3
      If you're a newbie to forex, I'd recommend you to start trading with some no deposit bonus. For example, FreshForex broker is offering $1000 no deposit bonus at the moment.

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      • #4
        You got to two choices to make; it’s whether to go ahead and get the skill level high required. Next way is slightly easier and that’s through SCB. Now, I am sure some people might consider that some sort of bank, but that’s not really what it is. The best way to know about it is from Review of Snapcash Binary. Although, I have already written the form of the words, but still the actually thing can be found be reading review and apply like I did not just to make some money but to make tons of them!

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        • #5
          I think we can make good money just be keeping everything straight forward, It’s not possible for anyone to make money without hard work or putting proper effort. So, it’s vital that we put enough into there and make sure we don’t try anything over the board. I keep it relatively simpler and that’s do able with OctaFX broker using their low spreads from 0.1 pips to high leverage up to 1.500 while there is also lovely cash back where I get 50% back on all trades.

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                • #9
                  Making money form Forex trading is not the hardest thing, but we just need to have proper plan and learn to execute them accurately and then will become easier. I am trading with OctaFX broker where I get excellent support and guidance which comes with steady conditions including controlled spread and all such conditions, so that way I can trade with freedom and allows me to trade very well and even if there is any problem, I can always contact their 24/5 active support service.

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                  • #10
                    The first step always should be activating of no deposit bonus money. For instance, you can use hot $2017 no deposit bonus offered by FreshForex broker for that purpose.

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                    • #11
                      We don’t need to do anything over the top to make profits, it’s all fairly simple things that’s required to be done with using of common sense, if we are doing that then we should be least worried about making money, as it is going to come! I always use proper strategy with strong money management; it’s the deal that is absolutely perfect. I have been helped well with Trade12, as they are the leading broker in the industry and have excellent structure with client-friendly services having low spreads, high leverages and smooth trading platform, it’s all what I need to generate profits consistently!

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                            • #15
                              I believe the best way to make good money and also to keep it going consistently, it’s through proper strategy and connect it with tight money management, if we do that then we put our self into great opportunity to make money. I find it incredibly easy through OctaFX broker with their superb conditions, it include low spreads from 0.1 pips for all major pairs while there is also rebate scheme where I get 50% back on all trades which is even with the losing one.

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