Forex trading is buying and selling currencies in hopes of making profits over a given period of time. Although it is possible to make a profit as a beginner, you are much more likely to learn faster if you have an experienced mentor as your guide. An experienced mentor can coach you on what trading strategies to employ and how to grow as a trader.
FOREX TRADING FOR BEGINNERS
What is Forex Trading and How Does It Work?
Forex trading is short for Foreign Exchange trading. When you convert your currency into a differing currency, you are engaging in Forex Trading. In that way, if you have ever visited a foreign country then you have engaged in Forex Trading. The only question is when you returned from your vacation did you lose or make money on the Forex market?
How Much Money Do You Need to Start Forex Trading?
To trade on the stock market, you need $25,000 and while that may seem like an obstacle, it also helps traders make more money per trade if they are successful. The amount of money needed to Forex Trade theoretically is any amount. However, as with almost all forms of trading the more money you start with the easier it is to generate more returns. One general rule that several traders abide by, is not risking more than 1% of their entire account on any trade. Even with an account balance of $1000, you would be trading $10 or less per trade.
PROFITABILITY OF FOREX TRADING
Which Currency Pair is the Most Profitable?
The most profitable currency pair to trade is dependent on your own trading philosophy. Let’s take a look at the most popular currency pairs and compare the pros and cons.
USD/EUR: Dollars to Euros is a currency pair that is the least volatile because it is the most popular. If you are a trader that trades best when there is not a lot of risks, then this USD/EUR currency pair may be the best for you.
USD/JPY: This currency pair is also extremely popular and could be very profitable with the right strategy. It arguably has smooth trends and is afforded a smaller spread. However, it is considered more volatile than the USD/EUR currency pair, which can lead to higher returns but also higher risk.
USD/GBP: This currency pair is for the riskier traders who still want a relatively popular currency pair. This currency pair is no stranger to large jumps and large dips depending on the Forex market. USD/GBP is considered to be a volatile currency pair. However, due to its popularity most vigilant traders able to make educated decisions and beat the market by staying up-to-date with the latest news and trends.
How Much Do Forex Traders Make Per Day?
Asking how much a Forex Trader makes per day would be similar to asking how much a poker player makes per day. The answer varies based on a lot of factors.
Capital: Traders who start with a larger amount of capital are able to leverage that capital and generate more profits. If you are able to generate 15% yearly through your Forex trading, with a $1000 account, you’re looking at an average of $150 per year. On a $100,000 account, you’re looking at an average of $15,000 per year. On a $1 million account, you’re looking at an average of $150,000 per year. As the amount of money you are able to trade increases, you are able to capitalize on trading signals more effectively and win big.
Frequency: The more often you trade the more you are able to beat the market. If your trading strategy involves an obscure signal that only comes during holiday seasons you will only be making money a small percentage of the time. Even if you are able to make money 90% of the time with this unorthodox trading strategy, you will always lose out to traders who are constantly moving in and out of the market. A trader who has a less reliable signal that only works 60% of the time will be able to make much more money so long as he trades multiple times a day.
Market: If a currency pair is continually rising in price, even the most naive traders are able to make money by simply buying and selling repeatedly. Conversely, making money on a currency pair that is continually spiking down is a much more difficult feat than on a more stable currency pair. As we stated earlier, it is very important to understand your own trading style and find a market that you can thrive in. While there is no guarantee how a currency will behave in the future, there are currency pairs that are generally safer or more volatile than others.
Skill: Forex Traders who are able to beat the market more often are able to generate more returns than those who get burned by the market. This is the most obvious aspect that will determine whether you are able to make money on the Forex market. Whether you start with a large amount of money or trade 100 times a day your skill is the main factor that will lead to success. A skillful Forex trader displays discipline and knowledge and can survive in any market climate.
Starting your career in Forex Trading may seem daunting and dependent on several factors, but having a mentor can smooth this transition. Finding a Forex Trading Mentor can help you overcome early obstacles and start trading like a professional!