Foreign Exchange trading: complex but also very profitable when you get it right.

News 100 redBy Justin Weinger

March 20th, 2020

BURLINGTON, ON

 

The way we make a living is changing, but too few people realize that. If you want to survive, you must stop thinking of yourself as an employee and start considering yourself to be an independent contractor. You can either sell your skills and time to a company (an employer) or use them to cobble together sources of income to fund the life you want to live.

Currency

One can buy and sell foreign currencies. Ideally you would buy when you felt a currency was undervalued relative to some other currency and sell when the values changes. Complex – but very rewarding when you learn the process.

In this article, I’m going to talk a little bit about making money with investments, and with Forex trading in particular. Admittedly, I’m not very good with investing, so this article will only get you started. You are better off having someone with a good amount of experience in this field mentor you in how to make money with Forex trading.

What is Forex?

Forex (a portmanteau of foreign exchange) trading is the art of using money to make money. Literally, you are exchanging one form of currency for another and pocketing the difference. Its just like trading shares on the stock market. You purchase currency at a certain exchange rate and then sell it at a preferably higher rate. For example, I would buy $9 worth of British Pounds (GBP) when the exchange rate was 1.5 (1 GBP = $1.50) and then sell it when the rate went up to 1.75 (1 GBP = $1.75). My profit from the exchange would be $3.25.

The Basics of Forex Trading

Currency has been bought and sold since it was invented. In fact, if you have ever traveled to another country and exchanged your currency for the currency used in that country then you have participated in forex trading, albeit on a very small scale (and you probably lost money).

Forex trading is done on a larger scale. There are some companies that allow traders to trade in small amounts. For the most part, though, you will need an initial investment of at least $1,000 to get started. Additionally, you won’t start making the big bucks until you begin buying and selling currency in the tens of thousands of dollars.

If you don’t have that kind of cash on hand, you can do what is called margin trading. Basically, you trade with money borrowed from the broker. The broker will require you to front a small percentage of the loan. For instance, to borrow $150,000 you would need to put up $3,000 or 2%. Each forex brokerage firm is different. Some allow investors to open accounts with as little as $25 while others won’t even talk to you unless you have $10,000 in the bank.

Currency is purchased in lots, with the smallest being 1,000 units (micro). The other sizes are mini (10,000 units) and standard (100,000). In general, you cannot break lots. You must purchase currency in the established increments. There are a few retail Forex brokers, though, that will allow account holders to trade in custom lots. So if you want to trade 1,511 units, you will need to find a company that will let you do that.

Lots must be purchased or sold by the end of the trading day (usually 5pm E.S.T); otherwise you will earn or pay interest on any open positions. All profits and losses are added or deducted from your brokerage account each time you buy or sell currency. Additionally, the brokerage firm may charge trading fees.  You can check the typical trading conditions at Friedberg Direct site. 

Can You Make Money with Forex Trading?

The short answer is yes, you can make money Forex trading. The slightly longer answer is you have to know what you are doing. You must be able to correctly predict what the currency exchange rates are going to do because making money depends on buying low and selling high. You could potentially wipe out your account if you misjudge the activity. At the same time, you could become a gazillionaire.

FX tradingLike I said before, the best thing to do is find a person who has made money with forex and convince them to show you how. If you like the thrill and excitement of trading on the stock market or you have money to burn, then it may be worth it to experiment with this money making opportunity.

Justin Weinger is a free lance writer who digs out opportunities and situations that can be very profitable.

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