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Make money with Forex

What is the Forex market? The Forex is a short to “Foreign Exchange Market” which is a global decentralized market for the trading of currencies. This includes all aspects of buying, selling and exchanging currencies at current or determined prices. It is the largest market in the world, where the volume of trading is more than 5 trillion dollars a day.

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What is the Forex market?

The Forex market operates 24 hours a day for 5 days a week where you can open and close positions at any time you want.

What is the mechanism of working in the Forex market?

The selling and purchasing process of currencies happens through electronic trading platforms, and the MetaTrader 4 platform is considered the most famous and widespread platform in the world because it is so easy to deal with. The way you deal with these platforms is in the form of currency pairs where traders sell and buy one currency for another. We have EUR/USD pair, for example, where traders sell and buy EUR/USD; the currency on the left (EUR) in the previous example is the main currency in which buying and selling are made against the other currency (USD).

In the Forex market, there are dozens of currency pairs and there are six pairs of them that are well known as main currency pairs:

  • European Euro vs. the US Dollar (EUR/USD)
  • British Pound vs. the US Dollar (GBP/USD)
  • US Dollar vs. Japanese Yen (USD/JPY)
  • US Dollar vs. Canadian Dollar (USD/CAD)
  • US Dollar vs. Swiss Franc (USD/CHF)
  • Australian Dollar vs. the US dollar (AUD/USD)

What is CFD trading?

A CFD (Contract for Difference) is defined as the difference between the current price of currency/commodity (when opening the transaction) and its price at the contracts end (when closing the transaction). In this case, the traders do not own the assets that they sold or purchased. They are speculating on price movements. For example, when buying EUR/USD, this does not mean that traders now own the EUR instead of the dollar. They are expecting the price of this pair to rise to get the difference between the entry price and closing price as a profit. However, if the price falls, they will get the difference between the entry price and closing price as a loss.

When to sell and when to buy?

As we discussed earlier, currency pairs are treated as goods that we buy when we expect that their price will rise. They are bought at a low price and sold after the price rise and vice versa when we expect the currency to fall, we sell it at higher prices and buy it back after the prices fall. For example, when we expect the Euro to rise and the Dollar to fall, we buy the EUR/USD and sell it after the price rises.

How can we predict the rise and fall of prices?

There are two methods, which are used to predict the rise or fall of the currencies; fundamental analysis and technical analysis. The fundamental analysis is the one that predicts the exchange rate of a currency through the economic situation of the state. For instance, when the economic situation for the country is good, the price of its currency rises and vice versa. Today, the brokerage companies offer what is known as the “economic calendar”, which shows all the economic indicators that relate to the economic situation in the country which probably leave an effect on the exchange rate of its currency. Technical analysis is the one by which we predict the currencies prices based on the chart and by studying the currency’s history, we can predict its future movements. This type of analysis is based on the principle that says: “history repeats itself”. Technical analysis is currently the most common and there are a lot of tools and methods that are used in this type of analysis.

What is the best trading strategy?

It is wrong to say that there is a trading strategy that is better than the other is or that there is a method of analysis, which is the best of all. The methods and strategies are many and diverse. Therefore, the trader, especially beginners, should begin to study the different methods of analysis, focus on their strengths, and try to make their own trading strategy because what suits me may not suit others.

What are the profit and loss rates in Forex markets?

You cannot say that there is a certain percentage of profit or loss in this market or that there is a trading strategy to achieve a profit of 100%. The probability of loss exists as well as the probability of profit. Even the best and professional traders win and lose sometimes. However, the successful traders are those that their profits exceed their losses and ultimately come out with a good return on the money they invested.

Five steps to get started with making money with Forex:

  1. Invest in yourself. Meaning; do not start any practical step in this field before you have the minimum experience to enter this market, so you need to learn (you have to do it constantly) and improve your abilities. You will find that the scientific resources in this field are many and various.
  2. Look for a good and reliable brokerage company. There are many brokerage companies working in this field. Compare them and choose the ones that suit you. For instance, you can compare between them in term of the ease of deposit and withdrawal, are they licensed from a Financial Services Board? Is the spread* small or big? Is it easy to execute orders? (Open and close positions especially at peak times), what is the impressions of traders dealing with these companies and is there a good record of achievements for the brokerage company? For example, did it receive Quality Performance Awards?
    *The spread is the difference between the selling and buying price or it is the commission that the company takes.
  3. Begin with a demo account. With the demo account, you can trade in the same real account environment with no real money. This allows you to know how the trading platform works and it will allow you to test what you have learned previously.
  4. Develop your own trading strategy, study it well, test it on the demo account, and improve it constantly until you are sure that it is good and achieves satisfying results.
  5. Start working on a real account. It is preferred that the amount of money you are working with exceeds your needs. This will be better for your psychological state during trading and it will not affect the course of your life if there was any loss. Finally, remember again that you have to read constantly and look for more information because there are many new pieces of research made continuously in this field and this will add new ideas and new techniques to your previous knowledge. If you stick to this, you will develop your experience until you reach the professional stage.

Note:We often hear talks from some people, who have no experience in this field, that trading in Forex market is a big lie and in this market, you cannot make any profit since the only goal of these companies is to steal money from traders. What happened is that these people saw an advertisement for a Forex Company and then they opened an account in this company without any study or any background, which led them eventually to lose their money. We can avoid these things and make a reasonable profit if we abide by the previous five rules.

In the end, here are some important tips to consider when working in this market:

  1. One of the most important factors that can affect the trader is the psychological factor so, it is better to stay away from the screen in the case of mental disorders.
  2. In case of loss, it is preferred to move away from the screen and study the reasons that led to it and return to trading when the negative impact of the loss disappears because keeping an eye on the screen, in this case, may cause significant losses.
  3. Daily, there are many opportunities in this market so, do not be upset if you missed a certain opportunity.
  4. Proper capital management is one of the most important reasons for success. While the use of large leverage is a major cause of loss.
  5. Patience is one of the most important reasons for success. One of the leading economists said: “trading is the transfer of money from the impatient trader to the patient trader.”
  6. Warren Buffett, one of the world’s biggest investors, says: “If you are working on a certain strategy and it achieves satisfying results, keeps it and does not change it, many traders have failed when they decided to change their strategies and try to modify them.
  7. When you place the take profit and stop loss orders, you should stick to them.
  8. It is said: “Do not put all your eggs in one basket”. So, be careful to focus your investment on more than one currency pair. If you fail in an investment opportunity in some pair, you might succeed on another and this makes your investments safer.