The possibility of making quick money prompts many people to ask themselves how to make money on forex and how to start investing in forex. The process of starting to invest in forex is not complicated. After reading this guide, he will already have an idea how to start his adventure with forex.
What is forex investing?
Forex trading is the process of speculating on the price movements of currencies in order to make a profit. Many currency exchange operations on the forex market are for practical purposes, not for profit. However, traders can speculate on price movements in the forex market, with the aim of profiting from correctly forecasting these movements. Investors through the investment account speculate on forex most often using CFDs, which offer leverage and allow you to make larger profits with small capital.
In a colloquial, broader sense, by forex, traders sometimes also mean investing in commodity CFDs. Making money on the price movements of raw materials, e.g. oil, is also popular.
For a more detailed definition of the forex market and definitions, read the article “what is the forex market”.
How to start trading forex – step-by-step instructions
For this purpose, you can check the ranking of forex brokers or use popular Polish brokers regulated by the Polish Financial Supervision Authority, e.g. XTB broker, which offers an investment account without opening fees and a monthly account fee. You can open a live or demo account to take advantage of the change in exchange rates.
Reputable brokers provide on their investment platforms, m.in, news and comments that may be useful in analyzing the market, as well as a macroeconomic calendar in which we can find information on the most important data that may affect currency movements.
Based on your analysis, decide whether you want to buy or sell
Does the analysis show that the base currency (the first currency in the pair) is likely to weaken or strengthen? Take long positions and “buy” if you think it will strengthen, or go short and “sell” if you think it will weaken. If you are a beginner, it is certainly worth reading the article Finance Shark What affects exchange rates.
Follow your own strategy. There is no single effective strategy that will allow you to make money on forex with every trade. Therefore, before placing a trade, you should ensure that you follow your strategy, which should primarily include risk management.
Make a trade in the forex market
According to your strategy, place forex trades with specific entry and exit points from positions. Don’t forget to use risk management principles such as a take-profit or stop-loss order.
Following your trading plan, close your open positions when the target price levels are reached in a negative or positive scenario. Think about how you did so that you can improve after each subsequent trade, regardless of whether it was profitable or not. It is important that the final balance of trading many trades over a longer period of time is positive for you.
Mistakes of beginner forex traders
Lack of a risk management strategy and not sticking to the assumed plan as to when to open and close a position are the most common mistakes of novice investors. Remember that forex trading is characterized by a certain amount of randomness and it is impossible to predict with 100% success the future behavior of the exchange rate, especially in the short term.