How Forex Traders Make Money?

Forex trading is one of the most popular online investment opportunities. Learn what strategies can help you earn more profits from currencies, stocks, indices, and commodities.

Foreign exchange (FX or Forex) trading is a relatively recent way to make money from investing online. Unlike exchange-based methods such as stock and commodity trading, Forex involve taking advantage of the constantly changing prices for hundreds of currency pairs. To make a profit, you try to sell a pair at a price that is higher than what you paid to buy it. While this may seem simple, we’d like to explore a few easily learned techniques which can help you improve your results.

Trading Calendar

The most important way to maximize how much money you can make from Forex is to keep track of the trading calendar. FX pairs are basically a way to balance the performance of one country or region’s economy against that of another regional economy. This means that currency prices are tied to economic reports that are issued by governments on a consistent basis.

Many brokers provide access to a calendar that can be used to filter upcoming reports that are expected to have an impact on a specific currency. Some Account Managers will also send out signals which will alert you to upcoming events. Make a note of these reports. You can then prepare your account so that you are ready to place appropriate orders as soon as you have decided how the market will react.

Automated Trading

This can be made easier by creating rules that will trigger order activity when certain conditions are met. Software, such as the popular Metatrader 4 (MT4) can now be used to place trades automatically based on customized rules you select in advance. You can also create entry and exit points for orders to reduce your losses or lock in profits. This will allow you to make the most of every market move, even if it occurs when you are not available to trade manually. Automated trading can also take some of the emotion out of trading, which is a common cause of reduced profitability.

Trader Psychology

So, of course our last piece of advice is to take the emotion out of trading! No one is perfect. The markets are unpredictable in their nature, so one unsuccessful trade is not a personal failure. Numerous studies have shown that the majority of trades are made in the right direction. For example, you buy the EUR/USD and the price subsequently goes up.

Where novice investors, and unfortunately sometimes even professionals, mess up is that they stay in bad trades too long, and leave good trades too early. Decide in advance how much of your equity you are willing to risk on a single trade. Once you have lost that amount, close the trade and start over with something new. A good rule of thumb is to limit risk on any one trade to one percent or less of your account balance. Additionally, create Take Profit settings so that you can keep profitable orders open for as long as possible.

Adding these three techniques to your repertoire will help you graduate from a beginner to a star Forex trader. After you have mastered these skills, you can add more advanced techniques which will allow you to climb to the top of the FX investor ranks.  If you are interested in more tips about how to enhance your trading outcomes, we recommend speaking with an Account Manager from YorkCG. For more information on opening a Forex account, make sure to visit our web page.

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