Can you really make money from forex?

The answer for this question is yes; of course it’s obvious that I would say so. The hardest part in this scenario is to avoid loosing money before you make some profit at all. The point to mention is that you're going to have to do a little homework to be successful at this. It’s easy to learn how to claim some cash from the $3.2 trillion that trade through the forex market every trading day, if you make yourself do some homework everyday.

There are thousands of people who make money by trading in forex since a very long time. Fortunately, nowadays forex trading has become more and more uncomplicated as computer and internet enables you to trade right from your house. You can sit at your personal computer and trade from home without having to make any phone call or referring to any bank.

Buying cheap and selling expensive or selling expensive and buying cheap is the philosophy used in the forex world. The story behind the trade can be explained by a simple instance. Let’s say you are trading GBP against USD, and you buy GBP for 3.456 USD. Later you sell the GBP when the apples ripe, you sell it for 3.788 USD and make some profit. Immense difference between a forex market and other markets such as a stock market is that you don’t need huge investment to start trading. You can start an account with a small investment and make reasonable profits. For example, with a $1000 account, you can make about $1000 per month. Of course it highly depends on the way that you trade and the strategy that you follow but good and experienced traders can double their money every month.

Forex trading is like driving a car. Always drive a car after you are sure you can drive, or you are going to hurt yourself and others as well. So always make sure that you know about forex markets in and out before start trading to become a successful trader. The end result is; you will yield the harvest according to the product of time and effort you put in. Do this the right way and it can change your life. If you are looking to get rich quick, Forex can do it, but it can break you just as quickly, so beware.

What is the best time to trade forex?

As mentioned earlier forex trades takes place round the clock. Currencies are traded 24 hours a day, from Sunday afternoon EST (Eastern Standard Time) to Friday afternoon EST. It’s evident that through this 5+ day week of market activity, it is ensured that there is at least one forex market opened at anytime of the day. Indeed, as some markets close for the night, others open somewhere else on the planet. Since forex trading hours overlap, currencies are being traded continuously. In a nutshell it can be said, forex markets never sleep.

Traders new to the forex market have a preconceived idea, since the forex markets are opened all 24 hours they can trade at any time in the day. But this idea has to be rectified. There are particular times in the forex market that has high profitability. So what are the times that have greater opportunities?
The best time to trade is when large bulk of currencies is traded. All though forex markets 24 hours a day, the best time to trade is when many countries are trading at the same time. In all time zones forex markets operate between 8am and 4pm. So what the wise men do is to trade when many trading hours of popular forex trading countries overlap. This is the time to earn the optimum in forex trading, as it is the most active period and has thus the largest volume of trades and the biggest pip movements.

Forex Trading opens in New Zealand, followed by Australia, Asia (and particularly Japan), the Middle East, Europe (with London being the main financial center) and America.

Forex Trading Hours (EST):

Australia: 5pm - 1 am
Tokyo: 7 pm - 3 am
Singapore/Hong Kong: 9 pm - 5 am
Frankfurt: 2 am - 10 am
London: 3 am - 11 am

What does this mean? The New York and London trading sessions overlap between 7 and 11 am EST. The volatility is much higher and trading opportunities are much more frequent with bigger moves, especially in these four hours. This is when the largest volume of trades occurs, creating a greater chance of making significant profit in the forex market. This is when you can make 30-100 pips trading in just a few minutes or hours, using any of our strategies in any time frame, especially around news releases.

How to choose a good broker

After you have laid out plans to sail in the forex market and lay your money management plans it’s now the time to look for a good broker. It is not going to be a easy task as it needs some research to stumble on a good broker.

I'm sure you know it, but the forex market is unregulated. That is, it doesn't have a governing body like the SEC for the stock market watching over it. That means that there will be atrocious brokers. A bad broker will shade pips, take the other side of your order, etc. In general, they will definitely make it harder for you to make money.

There are some things you ought to look for when choosing a broker. Low spreads is one such aspect. Spread illustrates the difference between the price at which a currency is bought and the price at which it is sold. So when selecting a broker keep an eye on their forex rates. Lower the spread, more the profit you earn.

Leverage is yet another aspect to take care of. Leverage is needed to trade currencies due to the fact that price movements are only fractions of a cent. It signifies the ratio between the money you provide and the money your broker is prepared to offer. For instance 100:1 leverage point means that your broker is geared up to provide 100 times more money than you provide.

The more the leverage, the more the risk you take. So a massive leverage will prompt you to an impressive gain or the other way round. When selecting a broker select a broker who has wide options of leverages, so that you can select the leverage option according to your risk management scheme.

Most forex brokers come up with many useful tools such as Real-time currency price charting, technical analysis tools, fundamental analysis commentaries, and economic calendars to assist you in the trading. Forex trading takes place around the clock, so ensure customer support is provided by your forex broker all 24 hours. You can use the information from other forex traders to find out details about brokers, about their customer relationships. You could get hold of a number of a forex broker and find out how fast and efficiently they respond to customer inquiries, before giving your business to them.

So it seems finding a good broker needs some bit of search in the net and some work? Well it’s always affordable to bear some extra work, rather than get caught with a bad broker.

How to become a successful forex trader

Even if you are new to forex markets, still you can become a successful trader if you learn the basics right and learn the proven victory paths that are defined by experts who have excelled in the Foreign exchange world.

The first step is to work smart. There prevails a obvious difference in forex trading and other kinds of trades. In all other professions the more you work hard the more you yield. But in this context the critical point is not how hard you work but how smart you are. Many intellects build complicated forex exchange systems with plenty of hard work, but at the end of the day they fail – the penalty the pay for not being right at the right time.

The consolation news about forex is; you can learn everything you ought to know from the web. A simple trading mechanism is something that is easy to understand and implement, which translates in to discipline and eventually succeed in online trading.

Now let us concentrate on a way which allows you to earn in he amounts. ‘Buy low and sell high’ is the principle used by most traders, but they miss the point here. There exist many breakouts in the market which most traders miss. As you examine the flow of the market you can guess the breakouts and go for ‘buy high and sell higher’.

A success of a trader also relies in the amount of risk he takes. If you are a person who is reluctant to take risks you are not suitable for the forex market. Meaningful, calculated risks are inevitable in the road to a successful forex trader. Trade with a small account risk as much as 10% per trade and don’t move your stop too quickly. This ensures that you don’t get thrown out of the trade by normal market volatility and can stay with the longer term trends.

Patience is yet another key factor that earns you many points. Don’t be in a mind set to be in the trade all the time which will eventually make you a looser. Forex trading doesn’t yield money for the number of times you trade, but for the number of times you are right. So trade only when you think it’s the right time. Wait till the opportunity arises, wait till a breakout occurs.

Becoming a successful forex trader is within the reach of everyone if you think smart, take well calculated risks and learn the essentials yourself.

Let me learn about forex terms

Before entering forex market you should make certain that you are familiar with the terms customarily used in forex trading.

Each country’s currency is depicted in a three letter word. For instance : US dollars is depicted by USD and Japanese Yen by JPY. The first currency in the quote is known as base currency. JPY is the base currency in JPY/USD. A quote of USD/JPY 2.34 means that one USD is equal to 2.34 JPY.

Pip: Pip refers to the smallest increment in the value of the currency. For instance in USD/JPY, a move from 251.35 to 251.36 is one pip.

Offer price: It is the price displayed to the right of the currency pair. It mentions the price at which the base currency can be bought.

Bid price: It is the price displayed to the left of the currency pair. It refers to the value at which the base currency is sold

Spread: The difference between Bid and Ask price in terms of pipes. The narrower the spread, the better for the trader.

Cost of Carry: The cost, referred in terms of pips per day, for holding an open position.

Cross Rate: The exchange rate between any two currencies that are not of the country in which the currency pair is quoted. For instance in UK, USD/JPY would be considered as a cross rate but in US it won’t be considered so.

Limit: An order to buy at a specified price when the market moves down to that price, or to sell at a specified price when the market moves up to that price.

Liquidity: A function of volume and activity in a market. It is the efficiency and cost effectiveness with which positions can be traded and orders executed. A more liquid market will provide more frequent price quotes at a smaller bid/ask spread.

Margin: The amount of money needed in a person’s account to maintain an open position.

Margin Call: A requirement initiated by the broker to deposit more funds in order to maintain an open position.

Market Order: An order to buy at the current Ask price.

Premium: The cost, often quoted in terms of dollars or pips per day, of holding an open position.

Spot Foreign Exchange: It symbolizes the currency exchange taking place between two counterparts, most probably between banks, so it is referred to as the Inter bank market.

Major currencies: Major currencies change frequently and they refer to the mostly traded currencies currently. USD, JPY, EUR, GBP are the current major currencies in the market.