How to make money with Forex trading?

How to make money with Forex trading?

Making money with Forex trading is awesome. The thrill and joy you’ll experience when trading Forex are difficult to describe and the possibilities are almost endless. The feeling of a successful trade is unique and when you understand the system behind Forex trading you will be able to experience this as well. But how can you actually make money with Forex?

Making money with Forex: the basics

The basics of making money with Forex trading are pretty straightforward. The answer to the question “how to make money with Forex” is “buying or selling the right currencies at the right time”. Just like the price of gold the price of one currency against another currency changes as well: this happens because the value of the currency is volatile.

You might wonder, where do I have to go to trade Forex? Do I need to go to the city centre or to the airport? Fortunately, the answer is no! These days everyone can trade Forex online, on their computer, tablet, or smartphone. Opening an account is usually free and by practicing with a demo you can try yourself whether you too can make money as a currency trader.

Do you want to trade Forex yourself? Open a free demo account with a broker!

Basic terms Forex tradingHow to make money with Forex trading

Ratios
One thing you should know before you start trading Forex is that currencies are always displayed as ratios or quotations. For example: say you buy or sell EUR / USD, then you buy or sell Euros for dollars. If the exchange rate is equal to 1.2, it means that for every euro you receive 1.2 dollars. If subsequently the ratio increases to 1.21, you will make profits.

Summary: Forex is about ratios. If the euro increases in relation to the dollar, the dollar will depreciate in value relative to the euro.

Long and short
Forex trading through CFDs (the best and cheapest option) provides basically two possibilities to open trades. The first is to buy or go long and the second option is to sell or go short.

When you are going long you earn money when the price rises. If you open a short position you earn money as soon as the price falls. Making a decision is therefore quite simple; if you think the price is going to rise you go long and if you think the price is going to drop you go short.

Summary: Buy (long) if prices increase, sell (short) if prices decline.

Before you can really start with Forex trading through CFDs you should know a bit more about the underlying mechanisms. In the Forex informative category you can read more about the rate-determining mechanisms and within the category Forex trading you can read more about the opportunities to invest in Forex.