What Is Forex and How to Make Money with It?
Currency or Forex trading has received a lot of attentions in the past few years.
However, let&8217;s see whether it is what people really think, or it is something completely different.
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What Is Forex?
Forex is the knowledge and art of trading different currencies against each other and making profit through it.
Each country has its own currency, and the currency of different countries can be bought and sold against each other.
Forex traders are those who make money through buying and selling different currencies against each other.
Forex is not a new business, and its history is as old as the history of money.
However, computer and Internet have enabled people to trade Forex from home and through the personal computers.
There are two kinds of Forex Traders
Forex trading is different from the money exchange business.
A money exchange business also deals with the currencies.
But it is different from Forex trading and Forex traders are not money exchangers.
Forex traders are those who buy and sell currencies against each other to make profit.
They don&8217;t to offer a money exchange service to people.
1) Retail Forex Traders:
Retail Forex traders are the ones who trade Forex from home and through the retail brokers.
They are the ones who lose a lot of money and give up on Forex trading sooner than later.
Most people think that it is possible to have a fixed monthly income through Forex trading, and so they start doing it from home.
However, Forex trading looks easy at the beginning and when you look at the price charts.
Indeed, there is no retail Forex trader who can make money consistently from trading the currencies from home and through the retail brokers.
It is becoming harder and harder to make money through Forex trading and as a retail Forex trader.
Brokers get greedier all the time and try to cheat their clients more.
Indeed, I have never seen a consistently profitable retail FX trader who trade currencies through the retail brokers.
You can learn more here: Some Forex Trading Facts and Myths You Must Know
By the way, I forgot to tell you who Forex brokers are.
They are the companies that connect you to the currency market to enable you to buy and sell currencies through your personal computer and the Internet.
2) Professional Forex Traders
Professional Forex traders are the ones who either trade for the banks or the hedge funds and financial companies, or if they trade for their own, they do it through the bank accounts and with a reasonably big capital, not through the retail Forex brokers and with a small trading account.
They don&8217;t trade every day, because they only take the big trading opportunities to increase their wealth and capital.
Indeed, currency trading is not a source of income for them.
It is an investment opportunity to increase their wealth.
Learn more about these Forex traders:
So, the first thing you have to keep in mind is that Forex is not what the brokers and Forex signal websites advertise over the Internet.
Therefore, make sure not to waste your time and money on it, with the hope of creating a source of income that makes money for you every month, consistently.
It doesn&8217;t work like that at all.
Forex trading can&8217;t be as your main source of income and full-time job. Period.
If you don&8217;t believe this, you will be back to this article and this website after a while of wasting time and money.
So make sure to bookmark this page to come back here when you remember me and this article after losing some money and wasting a lot of time.
I hope you don&8217;t rick too much.
How Can You Make Money with Forex?
Does what I explained above mean that you can never make any money through Forex and currency trading?
No, I didn&8217;t say that.
Indeed, currency and stock markets are great investment opportunities.
But please note that they are investment opportunities, not sources of income.
It means, you can invest a portion of your capital in currency market to increase your capital, as you do the same with the real estate and stock markets.
To do that, first you have to have a reasonable amount of capital that you can invest a portion of it in the currency market to increase your wealth and capital.
This is how Forex trading and currency market can benefit you.
Day Trading with Shorter Time-Frames
If someone tells you that he makes money every day while sitting at the computer and trading the currencies against each other through the shorter time-frames, then you should make sure to ignore him, because he is lying.
Now, As I mentioned above, Forex is a good investment opportunity that enables you to invest some money and increase your wealth and capital.
What if you don&8217;t have any money to do this now?
If you don&8217;t have any money and capital to invest in the Forex market, then you have to create a reliable and strong source of income to make money consistently.
Forex can&8217;t be this source of income at all.
I explained why.
Therefore, if you are unemployed and you have no job and income, or you have a job, but your income is not enough and you want to make more money, and you think that Forex trading is the solution, you are wrong.
I explained about the reasons above.
The First Step
What you have to do first, is creating a reliable and strong source of income.
When you made enough money, you can invest a portion of it in the currency, stock and real estate markets to make more money and increase your capital.
If you aren&8217;t ready to do that now, then stay away from the Forex market, because you can&8217;t make any money through it with a small $500, $1000 or even $10,000 account with a retail Forex broker.
This is the most important piece of advice we always give to our website&8217;s followers.
Now, if you are ready to start from the beginning and establish a reliable and strong source of income, I suggest you to read the below articles to understand what I mean by a reliable and strong source of income:
- The Easiest Way to Get Rich Fast
- How a Reliable and Strong Source of Income and Proper Investments Make You Super Rich
- Trading Strategies Don’t Work If You Don’t Choose the Right Living Strategy
The below article explains how our investments strategy works.
If followed properly, it can make a lot of profit in long-term in the Forex market.
This is the strategy you have to follow when you have already earned enough money through the reliable and strong source of income I talked about it above: A Short Term Investment Strategy That Makes You a Millionaire
Don&8217;t Trust the Fund and Account Managers
There are some people who claim to be skillful and profitable Forex traders.
They offer you to give them some money to trade in the currency market and return some profit or interest to you every month.
These are the ones you should avoid as well.
Many of them are scams.
The ones who are not scams, don&8217;t know what Forex trading is in long-term.
They have been lucky to make some profit for a short while.
Therefore, now they think they are professional Forex traders who can double and triple the accounts every month.
What will happen is that they will wipe out the whole account and all the money will be blown up.
So, if you are looking for making money through Forex, make sure not to give your hard-earned money to anybody.
Also you don&8217;t risk your money to trade Forex on your own.
For Newbie Forex Traders
For a newbie, Forex and currency market is nothing but a money sucker.
It only wastes your time and money. That is it.
Now, if you are really after making money and getting rich, you can follow a clear and straight-forward wealth building strategy: A Wealth Building Strategy to Create Wealth from Nothing
Forex market can make you richer only when you are already rich.
Now you know what Forex is and how professional Forex traders make money
Therefore, you won&8217;t make any mistakes and you won&8217;t lose any money in this market.
You are lucky if you have found this article before risking any money in Forex trading.
I know some people who haven&8217;t been as lucky as you.
They lost their shirts before they learn that Forex trading was not what they thought.
Make sure you follow us on this site, if you are serious about getting rich without losing any money and wasting any time.
In this below 23 minutes video, we have talked about the history of trading at the beginning. Then we have explained about the currency trading basics. This video covers the below topics:
- The currency market and the world of exchange
- The modern exchange
- The modern stock exchange
- The history of Stock Exchanges
- What is liquidity?
- Rating of quality
- The agreed minimum quantity which can be traded which is “LOT” in currency trading.
- Different kinds of exchange: Commodity, Stock, Currency
- International transactions: US Dollar, Euro, British Pound, Japanese Yen, Swiss Franc
- What is “Foreign Exchange”?
- Who works on the currency markets? Central banks of countries, Financial companies and brokerage houses, Private individuals like forex traders
- The markets working days and times
- Currency pairs
- Point or Pip
- Margin and Leverage
- Trading platforms
- Bid and Ask prices
- Long and Short Positions
- Stop loss and target (take profit) orders
Here is the video:
How Do You Make Money through Forex Trading?
You buy or sell a currency against another one when you come to this conclusion that their value is going to change against each other and consequently your trade will make profit for you.
For example when you buy EUR against USD, it is because you think that the EUR&8217;s value is going to go up against USD after a while.
Therefore, (1) you pay USD to buy EUR and then (2) you hold the EUR you have bought for a while (3) to wait for the EUR&8217;s value to go up against USD. Then (4) you sell the EUR you have bought to collect the profit you have made.
For example, you buy €100,000 against USD when the EUR to USD rate is 1.0590. Therefore, you have to pay $105,900 to buy €100,000:
100,000 x 1.0590 = 105,900
You expect the EUR&8217;s value to go up against USD and you are fortunate enough to see that it really goes up after a while and let&8217;s say it reaches 1.0690. Therefore, you decide to sell the EUR you have bought to collect your profit. As the rate is now 1.0690, you will receive $106,900 when you sell the €100,000 you had bought:
100,000 x 1.0690 = 106,900
Therefore, you have made a $1,000 profit:
106,900 &8211; 105,900 = 1,000
It can be the other way round if EUR&8217;s value goes down instead of going up. For example, if it goes down and reaches 1.0490, and then you sell the EUR you have bought, you will lose $1,000 because you have paid $105,900 to buy €100,000 while the EUR to USD rate was 1.0590. Now it is depreciated to 1.0490, and so, you will receive $104,900 if you sell your €100,000:
100,000 x 1.0490 = 104,900
Therefore, you lose $1,000:
105,900 &8211; 104,900 = 1,000
This is how you can make or lose money through Forex trading.
How Can You Buy and Sell Currencies Against Each Other?
1) There are some brokers who facilitate the trades for you by providing a trading platform software that can be installed on your computer, and connecting the software to currency market. They charge you some fees for each of the trades you do.
To make the work easier for, brokers pair the currencies against each other and create currency pairs.
There are a lot of things you have to learn about the brokers before you open an account with them. Many of them are not reliable and can make you lose money. So be careful.
2) You can trade the currencies against each other through a bank account as well.
Now that I have almost explained what Forex is, I&8217;d like to explain what Forex is not.
What Forex Is Not?
Some people have some wrong impressions about Forex trading.
Forex Is Not a Get-Rich-Quick Scheme
If you become a professional Forex trader who can make profit consistently, you can make a lot of money from Forex trading. But you can do that only when you become a consistently profitable trader who knows a lot of things about trading and knows how to manage and limit his risks.
It takes time and effort to reach this level. You cannot start making money through Forex trading overnight and just by following a friend who is also a beginner and probably has been able to make some successful trades on a demo or a small live account.
A Forex trader is called a consistently profitable Forex trader if he can make money consistently for several consecutive months and years. He should be able to repeat his success, not that he doubles his account through one successful trade and then keep losing money.
No doubt that even a professional trader loses money sometimes, but the difference is (1) his losses are much smaller than his gains, and (2) he can easily recover his losses. Additionally, (3) the number of his successful trades is higher than the losing ones, and he can repeat this pattern over and over for several months and years.
Keep in mind that trading can be risky and there are some people who have lost their shirt in trading. Most or all of the professional Forex and stock traders, have at least one good source of income and use the trading to increase their wealth, not as their main source of income. Indeed, they force their money to make more money for them through the ways like stock or currency trading or other kinds of investments. Therefore, don&8217;t look at Forex trading as a main source of income. You have to have a good backup.
Hope I have been able to explain in brief what Forex is. Keep following us on this website if you like to become a professional trader who also has some good and stable sources of income and uses the trading as a way to increase his wealth.
How Does Forex Work?
Most of those who ask &8220;How Does Forex Work?&8221;, don&8217;t care about the technical aspect of Forex trading. They want to know whether it really makes money or not.
People start learning how to trade Forex, because they want to make money. Many of them want to make a living through Forex trading and look for having a source of income through Forex trading. They want to become full time Forex traders who trade Forex to make a living.
Some others look at Forex trading as an investment opportunity to increase their wealth.
Now the question is whether Forex really works for these people or not.
Before I answer this question, I&8217;d like to explain a little about the technical aspect or Forex trading and how Forex works behind the scene.
How Does Forex Work Technically?
Forex or Foreign Currency Exchange is the business of exchanging the currencies against each other for the purpose of making profit. This is what Forex traders do. They buy and sell the currencies against each other to make profit when one currency&8217;s value goes up or down against the other one.
Some others, offer a currency exchanging service to those who need to convert a currency to another. For example, tourists have to buy the destination country&8217;s currency. The money exchange agency charges some fees to exchange the currencies to each other for them. You can do this through the banks too, but the private money exchange agencies are used to offer better prices: How to Run and Manage a Money Exchange Business that Makes Money
Forex trading is not something new. Its history is as old as the history of money. But the way that retail Forex traders trade currencies now, is somehow new. It is done electronically and through the Internet. It is almost 100% automatic and it needs no human touch to complete the exchanging process.
To trade currencies against each other as a retail Forex trader, you have to open an account with a Forex broker. More professional traders, trade through the bank accounts that needs more capital. They buy and sell currencies against each other through a trading platform software, or through their online banking account.
Here, I&8217;d like to focus on this question that how does Forex work to make money for Forex traders. And, how Forex traders can make money with it and whether it is really possible to make money with Forex or not.
How Does Forex Work to Make Money for Retail Traders?
Theoretically, retail Forex traders try to predict whether a currency&8217;s value will go up or down against the other currencies. If they conclude that the value of currency A is going to go up against currency B, then they will buy currency A against currency B. It means they pay currency B to receive currency A.
In case they are correct and the value of currency A really and reasonably goes up against currency B after a while, they will convert currency A to currency B. The price difference makes some profit for them. This is how Forex trading makes money for Forex traders theoretically.
Now the question is whether this process results in profit in reality and actually or not. Can the Forex traders make money consistently? Is Forex trading a good and stable source of income? Does it really make money as a full time job?
There is no doubt that the currency market is a big opportunity to make money. There are so many who make a lot of money through this market.
However, to make money through currency trading, a retail trader has to have two things:
- He has to master a trading strategy.
- He has to have money to trade with and make more money (profit).
Mastering a Trading Strategy
There is no special and clear way to master a trading strategy. While it is hard and complicated for most people, some others can do it after a while of learning and practicing. I personally believe that mastering a trading strategy and then making money as a professional trader has four stages:
- You have to choose a trading strategy and learn the related basics and technical parts.
- You have to demo trade the trading strategy until you become a consistently profitable demo trader who makes profit on the demo account consistently and consecutively. To make sure that you have reached this level, you have to repeat your success for 6 consecutive months at least.
- After becoming a consistently profitable demo trader, you have to try the same trading strategy on a small live account to make sure that you can repeat your success with real money too. To make sure that you have gained such an ability, you have to repeat your success at least for 6 consecutive months here too.
- You can trade with a bigger account to make a reasonable amount of profit. If you can afford, you can even trade through a bank account that needs more capital, because banks usually don&8217;t offer any leverage.
Nobody knows how long it takes to pass the first 3 stages and reach the stage 4. It is different from person to person. However, something which is clear is that nobody can pass these stages without spending enough time and energy. You have to spend time to become a consistently profitable demo and then live trader. You have to practice with peace of mind.
Now, it is time to refer to the beginning of this article that says &8220;People start learning how to trade Forex, because they want to make money&8230;&8221;
Whether you like to make a living through Forex trading or you want to look at it as an investment opportunity to increase your wealth, you have to be financially free while you are trying the master your trading strategy and pass the 4 stages I outlined above.
Financial freedom creates the peace of mind you need to spend enough time on learning and practicing. When you are not financially free and you have to make money as soon as possible, you will not have the peace of mind you need to focus on learning and practicing, and you push yourself to start making money as soon as possible.
Therefore, you will open a live account even before you become a consistently profitable demo trader. Then you will push yourself to make money with your live account. But, as you haven&8217;t completed the learning stages yet, you will make a lot of mistakes, and so, you will lose money.
Most traders wipe out their live accounts at least a few times. Unfortunately, many of them start trading with the money they cannot afford to lose. Finally, they give up after wasting a lot of time and money.
You can&8217;t make money through trading, when you HAVE TO make money. This is one of the big differences that trading has with the other money making opportunities: Trading Strategies Don’t Work If You Don’t Choose the Right Living Strategy
How Does Forex Work Practically?
Therefore, we can say that making money through Forex trading has two main stages:
- Mastering a trading strategy
- Having enough money to trade and invest
According to what I explained above, both of these stages are dependent on &8220;money&8221;. You have to have money to master your trading strategy. Then, you have to have enough money to open a reasonable live account. You can start with a small account, but it takes you a lot of time to turn it into a reasonably big and professional account.
Therefore, having a good and strong source of income is a must. This is how Forex works. It is not only with Forex. It is the same with any trading and investment opportunity, be it currencies, stocks, real estate and&8230;
Forex Trading as a Full Time Job to Make a Living With
Forex or stock trading can&8217;t be known as full time jobs that you can make a living with. They are good and strong investment and money making opportunities, but you shouldn&8217;t look at them as full time jobs. The first and the most important reason is that making money through trading is not just dependent on you, your abilities and activities as the trader. It depends on the markets too.
Sometimes the markets become too slow for several months, and so, you can&8217;t locate a trade setup to make money. Sometimes the markets become too volatile and cause some big losses. You need to have a good and strong source of income and a reliable backup to support your trading venture, otherwise you will be in trouble.
While Forex trading is a great opportunity to make a fortune, it is not a business that you can make a living with in long term. It is the same with stock trading and real estate investment. They can help you increase your wealth and grow your capital dramatically. But it is too hard to rely on them as the main sources of income under the normal conditions.
It is great that you are after making money through Forex trading. But you should consider the facts I explained above to avoid wasting any time and money. As I explained above, having a good and strong source of income is a must for those who want to learn to make money through Forex trading, and also for those who have already mastered their trading strategies.
That is why we not only teach our followers the trading techniques, but also help them to establish a good and strong source of income. This is how Forex works.