Forex Trading simply means buying or selling currencies. The main objective of Forex Trading is the exchange of one currency with another with the expectations that the price will change. In this case, when the value of the currency bought increases, profit is earned.
Basically, currencies are traded and priced in pairs with the Forex, for example, a EUR/USD. In this case, the euro is the base currency while the U.S dollar is the quote currency. The base currency is worth one unit while the quote currency is the amount of currency that one unit of the base currency can buy. For a trader to earn money through Forex, the quote currency must appreciate while the base currency depreciates.
In Forex Trading, a trader uses a leverage account. To get a clearer understanding of how the trade takes place, here is an example of a trade in dollars.
You can consider starting off with about $1000 in a 1:500 leverage account. With a full 100k Forex Trading contract, every single lot you buy will cost you $200 to hold on as a margin. A pip per trade will cost you $10, which means that if you make about 100 pips in one day, you make $1000 every day. This possibility can only happen if you trade one lot with 100 pips per day. Note that each currency can range from hundreds of pips to thousands each week. This means that the chances of getting a 100% return on investment every month are very high especially if you consistently gain 100 pips a month.
If you do not want to take high risks, you can just trade using a mini-lot which works out to $1 a pip where you will need an average of 1000 pips in a month. This way, you have less chances of losing a lot of cash in the long run.
There are several strategies that you can still use to maximize your earnings. This is because a certain strategy may give losses while another may earn huge profits at the same time.
Sometimes, you might be able to earn about 1100 pips in a month and in the same month, you might end up losing 1000 pips. In this case, you should not panic because with the 100 pips profit under the 100k contract, you can still earn $1000 every month, which is 100% return on investments. It’s very easy to make $1 million dollars in one year of consistent trading.
Nowadays, the MT4 trading platform has made trading much easier. This is because the MT4 trading platform comes with a unique programming language that helps you code your winning strategy as well as a strategy tester designed for you to test. The codes are professionally known as Expert Advisors and today, the numbers of these codes are many in such a way that it’s easier to make %100 returns on investments.
Being the largest financial trading market, Forex Trading has influenced many people around the world, some of whom have made huge profits from them. In order to learn about Forex Trading, you need to first learn about the concepts and develop the right strategies in order to succeed.