How to Trade Currencies

There are three steps to trading currencies:

  • Deciding what currency pair to trade and buying into it.
  • Deciding when to sell and selling.
  • And you spend more time waiting and watching for things to develop.

A trader cannot be emotional. You can be happy when things work out, but running around screaming and shouting and popping champagne is overly emotional. If this is how you act when you have a win, you will probably go to the flip side when you lose. And you will lose. Trading is a win/lose game, and when you decide to enter it, you must be prepared for wins and losses. Some traders maintain that they lose at least as many times as they win. On average, they will usually come out winners.

It is best when trading Forex to tally your wins and losses after an extended time. Daily wins will not be much, rather view the profits on a monthly basis.

Can you get rich by trading forex?

Forex has been established as the largest trading market you can join for your investment portfolio. There are many things to consider when you question how to trade currency.

Studying is important

Forex is dangerous if you don’t know what you are doing. It is not something that you can say, “Oh, I’ll learn as I go along.” Most beginner Forex traders will lose money time and again. This is especially true if they have entered into it on the fly. 

To figure out how to trade currency, you need to research and find people who offer courses and webinars; watch videos (YouTube has many), and download pdf files. You will find many forums that you can join. Look for Facebook pages to join like-minded groups. Open your brain and imbibe whatever information you can. Keep a journal. This can be online or in a book. Take notes. Make sure you understand all the terminology before you get burnt. 

Make friends who can help you through the intricacies of the market. Join discussion groups where you can ask questions in a safe environment. Others will have been there before you and will be keen to help you out. 

Examine the different tools available and see which offers you:

  • The most help on how to trade currency
  • Studying opportunities
  • A workable interface.

Continue to be a Forex student the entire time that you are investing. Things change. New techniques are discovered. You will also grow in your knowledge and want to extend your strategies which I will discuss later. 

Once you are confident that you have grasped the concepts, operate a demo account for a while. Three months is considered a reasonable time frame. Most Forex traders say that it takes a full year before you really get to grips with Forex.

Bone up on trading strategies to help find one that works for you.

Why Trade Forex?

Forex is the market to facilitate foreign exchange. With Forex you are dealing with a rapidly changing market. Currencies depend on the stability of the country’s economy. The economy can be affected by physical factors like floods, earthquakes etc. The stability of the government is also a factor, particularly around times of unrest or just before or after an election. Corona has had an adverse effect on trade so currencies have tended to fluctuate more in these last two years.

With Forex you swap the physical cash for virtual cash. You deposit physical cash into your brokers account and then trading, for you, takes place virtually. You buy and sell your currency pairs and you can withdraw any profits you make.

Because of the volatility of currencies, Forex suits the trader who likes excitement, the trader who can make quick decisions and not be fazed if things erupt.

Research the available currency pairs. See how they have been trading. Remember in Forex you are gambling that the one currency will increase in value as the other declines.

Is there a difference between the Stock market and Forex?

The US stock market opens up at 08.00 EST and closes at 16:00 EST. It works from Monday to Friday.

The forex market operates 24 hours a day. There is no trading on Saturday and Sunday. But the market opens the minute the clock hand passes 12 o’clock in the first time zone to see the new day and finishes at midnight on Friday at the last time zone to go to bed. Forex trading has much more flexible trading hours – about five and a half days. 

The stock market deals with companies and commodities. Forex only deals with currency pairs. You exchange one currency for another. Exchange rates are continually changing, and the deal with Forex is to find the optimum point to sell so that you profit from the trade. 

Trading Currency Pairs

In Forex, you trade currency pairs. You are banking that the first currency will go up in value as the second one goes down. It will be easier to understand with an example. Let’s take the US Dollar (USD) against the Australian Dollar (AUD) (represented as USD/AUD). Presume it is trading at 0.80. This means that 1 USD = 0.8 AUD (these are not actual trading figures.) These now act as a unit. If the price for the pair goes up, you win. If the price for the pair goes down, you lose.

The three types of currency pairs are:

  • Major pairs. These all feature the USD as on eof the pairs.
  • Minor or cross currency pairs. These are pairs that are frequently traded. They do not feature the United States Dollar.
  • Exotic pairs. These feature currencies from developing countries that have a stable bank presence. These emerging markets include South Africa, Russia, China, and Brazil. They are traded less frequently.

All pairs are referred to by three letters. The first two letters represent the country (US for the USA, GB for Great Britain, etc.). The last letter stands for the currency name (D for dollar, P for pound, etc.) The United States Dollar becomes USD, The United Kingdom Pound is GBP. Because the Euro is a legitimate currency for many countries, it is shortened to EUR. Note that there is no country code, just the three-letter Euro code.

How to trade currency to win

When you trade in Forex, your aim is to select a currency pair based on studying how they have been doing in the market recently. It is no good just looking at an hourly chart. A monthly chart (or several months) gives you a better representation. Charts give you a picture of how the pairs behaved. It is easier to see fluctuations in a picture than to look at lists of figures. The most quoted charts are candlestick charts. They are a difficult concept for a beginner trader but there are many videos and courses which will clarify their use. Candlestick charts come with many analyzing tools which help you to see trends in the Forex market. 

With experience, it is relatively easy to win more than you lose on Forex pairs. Many beginners find it difficult to read the markets accurately. Currency trade is volatile. It can change in a minute. News from the country can cause it to fluctuate alarmingly for a beginner. More experienced traders will be more equipped to act quickly as the pair plummets or increases. 

Forex is a no-get-rich quick scheme. Forget all the advertising hype with yachts and mansions and pearls and diamonds. These posts are probably from scammers who got rich, not by trading, but by willingly accepting any cash you steer in their direction. But with care, you can make a nice steady income from it. Those who benefit most are the rich as they can invest more than the trader who enters with the bare minimum deposit – and some brokers allow you to start at $10.

Let’s use the USD/AUD example above. If you have invested $10 and the price goes up to 0.85. To simplify it as much as possible at the moment, you have made $0.5 x 10. If you had invested $100, you will gain $0.5 x 100. Now, if you are really wealthy and you have invested $100,000… You see where I am going with this. The more you have, the more you make. But the flip side is – the more you have, the more you lose if the trade goes down to something like 0.75.

Because of the volatility of the currencies, you need to watch the market continually. Watching or hearing the news relating to the countries that you chose is important. No one can watch the market 24 hours a day, so you need to have strategies to protect your investment.

So to sum up this section:

  • Yes, you can win trading in Forex, but it may take time. It is not a get-rich-quick scheme. Your wins will help you elevate your lifestyle a little bit. 
  • You need to educate yourself and find like-minded connections.
  • You need to select a Forex pair and understand the difference between major, minor and exotic pairs.
  • You need to study Forex charts for the chosen pair and get help if you don’t understand them.
  • You need to invest as much money as you can without using money targeted for necessities.

How do I start trading currency?

The first step to trading currency is to have educated yourself adequately (see above). Once you have done this, you will be itching to start. 

Brokers

Your very first step is to find a broker. You cannot trade Forex without a broker. Forex brokers are all online brokers. So how do you find one? 

Search for them on Google. But be aware that there could be scammers out there. Scammer’s websites will frequently feature a banner with a ticking clock encouraging you to sign up before the clock runs out. They are relying on impulse traders. You have no place in trading if you are lured by impulsive commands. An interesting fact is that you can visit the site many days later and the ticking clock will still start at the same place as it did before. They will frequently feature pictures of the CEO. Rest your mouse on the picture, and see if the link leads you to a stock picture site. Run away. Google the CEO’s name. If it comes up as an actor or other semi-famous person – RUN.

Ask the people who you have connected with while studying. They are all working with brokers and can give you recommendations. Brokers may not be in the same country as you. It might be best to find a broker from your country. But in our modern virtual world, this is not essential. US citizens need to be careful. United States brokers have regulations that are not common with brokers from other countries. So if you are a US trader, you need to find a regulated United States broker.

Visit the broker’s online site. You will be doing online currency trading.

Read the small print. If the broker is not regulated (and many are not) stay away. Your money may not be safe with them.

If you think you can work with the broker, examine his site before making a final decision. 

  • What help is available?
  • Do they run courses?
  • Do they have news reports in real-time?
  • Is the site easy for you to navigate?
  • Do they offer Demo accounts?
  • What is the smallest amount you can use to start trading?
  • What fees do they charge?
  • What trading platforms are available?
  • Can you trade on your computer, phone, or tablet?
  • Do they allow you to trade on borrowed money (i.e. do they offer leverage)?

Roboforex

Roboforex is a reliable, regulated broker from Cyprus. They have a worldwide clientele. They are award winners and sponsor sporting personalities. It rates well with the organization Traders Union. 

It has a user-friendly site with available courses, videos, online help, and webinars. They offer demo accounts. 

It offers a choice of three different platforms:

  • MetaTrader 4 – A user-friendly platform that is available on computers, mobile, and tablets. 
  • MetaTrader 5 – Is also user-friendly and is gaining in popularity amongst traders. 
  • StocksTrader – Works with all leading world markets using a trading robot. It offers one-click trading.

The customer reviews are good.

Vantagefx

This is an Australian Forex broker who accepts worldwide clients. It is a regulated Forex broker which trades globally. The site has many tools to help traders and has a good customer support system. 

  • It requires a minimum of $200 deposit. 
  • It has an active news broadcast updating your marketing news. 
  • It offers a 50% Welcome bonus. This bonus may be time sensitive
  • It has been in existence for more than 10 years. 
  • Its apps are available for any mobile or tablet, and trading can be done on any device. 
  • It offers MetaTrader 5 and MetaTrader4 as platforms.
  • It offers a demo account experience. 

Markets.Com

Markets.com’s trading platform is a regulated brokerage. It has a user-friendly platform. It is based in the UK but trades globally. It has an excellent online education system.

When you register, you have a choice of four regulators:

  • CySEC (EU)
  • FSC (GLOBAL)
  • FCA (UK)
  • ASIC (AU)

It has many real-time financial news channels. Real-time graphs are available to assist in your Forex decision-making. 

It offers to trade on any electronic device. 

It caters to traders, especially beginners, in the following ways:

You can have a live stream that is tailor-made to your specifications with an app called XRay

It offers an e-book on trading.

It has an FAQ section that will answer most of your financial trading issues. 

The next step

Register with the broker of your choice. You will need to supply your name, email address, and cell number. Most brokers are not interested in your physical address as all correspondence will be via SMS or they will send an email. 

Once you have supplied this information, you will be asked to deposit money into your account. To begin with, deposit the minimum allowable amount. As you warm up to the trading, you can increase your deposit.  

Operate a Demo account

This is a crucial next step. You will be trading in the real market without using your deposit. Using a demo account gives you the time to use the strategies you have researched to see if they work for you. 

Once you have sorted out the nitty-gritty of trading currencies with virtual cash, and you are consistently gaining instead of losing, you can swap to an actual account. But remember, there will always be losses. The idea is to have more gains than losses. 

What to watch out for

Don’t overtrade. Spend only what you can afford to lose.

Don’t think you are going to be a millionaire soon. You will, if you have prepared yourself, make money over time. Your wins and losses will fluctuate but you should come out with more wins than losses.

Make sure you have a strategy in place. This will improve your chances of coming out on top. 

Measure your successes over a long period of time. Years rather than days and months.

While leverage gives you an edge in the market when it is favorable, you may also lose more than you can afford with excessive leverage. 

Buy low and sell high.

Know when to stop trading if the currency pair is losing. If necessary, set up a stop-loss system so that unexpected down flow overnight does not bankrupt you. 

Can currency trading make money?

This is a difficult question to answer. Some people do make money, and others don’t. So we’ll explore the reasons for success or failure. Forex trading is a risky and complicated business. 

There are over one hundred and eighty currencies in the world. Each one is revered for what can be achieved with it. There are haves, and there are have nots in the world – based purely on how much money they have. There is a continual drive for cash – a drive to make more money; a drive to make enough money to eke out a meager living. Money brings power, and the power-hungry will always seek more. 

If you travel outside your country, you will need to do currency exchange. If you can buy a pack of gum for let’s say, $1, you would think that when you exchanged $1 for another currency, you would be able to buy that same pack of gum in the new country. This is not necessarily true. It may be cheaper or more expensive. The buying power changes from country to country. 

It is easy to see why Forex trading has become so popular. Forex deals with how to trade currency with currencies from two different countries. Because it deals with money, people are fascinated by the prospect of making more. The value of a country’s currency is dictated by supply and demand. If many people are after a specific currency, that price will go up. 

How to trade currency 

Swapping one currency for another, for whatever reason, is termed currency trading. Currency trading can be a physical exchange of money or a virtual exchange. The virtual exchange is what we do when we trade in Forex. 

The popularity of home computing has helped Forex develop into a major trading activity. People are drawn to the fact that they can trade from the comfort of their homes. So your computer, your broker, and the platform seem to be the only things that can lead you to great wealth. 

When you trade in Forex, you speculate how a pair of currencies will fare against each other. You are buying one of the currency pair while selling the other one. Your hope is that the one you are buying will increase in value. 

The Forex market is volatile. Fortunes can be made and lost within minutes. It is dependent on many factors, the stability of the countries involved being one factor. When there is a lot of trading in a specific currency pair the market is said to have high liquidity. 

The personality of a currency trader

There is no set personality. Traders can be high-powered or conservative. Both types stand an equal chance of gaining or losing in Forex. It attracts the wealthy and the man who works for a living. 

Forex has a promise of gaining huge wealth. This concept is bolstered up by the many Instagram and Facebook posts by people claiming to have the cash to buy mansions and luxury cars because of their Forex investments. Pictures posted relaxing on the beach with a Mai Tai and your laptop earning money while relaxing in style at a luxury resort.  

Trader – get your feet back on the ground. Start thinking! Nothing involving money is that easy. The guy who invests hundreds of thousands is likely to win big, but he could also lose big. The best that the conservative Forex trader can achieve is a small rise in their standard of living. Your profits can go towards savings which can be earmarked for a new car or a better house or maybe you just want a slightly better lifestyle. 

If you want to make money on Forex, you need to spend time educating yourself and building strategies. You need to be patient. You need to be prepared to act quickly if things go south. You need to be calm. An emotional trader is likely to make stupid on-the-spot decisions. 

Set your goals to win 60% of the time. Yes, you will be losing 40% of the time, but overall you will come out gaining. 

Regard your trading time as a second, part-time job. Devote time to it each day. 

What are the risks?

You want to make money on your trading, so you need to be aware of the risks. 

Forex trading is not as tightly regulated as other trading platforms, so it is an attractive way for traders to try to make a winning deal. The risks of the trade center on you, the trader. You can do much to increase the risk or obliterate it. 

Leverage as a risk

The first risk to look at is leverage. Leverage means that you are trading with borrowed money. We are taught from an early age that borrowing is bad, but we will gaily traipse into trading with leverage. Leverage increases the amount you can make in a Forex deal. But if you lose, it will be so much worse.

Many countries have forced regulated brokers to cut down the amount of leverage they allow. People have been financially crippled by having too much leverage. 

Volatility of the market

Currencies change all the time. They rise and they can fall rapidly. A new trader often finds it difficult to predict the nature of their currency pair which could lead to losing money.

Many factors affect this volatility. 

Natural disasters in one of the countries can rock the value of your transaction.  

Voting days in the country of your choice can destabilize the currency for weeks before and after. 

Too many people may be going after that currency pair or there may be sudden disinterest and people are selling off their investment. 

Technology can be risky

Those pesky computers! We depend on them so much nowadays. But they are tools, just machines, and tools and machines can go wrong. 

Your computer could crash. I just hope you have a tablet or phone that can serve you in this emergency. Otherwise, you will be biting your nails wondering what is happening with your currency pair.

There could be a power out. Maybe you need to get equipment that can still work with no electricity.

Your broker’s site could go down. There is nothing much you can do about this except try to wait patiently while they sort out the problem.

Your ISP could go down. Again there is nothing to do but wait. 

All of the above could interfere with trading success. 

Analyze to succeed

If you want to be successful in Forex trading you need to invest in tools to help you analyze the performance of your Forex pair. Most of these tools will be available to you via your broker’s website. There are also apps that you can download on your phone or tablet as well. 

As you get more experience in analysis you will begin to find it easy to predict movement with a reasonable success rate. The better you become the more cash you will make on your transactions. 

You can search back in the history of how your currency pair did in the past. Look for patterns and trends to help you predict what will happen in the future. 

Keep an eye on how the currencies are performing now. Inflation, country debt, GDP, and interest rates will all factor in to affect your pair.

See where other people are flocking to make money. Join the herd but keep an eye on fluctuations. The number of traders active in your pair will have a bounce-off effect. 

That’s the way of the game

The reason why a huge percentage of Forex traders are not successful is that they:

  • Do not plan strategies. There are many set strategies that a trader can apply to ensure an equitable outcome.
  • Do not spend enough time learning terminology and techniques. This leads to confusion. Confusion leads to making bad decisions. 
  • Do not study the market. Trends are very important. You climb on when there is an upward trend and you exit when the trend goes down. 
  • Are undisciplined or emotional. Self-discipline and calmness will give you a winning hand.
  • Have depended too much on leverage. Borrowing is bad particularly if you do not have the funds to dig yourself out. 
  • Do not have enough backup funds. You should never invest all your spare cash. You need to have a slush fund just in case things go wrong. 
  • Have not deposited enough to play successfully. Some pundits feel that you should open your account with at least $10,000. Some brokers allow you to open an account with $10. You are the only one who can decide how muchyou can afford to lose. When you go into trading be optimistic about winning but be aware that you may lose all your investment. Think about how that loss will affect your life. If it is expendable money, shake your head and carry on. It is important that you only use expendable money for trading.

Conclusion

The concept of forex trading is simple but it is difficult to practice as there are so many variables to consider. It requires skill to trade successfully in Forex. As in anything in life, practice makes perfect. The more time you spend reading, analyzing, trading, and educating yourself will lead to an overall success rate.

You need to accept that losing is a part of investing. You are going to lose in some transactions. As long as you win more times than you lose you will be making money with Forex. 

Keep your dreams realistic. Don’t be tantalized by those adverts luxury items that people assure you came with big, easy Forex wins. Nothing is that easy in life. To win big you have to invest big. So if you are an ordinary man in the street with some spare cash that you can afford to lose, set your goals to win small but consistently. Then you will be able to up your lifestyle or contribute to your savings for a big item.

Trading, investing, and gambling?

You may think that these terms can be used synonymously and under certain thought processes, they could be. The differences are small but all start with the hope of making money during the deal. 

Gambling: In gambling, the house always comes out winning at the end of the day. When you enter a casino you hope that you will win but you know that you could lose everything you were prepared to stake. Winning big in a casino is very rare. Businesses have to make money.

Trading is the buying and selling of goods (or currencies) in the hopes of making a profit. This is exactly what you are doing when you dabble in Forex

Investing requires you to assign money to a project or commodity in the hopes of making a profit. 

Time

Time is important. Spend more time on the following than you spend in active trading.

  • Spend time learning all that you can. You need to understand the terminology of trading if you want to succeed.
  • Spend time to find the tools that will assist you make your decisions.
  • Spend time reading or listening to the financial news broadcasting the countries of your currency pair. 
  • Spend time to find the right broker for yourself.
  • Spend time analyzing the market trends
  • Spend time to research strategies that may work for you.

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Contact

Witzel Capital LTD.

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