How to make money in Forex

Making money in Forex market is a very exciting experience. However, it will require strong nerves and good market knowledge. To earn big money in Forex is not an easy task, but it is possible. The main thing is to set this goal and work to achieve it, even in spite of the frequent failures.

How to make money in Forex

Characteristics of foreign exchange market

Forex is an international currency market. If you are thinking about trading in Forex, the answer is clear: it will be hard, confusing, and even risky in the beginning. With the flow of time, any trader becomes more experienced and develops a kind of “instinct” that helps to avoid unnecessary financial losses.

Forex vs the stock market

Forex differs from the stock market because it doesn’t have a single trading platform. It is divided into three trading session in accordance with the three parts of the world: America, Europe, and Asia. Forex work schedule is around the clock and uninterrupted. It is open daily 24 hours.  It does not matter what day of the week it is or are there public holidays such as New Year or Victory Day.

Converting currencies to Forex

Initially, Forex was designed to convert currencies. Converting one currency to another was available for large companies, banks, and entire states. After its introduction in 1971, this currency market has started attracting financial speculators. The latter is called the word of English origin — “traders”. The word “trader” is translated into Russian as “трейдер”. This is how all people doing all sorts of speculative operations to profit in the market are called. Therefore, the person, which was engaged in Forex trading at least once, can be called a trader.

Mechanisms of making money in Forex

There is a behavior of currencies in the basis of Forex. Every single moment the dollar’s rate against the Russian ruble changes. The same can be said about the relationship of the other currencies. For example, if one US dollar costs 50 rubles today, you can buy $ 100 for 5 thousand rubles. Let’s say that the next day US dollar will rise and Russian ruble will be cheaper. For example, 1 dollar will cost 52 rubles. In this case, previously purchased 100 dollars can be sold in the foreign exchange market for 5 200 rubles, and the trader’s profit will be 200 rubles.

Such operations can be performed on a daily basis and even several times a day. It is possible to make more expensive purchases, for example, to get not $ 100, but 200, 500, 1000, etc. Everything depends on the amount of money a trader has for every particular purchase. In any case, you need to understand currency does not always go up every next day. It is possible that a trader will remain with purchased currency or at least will be waiting a long time for the right moment for sale.

That means, US dollar may cost 50 rubles today, but its rate will fall against the Russian ruble tomorrow, for example, to the level of 48. However, dollar can fall in price tomorrow as well. In this case, making profit is not possible: a trader will either have to sell the currency at this price and accept the financial loss, or still continue to hope it will be more expensive one day.

Averaging of the purchase price

However, there is a third option, which is more complicated. As a matter of fact, American currency can be purchased at the present price, which may increase. As soon as the price of dollar will go up, a trader just sells all the currency. This action is called averaging of the purchase price. Averaging is often justified, but this operation is still risky as the dollar rate against the ruble may continue to fall. As a result, a trader will not receive long-awaited profit and will lose even more money.

In fact, brokers warn that trading on Forex is quite risky because of these fluctuations and the need to accurately forecast price movement. However, it is possible to earn good money if you calculate in a right way.

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