The fundamental principle of any market trade is to never invest money that you can’t afford to lose. Over-investing or failing to appreciate the risks can result in huge losses, especially when you are using other people’s money and the stock market suddenly crashes.
The bottom line is that all markets, whether trading in Forex or stocks and shares, can be volatile. That is particularly true at the moment with a global pandemic resurging and the ongoing Russian-Ukraine war.
It may be enough to question whether this is the right field to be in to earn a living.
The Basics Of Forex Trading
Stock market traders rely on purchasing low and then selling when the price increases. It’s a policy that has worked well for some. However, Forex trading is different. You are placing trades on the basis of how two currencies will react to each other. That means you can invest on the basis that a currency will go down in value as well as up.
In short, it’s possible to generate a return on your investment on prices decreases as well as rises.
Naturally, you need a brokerage account. There are plenty of companies offering them but you should ensure you choose a reputable one. This will give you peace of mind regarding the security of your funds and allow you to focus on the trades.
Earning A Living Trading Forex
Because you can get returns on upward and downward movement of currencies it is possible to earn a substantial income. Some estimates suggest Forex traders average earnings of $62,000. However, it is important to note that this is a risky business and you can easily lose as much as you gain on the same day.
That’s why you should proceed with caution, the following principles are generally used by Forex traders:
- Know Your Market
The key to successful Forex trading is in understanding currency markets. That means you need to watch currency movements and practice trading before you commit your funds.
While it is virtually impossible to be right every time, understanding the market and what influences currency movements will help you to be profitable.
- Invest What you Can Afford To Lose
As already mentioned, the best traders never invest what they can’t afford to lose. That way you can always afford to pay your bills.
- Develop A Strategy
Perhaps the most important principle to successfully trade in Forex is to create your own strategy. That means deciding how much to invest per day, regardless of the number of trades or the success of them.
Being tempted to do extra trades to recoup losses or because you feel you are on a roll is a certain way to end up losing money.
A strategy implements discipline which helps you successfully trade in Forex.
There is potential to earn a living trading in Forex, plenty of people successfully do so. You simply need to approach it cautiously and develop your understanding of the markets to improve your profitability rate.