Forex has been around since the 1990s, but it has never been as popular as today. Over 15 million people partake in trading on the internet, and this global community is growing rapidly. If you are dreaming of becoming your own boss and making money in global markets, this guide is for you.
How to Make Money on Forex
The foreign exchange is the biggest financial market worldwide with a whopping turnover — upwards of 6 trillion US dollars! Institutions and retail traders buy and sell currencies 24 hours per day five full days a week. Exchange is also an integral part of global trade and tourism. Somewhere in the world, currencies are being exchanged every second so take advantage of forex trading South Africa for beginners to gain some profit.
As exchange rates are constantly in flux, traders can buy low and sell high. Software systems can provide automatic signals to help them seize lucrative opportunities. Thanks to automatic triggers (Stop Loss and Take Profit), positions can be executed at an attractive price without your participation. Here are five tips to help you get started.
1. Find a Broker
You cannot trade without a broker, as the market does not allow direct access for individuals. Intermediaries provide accounts, take care of financial processing and offer comprehensive guidance to help rookies learn.
Make sure your provider is regulated and authorized to operate in South Africa. Check customer feedback to see what the real training experience is like. Test the quality of customer service, too.
2. Open Demo Account
Any reputable intermediary offers both live and demo accounts. The latter type converts your trading platform into a simulator, so you can study at your own pace. The demo period is usually unlimited, or you may be given a free virtual deposit — for example, $10,000.
3. Explore Strategies
Traders make money in a variety of ways. Scalpers prefer dipping in and out of the market frequently, capitalizing on slight changes. Day traders open and close all positions within the same day, avoiding overnight fees. Swing traders may leave positions open for days or weeks.
There are no right and wrong styles — any strategy can bring money when applied correctly. However, the more intense the trading, the more stressful it gets.
4. Learn the Ins and Outs of Risk Management
Risk is inherently present in any financial market, including forex. Currency exchange rates are affected by a plethora of factors, both economic and political. You can rely on fundamental or technical analysis, but Stop Loss is vital regardless.
Never risk more than 1% of capital per trade, and aim for diversification. Add more pairs and other instruments to a portfolio gradually, so you are not overly reliant on a single asset.
5. Avoid Leverage
Leverage lets you use a portion of your broker’s funds to open much larger positions — for example, 1:100. Remember that potential losses rise along with potential gains. Leverage is tempting, but you should avoid it altogether while you are still learning. Otherwise, you risk wiping your balance out overnight.
