3 Ways to make money using Online Foreign Exchange trading
The Forex Market
Most traders refer to online forex exchange trading or Currency trading as Forex trading. Forex is a combination word of FOReign EXchange.
Online Foreign Exchange trading refers to the opportunities created by Online Brokers for you to trade or take bets on the direction the Foreign exchange prices will move. These online brokers are called market makers. They have created this opportunity about 20 years ago when the man in the street was allowed to trade the Forex market.
The biggest advantage to online traders is that these brokers provide leverage. This means that you can control $100 000 of currency with sometimes only $250 in your account.
Forex price levels are uniform and consistent throughout the whole world. If the exchange rate of the Euro in relation to the USD is 1.2000 in London, it Will be I.2000 in Congo, New York, Australia and Johannesburg.
Speculators and gamblers
The Forex market is largely composed of large and small speculators.
Small speculators are people like you and me who buy and sell currencies to profit from the change in the exchange rate of a currency cross. Only five percent of trades are for real commercial purposes such as: Business, tourism, etc. The remaining 95 percent are for speculation purposes.
This is the zero-sum game: the total gains are equal to the total losses.
What affects the Forex market?
The Foreign Exchange is impacted solely by macroeconomic data. This is factors like the unemployment rate of a country, raising of the interest rate in a country, and political events within the country. The micro-economic data does not interest the Forex market and does not affect it. In other words, the Forex market is only impacted by huge and international events.
The Forex market is comprising of: currencies and commodities. Today, some brokers also allow trading of indices and futures contracts. All the strategies and technical analyses that used are mainly relevant for currencies as well as for commodities.
3 Ways to make money
There 3 main ways of making money trading or investing in the Forex Market.
- You can trade the market yourself making all the trading decisions based on your own analysis and experience
- Alternatively, you can use a Forex trading Robot to trade the market
- If you are lazy, you can link your Forex trading online broker account to a trader who is trading very well.
Leverage is what makes it possible for you to double your account in 1 trade.