Sunday, September 2, 2007

How To Make Money In Forex

As you might already know, forex is an acronym for foreign exchange -- is the international currency market where money is being sold and bought. Forex certainly is a new and exciting way to make money in the huge global currency market.

Making money in forex is very similar to stocks, options, or futures. You will be provided with a list of currency pairs each is coming along with graphs which you can select and trade. You can sell (or short) if you expect the graph to go down and you can buy (long) if you expect the graph to go up.

How Can I Make Money in Forex Trading?

When you buy a currency in the forex market, you are actually doing two trades. You are selling one currency and buying the other. You have known what currency you are betting for/against, as opposed to the stock market where you only need to know one stock.

Unlike stock trading, most online forex firms don't charge commission. They make money by giving you a worse spread then they get and by charging you interest on margin. This spread is usually two or three pips (explained below).

Margins are huge in currency trading; you can easily be accepted for 200 to margin on-line. Some forex firms will give you up to 400:1 margin. To be honest, there is very little regulation in this industry, which means you can move $2,000,000 worth of currency with only $10,000 in your account. You can even open an account with as little as $300.

Profits in forex are measured in "pips" or "points." A pip is 1/1000 of dollar. For example if you buy the dollar (USD) against the euro (EUR), and it went in your direction from $1.300 to $1.299, you have made a 1 pip profit. On a $10k order at full margin (200:1), this is equivalent to $50 in profit.

How Much I Can Earn?

Virtually, the limit is the sky. As much as how long you trade and keep earning. Trading will be within 24 hours 5 days a week. How fast you can earn is depending on the volatility of the market. If it is very volatile (moving ups and down quickly), you probably can earn a lot of pips if you are lucky.

However, average earning for professional trader is 100 to 200 pips a day that is equal to 100% to 200% return on investment. George Soros, the heart of inspiration for every forex trader, made a history in September 22, 1992 when he bagged US$1 Billion and ruined the Bank of England. This called The Black Wednesday.

What Do I Need to Trade?

The first thing you need to trade is a broker. Register with any of them and they will provide you a software platform that equip with a list of currency pairs, graph, technical indicators free to use. The broker usually provides you free practices by providing virtual money for you to practice enhance your skills.

There are two schools of thought like in stocks about how to make money in forex trading. On one side you have the technical, which are basically charts and other statistical methods that used to try and guess the market. On the other side you have the fundamentals, which study things like countries domestic product, interest rates, economic output, etc. to try and forecast currency movements based on these criteria.

Of course the best answer is always in the middle, using a combination of graphs and charts along with real world knowledge of political events and economic statistics to make the market more predictable for you.

If you want to learn more about mainstream technical analysis tools, in my experience, the most honest person who teaches mainstream technical analysis in the best way is Peter Bain (Forex Mentor). Whether Peter trades himself, and whether Peter ever made money in forex is definitely questionable. But if you want to get good education and overview of many different mainstream technical analysis tools, I think Peter is good for that.

Is It a Risky Business?

Is there any risk involved? Yes. Everything has risk whether it is involve time, life, money, etc. Risk unfortunately can not be avoided. No absolutely not, that's impossible for everything. But as any other thing else you can minimize risk and increase profit, thats how to make money.

I feel so grateful and lucky to be able to trade forex full time. Not only is it fun, and I feel passionate about it, but it's also monetarily rewarding, and it gives me freedom to do it from almost anywhere in the world. I hope to be able to share some of this luck and gratefulness with you. And truly from the bottom of my heart and my being, I am wishing you tremendous success and abundance in forex or any other business you do.

Martin Chandra has over years experience in marketing. Hooked on potential of the Internet since '97. Good at seeing the big picture with an eye to detail. If you want to learn more about forex, please take a look at my site.