In the modern world it is difficult to find a person who would not hear about the market «Forex». But not everyone knows what the forex market is, how exactly his work is built. And even fewer people will realize the possibility of earning money in this market.
You can find out about the direction of the market activity already from the name: «Foreign Exchange», or more precisely – exchange of currencies. Prices are formed freely on the basis of demand and supply, which makes it possible to earn money according to the rule: when one unit is cheaper, the other is strengthened.
Market was founded in the 1970s for currency exchange on a global scale, Forex was loved by traders for profit. The largest participants are Central and Commercial banks. In order to stabilize its currency, the bank can carry out operations aimed at strengthening or weakening, which is usually applied during times of crisis. However, the share of such transactions is small, and the market is dominated mainly by speculative transactions for the purpose of earnings.
Among the participants, three main groups are identified, varying in number and degree of influence on the market situation:
- First group is small but surpasses the rest in terms of capabilities. These are Central Banks, commercial banking institutions and large investment funds. By injecting enormous funds, they are able to influence the direction of the market trend;
- A second, larger group, formed by trading companies. They also have an impact on the market, but are unable to cause key changes in the situation;
- The third group consists of traders. It is the most numerous but devoid of influence on the situation. This includes both the «guru» of the currency trade and the beginners who came in the hope of luck.
How Much You Can Earn On Forex
The international currency market has many participants and is quite complicated. There are a number of factors that determine the dynamics of currency growth and depreciation. But what factors should be taken into account by the ordinary trader, and especially the beginner wishing to earn money?
Recommended Deposit Amount
In the first step, you should determine how much you want to earn in trading and form a deposit based on this indicator. Profit is an individual concept. But based on statistics, a participant receiving 20% of income is considered quite successful. Agree, 20% of $1000 look much more solid than 20% of $100. Impressive capital gives you the opportunity to earn more. And vice versa. Experts recommend to start trading with capital of not less than 3-5 thousand dollars. But whatever the size of the account, it requires a reasonable approach.
According to the golden rule of financial management, it is unacceptable to risk more than 3% of the available amount at a time. Some experts even consider this figure too high. This is reasonable insurance in case your decision turns out to be wrong. Having failed, you will retain the opportunity to «win back». Experienced traders are also advised to make a deal only if the potential «profit» is three times the possible loss.
Choosing A Trading Strategy
How do you know if you ‘ve chosen a good approach? For verification it is worth resorting to trading using a demo account. Note that this is not a one-time promotion! You will have to spend time and collect statistics on the basis of which you will be able to draw the necessary conclusions.
Analysis should be carried out not only on the number of successful and unsuccessful transactions, but also on the degree of risks and the measure of profit. If on average two of the three deals are successful, it is quite a good result.
It is important to understand that trade should not be a burden and should be brought to the state of nervous disorder.
Beginners are not encouraged to connect with short-term deals, let them and sow profits here and now. Such operations are kept in excessive tension, capable of bringing an untrained person to a nervous breakdown and to discourage the desire to continue. It is optimal to start with medium-term deals, which eliminate the need to spend 24 hours a day, looking hard into the monitor.
Self-Monitoring Level And Risk Preparedness
Many participants neglect this paragraph. But not everyone is able to act in cold blood without hitting panic. Often such frivolity ends deplorable.
Risks and the threat of financial losses are always present in the market. Here it is important to be able to make deliberate decisions and not lose concentration. If you understand that you cannot stick to the intended course and control emotions, it is better to leave the trade. Especially since there is a lot of other ways to earn money on the Internet.
Market Volatility News and Analysis
The international market responds to changes in politics and society, and is therefore often subject to high price fluctuations (volatility). This indicator may change under the influence of some important news. For example, the news of natural disasters will cause the national currency to fall, and the publication of a GDP growth report will respond with an increase in indicators. As a rule, before the release of the most important news issues, the indicators fade, but then the steep fluctuations begin, on which you can both earn a fortune and lose. Volatility must be taken into account in trade, but in order to respond correctly to and benefit from exchange rate fluctuations, existing patterns must be understood.