Put simply, the basic rule of making money from forex sounds relatively easy, buy when the price is low and sell when the price is high. However, there are multiple other factors, and we will talk about how to earn on forex with ease. Supposedly, 95% of traders lose money and end up quitting trading.
So, making money through forex is a little more complicated than just buying and selling. It requires a mixture of patience, understanding of forex, risk management, and the ability to strategize.
Methods of Earning in Forex
The traditional earning method in forex is independent trading. The most significant advantage of this method is that the trader determines their ratio of profit and risk. The traders are free to make trading decisions and tactics.
However, forex trading requires time, effort, knowledge, and experience to succeed in forex. That is why alternative methods of making money in forex are proliferating with times that are easy to understand and execute. Let’s discuss each of them!
1. Using Brokers Leverage
You may notice that most brokers offer a certain level of leverage for your trades. Depending on factors, they may offer you the leverage of 1:30, 1:50, and 1:100, and so on. It is important to note that leverage is not a way to make money. It does help to boost your profit but also a cause of big losses if not used wisely.
But if used wisely, traders can make big profits even with a small amount of trading money like £100.
Let’s suppose there’s no leverage and you only have £100 to trade with. You will gain a £3 profit if the price moves 3% in your favor. However, if you choose a broker with a leverage of 1:50, you will initiate the position with a £5,000 value, and a 3% move in your favor will reward you £150.
However, keep in mind that while utilizing leverage (margin trading) can improve your profits, it also increases your risk of losing more money than you brought in.
2. Trading Forex with Binary Options
Another strategy to profit from forex is to trade binary options. They are referred to as fixed-return options because of their simplicity and the prospect of achieving more than 70% gains.
You can invest in the direction of a price movement regardless of the extent of the movement by trading binary options, where the basic binary options form is the high/low.
3. Trading Currency Pairs
In this currency pairs method, you basically sell a currency pair with the anticipation that the price will fall, and you will be able to buy the same currency pair at a lower price is how you make a profit.
Keep in mind that when trading currencies, you can use a variety of tactics to make money. Opening positions in the same direction as the trend (called trend trading) is one approach to trade currency pairs directly. You would purchase the pair in an uptrend while in a downtrend; you would sell or short the pair.
4. Trading Forex CFDs
Trading contracts for difference, or CFDs, is another way to profit from the forex market. CFDs are a sort of derivative trading instrument that can be used to trade a variety of markets, including stocks, indices, commodities, and currencies.
If you choose to trade CFDs, you will be able to make a decision on the movement of an underlying asset, but please keep in mind that you do not actually own the currency pair in which you are trading. When you trade CFDs, you trade on the price difference and profit accordingly.
5. Affiliate Programmes
An affiliate program is a type of business partnership between a forex firm and one of its affiliates, which the company pays for bringing in new clients through referral links.
Affiliate programs have the advantage of providing extra money to earn and the opportunity to realize one’s potential as an entrepreneur and start a business utilizing a ready-made model. Other benefits include:
- You don’t require any start-up funds. The company offers an affiliate with all of the materials needed to attract clients (for example, company information, banners, and referral links) at no cost. You only need to sign up as an affiliate.
- A basic understanding of forex is enough. You do not need to be financially educated, an experienced trader or an investment to draw a customer into a dealing center.
- Minimal effort is required in the first stages. Later, when the affiliate has introduced enough active consumers, they will be able to earn money without having to invest any time or effort.
How Long Does a Forex Trade Last?
One final point to remember is that you will have a lot of flexibility in terms of how long your forex trades will be live and active.
You may wish to take a long-term view on any two currencies you have selected to pair together, in which case you will want to use the long-term trades offered by all of the featured brokers.
However, certain very short time expiry Forex transactions will be available to you, so we recommend that you first try a demo trading account given by the forex brokers.
By opening a demo account, you will be able to use the demo trading credits to try out both the trading platforms and trading platforms of those Brokers and place both long and short-term trades through those trading platforms.
Once you believe you have gained sufficient experience placing demo trades, you can move on to a real money trading account, where you will, of course, keep any profits you make.
Is Forex trading profitable?
Remember that forex trading has risks; therefore, you should prepare yourself before you begin trading. You must understand how currency pairings work and what influences their prices. Also, try to establish effective money management to avoid risking all of your assets at once.
Here in this article, we have shown you how to earn on forex with ease. Read each method carefully explained here before making any decision on forex!
Good luck! Happy trading!