The global Forex (foreign exchange) market is estimated to turnover $4 trillion on average daily. By comparison, stock market turnovers are in the billions. So, the Forex market is easily the most liquid financial market in existence, period. So wouldn't you want a piece of the pie? With advancement of technology, trading Forex online has become much more accessible. There are literally dozens of online Forex brokers around the world. There has never been a better time to trade currency. In this article, I'll show you the safest and most profitable way to trade Forex online while minimizing and even eliminating risk altogether.
Risk And Leverage
The advancement of the internet, computers and mobile devices have made it a dream to trade Forex online. But it is absolutely important that one must firstly understand the potential risk involved with leveraging when trading with Forex online. Leverage simply allows a trader to put up a fraction of the money (margin) they wish to control on the Forex market, the amount is usually a specified percentage. For example, one broker may require 1% margin to control $100,000 on the market, so the trader will only need to put up $1,000. Therefore, that makes it 100x leverage. Simple! Leveraging varies from broker to broker. Some allow as little as 50x leverage, while others allow as much as 800x leverage. While the leverage can earn astounding amounts of money, you can also lose just as much if you become too greedy.
Choosing The Right Broker
When first starting out with Forex online, it's important to choose a broker that allows 'Options trading' (this will be explained later). In terms of leverage, choose a broker that allows 50x to 100x leverage, which is enough in my opinion. 200x leverage is pushing it but you can choose it if you're happy with risking that much of your capital but I don't recommend any higher. The reason why many people choose more than 200x leverage is because they are specifically day-trading. This is where they watch chart movements every single second and buy/sell every few minutes. That's not my style, I'm more of a mid-to-long term trader than a short term day-trader. I personally don't like being glued to the screen and trading Forex online like a robot. There are software programs that can do that much more efficiently than any mere person can.
Eliminating Risk
The best way to trade Forex online without risk is by "hedging" a trade with a put option. A put option is a form of insurance where it protects you in the case where the price falls unexpectedly. This is why it's important to get a Forex broker that allows options on Forex trades. The process is simple and requires basic three steps. Firstly, find a currency pair that has been either oversold or overbought. Next, go into the trade and then purchase a put option. The put option should be the same amount value as the actual Forex trade and the strike price should be exactly the same as the open price. This essentially eliminates any potential risk to your trade as it covers you whether the price goes up or down. The only risk is the cost of the insurance. I recommend buying a put option that lasts at least 6 months. Keep in mind, this is method only works for you're doing mid-to-long term trading and not day trading.
Trading Forex online can easily make you or break you. But there are many tools and strategies to help minimize the risk and maximize the potential profits. Put options are one of the techniques out there. Personally, it's made me a very successful trader. Although it sounds simple to do, being successful with trading Forex online will take time to master.
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How To Trade Forex Online For A Living
Trading Forex online for a living can be achieved through several methods. The new trading professional can use Forex trading signals that are generated from a provider, are generated through personal research, or are generated by an analysis using algorithms. The following are strategies that can successfully be used by the Forex trader making a living online.
Provider Generated Signals
A Forex provider offers a trader platform to each online trader. The trade signals that are presented online are watched according to each professional trader's method of trading. Some traders use a standard methodology that is offered and published through online publications and seminars. Other Forex professionals use a combination of standard methods and a self-directed method. Current events and other data are presented through an online provider platform.
Technical Analysis
A technical analysis is a type of trading methodology that uses ichimoku and candlestick charting, for example. Both long- and short-term price trends are given. A flexible range of trading options are available using a technical analysis.
Fundamental Analysis
This is a second critical methodology that is used by professional online Forex traders. Fundamental methods give longer term trading strategies.
Trading Online Professionally
A Forex account owner who wants to trade Forex for a living has several critical methods. These online methods can use the following approaches:
1. The novice Forex trader can select a self-directed online trading strategy. This type of professional trader selects the best platform that fits with an overall strategy. The online platforms are regulated. There will be a commission fee for any bid or ask orders put through this type of online system.
2. The new Forex trader can select to use an online mentor system. There are advisers available through several of the online trading systems. Seminars are offered that help with chart selections and order analyses.
3. There are online automated Forex trading systems that can be selected. These accounts generally require a larger deposit amount that is included in a pool of funds that are traded together.
A Forex Trading Journal
The online trader making a living through self-directed Forex trading may want to devise a personal trading journal. Writing a separate journal can keep a real-time record of the online trades that are completed. There are additional reasons to keep a Forex journal, and these reasons are the following:
Historical Record
The journal will become an important record of the trades over a period of time. The accumulated effects of all trades completed can be analyzed effectively. A personal performance data base may be studied.
Planning Tool
An online trading journal can be used as a planning tool. The journal provides information about each new decision. Parameters may be set, and profit targets are easily determined.
Methodology Verification
The exact method can be verified over time. Each trader can review how each decision was made, and which decisions were successful. A profitable method can be reviewed.
Method For Improvement
A successful and profitable Forex trading method is developed over time. Any negative habits can easily be seen when these negative habits are written down. The successful trades begin to develop into a profitable and professional methodology.
Trading Forex online for a living can be a profitable line of work. There are online providers that offer several types of professional platforms for currency and derivatives trading. Most successful online traders use a technical analysis, a fundamental analysis, or a combination of these two methods in order to professionally trade.
Keith Ng is an online trader and applies the unique 3-step OGT Trading Methodology by Online Guru Trader. He recently wrote a successful guide on stock trading for beginners.
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