Thanks to the emergence and the boom of the internet, foreign exchange (forex) have become an accessible investment to everyone. Moreover, a small saving budget is already enough to begin your trading journey.
Forex and CFDs trading, in general, are margin trading, meaning you can take advantage of financial leverage to reduce your deposit. For instance, with the leverage of 1:100 or 1% margin requirement, you can trade a lot of $100,000 by depositing only $1,000 or 1% in value of that lot.
This approach makes Forex an affordable investing channel for traders from all levels. The higher the leverage, the lower the deposit amount. Some brokers allow you to open an account from only $1. Nonetheless, higher capital is always better since you can make more trades and accept more risk.
Making Regular Income From Short-Termed Positions
Many traders take forex trading as their main income source. With hundreds or a few thousands of dollars, they can open as many positions as possible to maximise profitable chance. Normally, these orders are executed within one or several days.
Again, margin trading proves its advantages by magnifying the potential income of small positions. However, a high number of trades requires more time to manage. As a result, many individuals consider forex a serious career and their main job.
To trades small order effectively, traders need a good technical analysis ability. This skill includes studying charts, using technical indicators and understanding of price patterns.
For traders who have big capital, says from tens of thousands of dollars, they can trade long-termed positions. These positions can stretch for weeks or months and require a much bigger fund.
To take on such positions, the trader needs to watch the market from a wider perspective. They evaluate the overall economic health in fundamental factors like interest rates, inflation rates, employment percentage and others.
The advantage of long-term investment is that it brings negative incomes. Traders don’t need to spend much time managing but still get the money generated.
The Risk Of Forex Trading
Forex and margin trading contains extremely high risk. Not only does the leverage magnify the profit but it also increases the potential loss in the same proportion. Worse, that loss can go beyond your balance and blow your account up eventually.
Therefore, before trading forex, you need to prepare yourself with a good base knowledge, stable psychology, effective strategy and strict risk management plan. Traders can develop these things by trading in a demo account – a simulated environment with no risk.
Forex is an investment trend at present. The advantages of low capital and flexibility for all traders make Forex an attractive way to make money. If you have already had good knowledge, a proven trading plan and the ability to overcome emotions, let’s open a real account, deposit and start trading.