- Business and Employment
People who make money through online trading.
For the average person, any form of trading will seem daunting and not something that they would ever consider to make money. Most people are introduced to trading through other people who claim to be rather successful and don't mind sharing their secrets. The most common form of online trading is the Forex where you earn money buy simply buying and selling currency pairs. Money can be earned quickly with day trading of over longer periods, depending on what time frame you observe the currency charts. Some currencies are more stable than other however may not be as profitable as the more volatile currencies.
How to trade?
Firstly you will need to sign up with a stockbroker and they will provide you with an online trading platform showing all the currency pairs. I used to use IG Markets because it's good for people who have Japanese bank account.
To begin trading you will need to put a deposit into their account, the amount required will vary depending on the trading platform.
To enter a trade you basically observe the trends, if the graph looks like it is going to drop you sell and then buy again at a lower rate to earn profit.
On the opposite side, if the graph looks like it is going to rise then you buy, and the sell at a higher rate to make money.
It's an extremely simple concept that anybody can do. However it is not always easy to make money.
First of all, currency pairs have spreads. This means that the currency has to move in a certain direction before you make any profit. This would be the stock broker commission. For example, on the graph you could clearly see that the pound is dropping rapidly against the Japanese Yen so you sell, however your profits will still be in the minus figures until the pound falls for a fixed period. Once past this mark then you will be earning money. The amount you earn depends on how much you put in.
The winning strategy
It is better to begin with a demo account rather than using your own money in order to get a feel of how it works.
Basically you will be observing the graphs and charts to look for indications of a reversal. A reversal in the Forex will mean the point where the trend changes direction. The will be the best point to enter the trade to get maximum earning.
Once you starting earning you will then also need to exit the trade at a good point in order to maintain your earnings.
The main things to observe for signs of a reversal is the length of the candles in the candle type chart. Shorter candles with longer wicks are usually an indication of a reversal.
The second point to observe is the momentum of the graph, this is shown by observing the moving average graph or the MACD. This will help you in your decision to enter a trade by showing you which direction The graph is being pulled in. Some people are successful by using this alone, however I recommend you use a combination of both to maximize earnings.
Where people go wrong
Demo trading is rather different to real trading but you are not using your own money and you won't be trading with emotion. When using your own "real" money, things are very different indeed, no matter how many years you spend winning on Demo trading.
When most people enter a trade and start earning money they never seem to know a good exit strategy. They will stay in the trade to keep watching their earnings rise. Eventually the trend will reverse and you will be back in the minus figures. At this point many people get frustrated and wait for the graph to comes back but it won't in many case causing you earnings to plummet.
When people enter the trade at a bad point e.g. not a true reversal then your profits and instantly be in the red while to trend runs away in the opposite direction. The trade should be exited immediately to avoid further loss.
Trading without stop losses. Stop losses are there to limit your losses, they are set markers that will automatically exit you from the trade if crossed. There are certain times especially at business opening hours where the currency pairs can move sharply in a very small period especially at around 9.00am UK time. Not having a stop loss could wipe out your account if you are not careful.
There are always times when you could be busy and may be called away from your screen, especially if you have a family to attend. Not having an automatic stop could be disastrous.
Good trading is sticking to a solid plan and never deviating from it. Also more important is to accept your loses and move on. Loses are also part of the strategy however they should be limited as much as possible.
Trading on a smart device while out and about is also considered not good. Especially if you are using a 4G or 3G connection. For scalping, definitely no. You need to solid stable connection 100% of the time in order to jump in and out at an exact point.