Forex today is worth 5 trillion dollars, transacted every day. It is a global market, where traders deal in buying and selling of currencies from across the globe. The Forex market traditionally, have always allowed banks and other major and larger institutes to operate in the market. This was till internet took over, making information and global access possible. Hence, now we have FX transactions carried out via the internet. However, FX is not an easy market to trade in. For one, you need to have deep pockets for investments in FX. If you don’t have the funds, you still can enter the online Forex market and make money since Forex allows leverage.
Today, FX is an open market and witnesses trading in a larger scale across various traders: banks, financial organizations and firms, brokers and investors. The rational to understand here is why would such set ups deal in a decentralized market like FX. The answer is international trade and exchanges. Foreign currencies make purchases possible, internationally and aid hedge funds. With a growing interest in Forex trading across the globe, as a new
trader, one may also think of courses on FX trading for a better understanding of the market.
How do you make money online in FX?
Before you even start transactions in FX, a few things need to be straightened up. You cannot plunge head long into trading. So research well. Follow the trends in FX and read up. Your knowledge will go a long way in getting you started right.
Kishore M, Dubai based FX expert says, “Like any other trading is dependent on speculation. However, like anywhere else, history does hold a beacon of patterns here. You can choose to follow either history to understand the market or you can do an analysis of the way FX is trending currently or you may want to find a middle way out which would be a merger of both. The way FX works out at the end is on many factors but the bottom line is that good guesses work.”
Find a broker with solid credentials
While working out your strategies to trade in the FX market, understand the importance of a reputed broker. A broker is a must when it comes to trading in Forex, especially online FX trading. Hence as stated by Kishore M, “Finding the right broker, is probably, one of the single-handedly most important research you will need to do before you can enter the market”. Here are a few tips to keep in mind when you are looking for brokers.
- Look for brokers who offer low Spread. Spread is the broker commission, calculated as the difference between the price at which a broker buys currencies and sells them.
- Opt for brokers with solid backing. In the FX market, brokers are backed by banks and financial institutes. With leverage being an option, brokers often financially back investments.
- Make sure that your broker are affiliated to Futures Commission Merchant, and regulated by the Commodity Futures Trading Commission.
- When you invest and take risks in the FX market, you want to call the shots. However, you must remember that your broker also shares the risks along with you. This could often lead to broker intervention on the buy and sell of currencies. Ensure and opt for a broker who intervenes in the least
Every brokerage house or a broker has their set mechanics in place to track and analyse the FX market. Do a dry run and see if you get the mechanics. Without these way out to understand the market, you will end up making decision errors which will end up costing you a small fortune.
Tips for choosing your broker while FX trading
Look for brokers who offer low Spread
Opt for brokers with solid backing
A broker who intervenes in the least
Check for the mechanics offered
Stick to trade timings, days of the major FX exchanges
The FX market is open 24 X 7 for 5 days. But individual exchanges have timings. Since everyone is trading to make profits, it is in your best interest to know when to trade. The best time for trading would be the time when all of the major FX exchanges are open: NY, London, Tokyo and Singapore. Time zones will never converge to let them all remain open at the same time. In Kishore M’s words,” Aiming for the time when at least two of them are open, for trading, makes immense sense since the market remains extremely volatile at that point in time. A stagnant market does not have any opportunity of making profits. A volatile market allows not only for greater risks but also for bigger profits”. The midweek is volatile and is therefore most profitable for trading.
The trading hours of the mentioned exchanges are:
FX exchange timings
- London: 3 AM to 12 PM (noon)
- New York: 8 AM to 5 PM
- Singapore: 3 PM to 12 AM (midnight)
- Tokyo: 7 PM to 4 AM
Best days to trade:
- Mid week
- Tuesday, Wednesday & Thursday
Best trading months:
Understand the best FX market currency pairing
FX markets deal in currencies. So basically, you buy a currency and sell another. For instance, currency pairing in the FX market is represented as Euro/USD. This means that the EURO is the base currency (buy) and the USD (sell) is the counter currency.
FX is volatile in nature. Hence, the way currencies behave and the way a pairing would prove profitable, may be subjective to changes. However, USD is the most preferred currency, due to the size of its economy. Traders and experts have yet concluded that some of the pairings work better than others, due to their high liquidity and visibility in the exchanges.
Tips to making money online in FX
Open up an practice FX a/c
Find a broken with solid credentials
Get trade timings, days of the major FX exchanges
Understand the best FX market currency pairing
FX is a high growth, high risk market. Online trading has paved the way for individual traders to trade. Profits and loss is a trend with markets, but making money while trading online needs a few basic understanding in place. Get them right and start with a practice account. Once you are ready, go for it!