Make Money Trading Currencies! - Part I - The Process

Make Money Trading Currencies! - Part I - The Process 

So you want to know how to make money trading currencies? Well the mechanics of it are pretty simple. 1. First of all - you will need a computer with an Internet connection. 2. You then open an account with a Forex broker. There are many brokers out there and naturally some are better than others. Remember that this is the company with which you will entrust you hard earned deposit, so if you really want to make money trading currencies you will need to choose your broker very carefully! You can see my other article "Opening Forex Account" for tips on how to choose a broker. 3. You then need to execute an order. In Forex you buy and sell foreign currencies - that is how you make money trading currency.

The objective is to exchange one currency for another in the expectation that the price will change, so that the currencies you bought will increase in value compared to the ones you sold. Let's say you have 10,000 USD (US Dollars) and you want to buy British Pounds (GBP). If the Pound increases in value compared to the dollar then you will have made money trading these currencies. Example: You purchase 10,000 British pounds at the exchange rate of GBP/USD = $1.39. Ten days later you sell the pounds (also called closing your position or closing your trade or order) at the exchange rate of GBP/USD = $1.45. Let's see what happened in your account: Open BUY Order ----> GBP = +10,000; USD = -13,900 Close BUY Order ----> GBP = -10,000; USD = +14,500 End Balance: -----> GBP = 0; USD = +600 4. One of the great things about trading currencies, especially in times of recession is that unlike on the stock market, in Forex you can make money regardless of whether a currency pair goes up or down! Continuing with the above example, if at the same time the Canadian dollar went up, compared to the US dollar and you opened a SELL order on the USD/CAD pair, you would have also make money trading that currency pair! Example: Open SELL Order ----> USD = -10,000; CAD = +12,700 Close SELL Order ----> USD = +10,000; CAD = -12,200 End Balance: -----> USD = 0; CAD = +500 Note that this time the plus and minus signs changed their places - this is because this time we are SELLING the USD in order to buy Canadian dollars! If you don't know much about Forex then you are probably wondering, looking at the above examples, whether you have to have at least $10,000 to trade currencies? The answer is - NO! You won't need nearly as much to start. All forex brokers offer margin accounts where you only use a portion of your money (used as collateral) to control a much larger sum of money in your order. The idea is similar to a mortgage.

When you take a mortgage you provide the down-payment, which is only a small fraction of the price of your house, but are given control of the entire house! Similarly, in a Forex account your money acts as a collateral but it allows you to control much more money with which to trade. Most Forex brokers will allow you to trade 50x, 100x or even more times the value of your deposit! That's the basics of how you make money trading currencies: open an order and hold it until your position increases in value. Don't be fooled - even though it looks easy there's many aspects of currency trading that you need to be familiar with before you can start trading currencies successfully and profitably! Let's face it - just because it looks easy doesn't mean that everyone who starts doing it will make money trading currencies. In fact - most people who start trading Forex don't make money but lose money. Why? Forex provides the little guy with incredible opportunity for success... if you approach it seriously, if you take the time to invest in your Forex training and if you spend the money to get the right tools for the job.

Most people don't approach this wonderful opportunity seriously and the results are often dismal. Knowing how to play chess and winning at chess are two different things. This article explained to you the basics of the Forex trading process and how it is possible to make money trading currencies. If, however you want to know how to trade currencies PROFITABLY then you may want to consider investing some time and money into doing it right. Whether you decide to learn how to do it yourself or hire or a team of professionals to provide you with signals or manage your investments for you or (last but definitely not least!) decide to buy some automated Forex trading software - there are plenty of ways to approach your currency trading career intelligently and seriously. While going for an automated Forex trading robot may be considered a "quick-and-dirty" solution by some hard-core Forex traders it is also the fastest way to get a taste of the Forex market and pull in some quick profits, without burdening yourself with all the possible Forex trading techniques and methods available. By the way - did you know that in 2006, over 25% of all Forex orders and over 40% of all orders at the London Stock Exchange, were entered by automated software trading robots? These numbers are expected to double by 2010. Still think that trading robots are a fad, a scam or simply don't work?