Forex trading basics: five principles for stunning profits

Undoubtedly, Forex trading provides a dynamic opportunity to participate in the versatile and well-shaped world of international currencies, allowing traders, including complete newbies, to gain potential profits from currency fluctuations. In this review, we will provide you with the applicable information you need to confidently try your hand at the Forex market.

Principle 1: Forex is not a synonym for live casino

A lot of newcomers compare currency exchange to playing in a live casino, often making "random" entries.

Surely, the result would be the same as in a real-time casino: losing your valuable cash. Before you get into trading, you should change your perception and emotional attitude towards it.

Forex trading is serious work that requires particular skills, psychological devotion, and a certain level of attachment. In the casino, a gamer has RED and BLACK while in Forex a broker operates with BUY and SELL. These are incomparable things.  

Principle 2: Do not start with real money.

Before you start trading with a real-time account, you need to get your hands on a demo account with virtual money. A minimum trial period should last for a couple of months. Why do you need such a long time?

This manipulation will allow you to learn the intricacies of trading as well as dive deep into different strategies. Reasonably, only after a positive and stable result on your trial account, you can start considering a real account and replenishing it with your cash.

A lot of brokers do the opposite: as soon as they start trading for real, they lose money and then start learning from their mistakes. However, money is already lost in this situation.

Principle 3: Establish your personified marketplace system

There is no greater mistake than repeating someone's orders. Many traders earn by "selling signals", that is, they write when they open exact orders in diverse currency pairs. If you simply copy the actions of great professionals without understanding the logic, there is no way to correctly assess the situation.

You can be late with the entry or not make a timely exit from the position.

The result is total devastation within the currency exchange market. A demo account would be a helping hand for you to start practicing and diving into the matter. Overall, you should bear in mind when to enter a position, to what extent, how to place protective orders, and how to exit it. 

Principle 4: There is nothing better than a small start-up amount  

Most people think like this: "I will have more money, deposit everything, and immediately earn a lot! Why wait?"

Realistically, trading for big profits requires not only certain knowledge and skills but also a certain composition of mind and psychological stability. Let's get it straight: not everybody is born a trader. Thus, a hundred dollars is enough to start in this niche to realize if it is something that suits you. 

Principle 5: Never open an order for the full amount of cash

Top-notch entrepreneurs rarely open a position for the maximum possible volume. Because trading on Forex is often carried out using the so-called "leverage", with only $1,000, you can open a position 100, 200, or even 500 times larger.

\A movement for up to 70 points in the opposite direction will result in the trader's position being "knocked out" (a so-called "margin call" occurs). In this case, when to buy and sell forex depends on your leverage level and volatility.

How is the market influencing the currency's ups and downs?

It's no secret that currency prices only move up or down within the Forex marketplace. It may seem difficult for a trader to choose the best option. However, all you need is to make two separate lists, which will clearly state the conditions for how you should act in a specific market situation.

For instance, a trader has bought euros. At the moment, he has an open position, that is not a closed deal. As long as the position is open, the value of the purchased assets is affected by exchange rate fluctuations.

If, in our case, the euro rises against the dollar, the trader makes a profit, if it falls, his assets decrease. But he records his profit or loss only when he closes the position. It means that he carries out a reverse operation. 

What is the secret behind the Forex earnings?

Let's calculate how much we could earn by trading on the Forex market.

In our example, the EUR/USD pair was trading at 1.1896 one day and 1.1909 the next day. In this case, the euro increased by 13 dollar cents during the day. If you purchased 100 euros and sold them the next day, you would earn 13 US cents, and if you bought 1,000 euros, you would earn 1.3 US dollars, respectively.

As a result, a question arises. If the profit is so small, then what do traders earn in this case? It is all about on-margin trading or so-called leverage. Leveraged trading is trading using broker provided funds for impressive purchases.

For example, if you have $100, you can buy an asset for $1,000. The leverage can be higher, for example, 1 to 100 or 200 to own funds. In this case, the profit from the operation will also increase by 100 or 200 times.

Thus, the Forex market is developed for risk seekers who are ready to wager their valuable assets for even more profitable deals. Wise and timely currency operations indeed assist a trader in reaching impressive heights.