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Is Forex Trading Profitable?

Thu Sep 24 2020 12:01
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Forex trading is among the 'most scalable' jobs that an individual can have right now. Some prefer to do it as a side gig and some make it to the level of a proper career.

As a beginner, you would be glad to know that traders all over the forex market trade forex worth $5T daily. And from this figure, it's easy to guess if this is a profitable gig or not. To give you an insider fact at the beginning of this article— Yes, it's profitable and a stable opportunity to try. Before putting your capital on work, read this detailed article to get a complete idea. 

Defining your goal boundary is important

FX will be profitable for those who have a set goal of earning $10K in a month from a capital of $5-6K.

On the other side, it may not be useful for one who wants to put $5K but plays guess games in the hope of earning millions.

So, first, write down how much capital you want to invest and how much you can afford to lose. Once you figure out this matrix, the whole ecosystem will be easy for you.

While preparing your FX goal boundaries, also define how many trades you can go without a win. The concept behind this is simple as it gives you your own rules when you need to change your trading strategy.

Once you prepare your step-by-step trading goal, you are already ahead in the group of a pro trader. Most of the beginners never focus on this area of this field and they fail.

Do your homework for defining your trading goal and create an on-point road map. Also, do basic research on the profit and loss ratios, risk-reward graphs, indicator, trading platform, etc.

These are the basic goal planning pillars most people don't follow. But if you follow them, profitability will come indeed. After this brainstorming, understand the other factors of profitability of traded currencies below. 

Know About Your Profit And Risk Ratio

Many expert traders say you should risk less than 2% of your capital if you are betting in currency trading. But, this depends on how much you can risk gaining high profits.

For example— If you wish to put $250 on a trade with a risk ratio of 2%, you are willing to spend $5 as a risk. Some people take this ratio to 5% or even 20% depending upon their targets and goals.

At XOSignals, we recommend beginners to have a risk appetite not more than 3% of the total trade amount. If you define this ration for yourself, you will play a scalable game. In a trading day, if you lose 18 pips on a trade and win 23 pips on another, you are in a profitable state.

Planning for this profit/risk ratio is important to draw your success forex strategy. As a trader, be flexible in your approach to achieving your targets. If you are not happy with a certain risk/reward ratio, try re-defining your risk factor to achieve your goals.

Wondering about how to calculate if your ratio is correct or not? Follow the way of win rate. This tern defines your total win numbers out of total trade. For explanation— If you have done 200 trades so far and 120 are profitable, your win rate is 60%.

Keeping your win rate above 60 or 70 is good money trading forex as a beginner. After you calculate this ratio, know about trading plans, strategies, and trading accounts.  

Know concepts of strategies in forex 

There are a handful of trading strategies available for a beginner. All the strategies are profitable but you need to find a couple that suit you.

Before picking strategies, you can measure them on important 2-3 factors. These are learning curves of how to trade, the time you will put in them, winning chances in them, and more. You will find a lot of top strategies that experts will suggest. Price action, range strategy, trend trading are some of the top choices of traders. Let's have a look at popular strategies:

In the strategy of price action, you study the previous performances to make the analysis. You can consider it as a stand-alone technique.

Range trading is about finding both support and resistance levels for placing trades. Volatility in this strategy is low and the trader uses this with technical analysis.

In the trend strategy, it is more of going with the masses. In this method, you study market trends, external events to decide trades. Traders also use fundamental analysis to study the market better.

Position strategy is for those who are planning for a very long game. In this, traders don't focus on sudden market changes as they focus on long term profits.

The last popular trading plan is day-to-day trading in which the trading span is short. A trader opens and closes the positions on the same day. This type of trading needs more knowledge and experience. There are many other strategies like scalping, carry, swing, CFD trading, etc. 

Profit tips for beginners in forex trade 

The more you explore trading, the more you will gain from it. But, while you start as a beginner, there are some key things you need to understand as a forex trader.

Use the stop-loss feature every time you trade regardless of the amount. A stop-loss caps limits on capital when your trade reaches a certain point. For example— if you buy a share at $60 and you want that if that reaches $53, you will sell it; stop loss will do this for you. This feature is available on all platforms including Metatrader.

Do not get your emotions such as anxiety, fear of losing, or greed in the trading ecosystem. Treat this as a full-fledged business and don't risk capital without analysis. Don't let any emotion come in the middle of a trade. Always rely on technical data, candlestick charts and market reports.

Leverage is a concept in which a trader lets you trade beyond your limits in your trading account. For example— the forex broker offers 1:100 leverage this means for every $1, you can trade for $100. This is a powerful feature and it has the ability to cause both high profits and losses. So, even if you have the chance to use the leverage of 1:100, take calculated risks.

Discipline plays an important role in businesses like online forex trading. Don't get overwhelmed or feel under confident and stick to your trading strategy.

Developing discipline will take months or even years but it will gain you more profits in the long run. Among many trading platforms, select one that you can use with efficiency.  

Final Words 

Keep these things while making decisions in both short and long trades. For a quick recap— understand your goals, study profit/risk ratio, build a strategy, and follow the basics.

FX trading is more about the experience and more hands-on. The more you explore this domain, the more you will gain. Trading is not hard if you start early and keep doing it. Get in touch with XO Signals experts to start trading and gain accurate trading signals.   

References:
 
TAGS:
Forex trading,
Forex
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