How So Many Traders Are Making Money Online with Forex
Whenever you hear someone say they have found a great way to make money online, the first emotion that hits you is scepticism. We have been assaulted so many times with ‘get rich quick’ schemes that when something real comes along, we often pass it by without even taking the time to look into why and how it could really be profitable. Such is often the case with online day trading, Forex in particular through platforms like FX Pro, because we have all heard that it’s a volatile market and as a result it can be risky. Here is what you should know about that.
Learning to Ride the Waves
One of the metaphors which many seasoned day traders like to use is that of surfing. Forex day trading is much the same because a day trader, like a surfer, needs to learn to ‘ride the waves.’ You are literally betting the valuation of currency pairs which gain or lose value based on underlying market conditions. When they are right and match your investing strategy, you invest. When market conditions aren’t right, you hold or sell. In that way, it’s like riding the waves. Just as a surfer stands on his board when the right wave comes along, an investor stands his strategy when market conditions are right. However, there is more to it than meets the eye.
Those Tidal Waves Are Controlled by You, the Investor!
What many new day traders don’t often realise is that not only are they the ones riding the waves but they are also actually controlling the waves! Based on a number of factors, Forex investors decide conditions are right to trade. It is their activity that actually sets a value on the underlying currencies so there is always a constant tension between the value that traders are placing on a currency and the trading of those currencies that propagate movement. It’s sort of like balancing on a tight rope. If enough investors move in one direction, the market moves that way and they hedge their ‘bets’ on that movement. But in reality, it is their movement that sets the direction and their trading keeps the momentum going in that direction. But that leaves another question as to why they see a market moving as it does.
It’s All about Economics Underlying a Currency
Businesses in the Finance sector should, therefore, keep a close eye on macroeconomics within an economy. The GBP/USD pair would be a good example of what to watch for. The United Kingdom has just gone through a Brexit vote and we all know the outcome of that and the worries that can impact the economy. In the United States, the unexpected victory of Donald J. Trump has caused fluctuations in the market there as well. What should happen at this point to increase the underlying value of those two currencies is to stabilize worries over their respective economies going forward.
What this means is that both nations can do more to ensure there will be jobs for the unemployed. Both nations should also focus on their GDP in terms of helping add value to their respective currencies. Taxes need to be kept in check and healthcare costs should be kept minimal. Only by reassuring investors that the economy will be strong going forward will they continue trading these currencies. The connection is there! The strength of the currency impacts how investors feel about that currency, but it is their trading that also adds or detracts value from that same currency. In other words, it’s a double edged sword.
What You Can Do to Make Money Trading Forex
Before you can do anything at all, it’s imperative that you understand this connection between Forex and the value of underlying economies. Once you understand the connection you can begin to watch market movement in key areas such as employment, international trade, investments and current movement in Forex. Based on understanding how there is an interoperability between investing and valuation, you can learn to buy and sell on the Forex market to earn a profit over time.
There are a number of teaching sites on the internet that show you how to actually do the mechanics of a trade, but before you go that far, it’s imperative that you understand how currencies gain or lose value and the part you’ll be playing in all that by the simple act of betting on the value going forward at a specific point in time. Once you have an understanding of how currencies are actually valued, you are ready to learn to make money trading – and make no mistake about it – there is money to be made and plenty of it. You just need to understand your role and how you can personally affect the value of a currency you are trading.