Did you know that the largest trading market in the world isn’t the stock market? It’s forex. What is forex?
It’s short for foreign exchange. About $5 trillion in foreign currencies are traded every single day.
It’s an attractive avenue for investors because it’s simple and many see it as a get rich quick scheme. Investors bank that one currency’s value will increase against another. If you get it right, your investment pays off.
It’s easy to understand, but it doesn’t automatically mean that you’ll make a killing in the market. Is forex trading profitable? Keep reading to find out and how to hedge your investments.
Is Forex Trading Profitable?
Like many investments, some people including ECN brokers are successful in trading forex. Others, not so much.
Many people look at forex and think it’s an automatic win because it’s easy to guess if a currency will go up or down.
Take the US dollar as an example. Since the US government printed so much money during the pandemic, you’d assume that the value of the dollar goes down. Inflation did creep up a little, but the economy is getting stronger by the day.
That level of complexity doesn’t make forex an easy trade. You have to do your homework and know which economic indicators to look at. You also need a good strategy.
The truth is that large investment firms do quite well trading forex. Retail day traders aren’t that successful. There are some success stories, but those stories aren’t the norm.
How to Start Forex Trading
How can you start trading forex? It starts with your trading goals and how they compare to the rest of your investment portfolio.
Forex trading shouldn’t take up more than a third of your investment portfolio. Smart investors know how to diversify and do it well.
The next step is to pick your currency pair. For example, you can pick the US Dollar and the British Pound. Beginners should only pick one or two currency pairs.
Become the expert in those currencies. Learn the economics of those countries, what indices you need to pay attention to, and when major reports are released.
The US jobs report is an important indicator of economic health. That has a direct impact on the value of the dollar. You should know when the monthly jobs reports are released.
Your next step is to find a forex trading broker and trading platform. Forex trading for beginners means practice makes perfect.
You want to sign up with a brokerage that allows you to practice trades and strategies. A Metatrader 4 Brokers list can help you do preliminary research on different brokers.
Make Forex Trading Profitable
Is forex trading profitable? The answer to that question largely depends on you. If you approach it as a way to get rich quickly, then it’s not going to yield the best results.
You have to approach forex trading like any other business. It takes time to research and learn the best trading strategies. It helps to have the right broker as well.
If you enjoyed this article about forex trading, you’ll love the other investment articles on this site. Be sure to check them out today!