Currency Trading for Profit: Taking Your Trading to the Next Level

Today, more and more people are looking for ways to make money online and currency trading is one of the hot investment opportunities that continues to gain attention. With a little knowledge and practice, anyone can learn to trade currencies to produce a steady stream of income. If you’re new to currency trading and want to make money doing it, here is a guide to get you started on the right track.

What is Currency Trading?

Also known as foreign exchange trading, currency trading is simply the buying and selling of foreign currencies in an effort to turn a profit. Currency trading is an incredibly liquid market because there are buying and selling opportunities occurring 24 hours a day, five days a week across multiple exchanges and currency pairs.

Currency pairs are simply two currencies that you are trading against each other, such as the US Dollar (USD) and the Euro (EUR). When currencies are paired together, the exchange rate changes as the relative value of one currency in comparison to the other.

The goal of currency trading is to make a profit from these price fluctuations of the currency pairs. Profits or losses can be made depending on the direction of the currency pair’s price movements.

Getting Started

Before you get started in currency trading, it’s important to understand the basics of how it works and the terminology used.

• Choose a currency broker - When trading in currency, you must select a broker that’s authorized by the government. Brokers provide several platforms to choose from, and they also provide technical support and analysis tools ^[1].
• Understand trading terms - You need to familiarize yourself with the different terminologies used in currency trading such as pip, spread, and leverage. ^[2]
• Set trading objectives - Before trading, you should have a clear goal in mind. This can be either short-term or long-term, but it’s important to have a goal to keep you on track. ^[3]
• Learn about management techniques - You should understand how to manage and control risks to prevent them from exceeding your budget. This includes learning techniques like setting stop-loss and take-profit orders as well as position-sizing.^[4]
• And more- To further prepare yourself to become a profitable currency trader, you need to read books and articles written by experienced traders, join online forums to exchange ideas and strategies, and find good trading platforms to practice. ^[5]

Trading Tactics

Once you’ve got a basic understanding of how currency trading works, you now need to learn how to take advantage of movements in the market. Here are three common tactics that you can use to make money in currency trading:

Scalping

Scalping is a popular day trading tactic in which currency traders make quick profits by scalping a few pips (typically 2-7 pips) at a time. This typically involves holding a position for a few seconds or minutes before closing it. Scalping is considered a high-risk type of trading because the returns are often small, but it can be a very effective tool for making money.

Range trading

Range trading involves taking advantage of price movements within a certain range. Traders typically look for a currency pair that is fluctuating between two prices and then enter a buy or sell position when the price reaches the lower or upper levels of the range. Range trading is useful for traders who are looking to make smaller profits over a longer period of time.

Carry Trade

Carry Trade is an advanced trading strategy that involves taking advantage of the differences in interest rates between two different currencies. This tactict involves borrowing a currency with a lower interest rate and then investing it into a currency that has a higher interest rate in order to generate a profit. Securing higher interest rates means that the money you earn on the trade is greater, although this also increases the risk of significant losses.

Conclusion

From the basics of currency trading to various trading strategies, this guide has listed the information you will need to get started in currency trading and make money doing it. If you’re serious about becoming a successful trader, the best advice is to start off small and build up your experience and confidence. With a bit of practice and hard work, you will soon be on your way to becoming a profitable currency trader.

Sources

• The Balance. “Choosing a Currency Trading Broker.” Accessed June 10, 2020. [1]
• The Balance. “Foreign Exchange Rate Basics.” Accessed June 10, 2020. [2]
• Investopedia. “Should You Set Goals in Trading Foreign Exchange?” Accessed June 10, 2020. [3]
• Investopedia. “Position Sizing.” Accessed June 10, 2020. [4]
• University of Alberta. “Preparing for Currency Trading.” Accessed June 10, 2020. [5]