The search for income never stops. Even if we’re working a regular job 5 days a week, the opportunity of making some extra income on the side is too good to pass up. Whether it’s working weekends or overtime, a part-time job at a different location or even an online business, it’s important to have multiple streams of income.
One of the biggest reasons is due to job security. Let’s face it, not many jobs in the world are completely secure to a point that you’ll never lose it. Whether you’re a police officer or chef, there’s a chance that you could lose your job next day due to countless different reasons. As a result, many people have turned to the internet to provide services or start businesses that will be in demand for a long time to come.
One of the most popular sources of income for budding internet entrepreneurs is forex trading. The word “forex” is short for foreign exchange and it refers to the trading of currency. It’s by no means a get rich quick scheme and most beginners won’t get much income until they’ve been trading for a couple of weeks. But once you learn it and break into the industry, it’s a great way to earn extra income and could become your main source of money if you work hard at it.
There are many places to get a forex demo to help you get started, and this guide will serve as a beginner’s handbook to guide you along.
Learn the Major Currencies
Every trader needs to learn the right major currencies that are traded. This is:
- USD (U.S. Dollar)
- GBP (British Pound)
- JPY (Japanese Yen)
- EUR (European Euro)
- CHF (Swiss Franc)
- CAD (Canadian Dollar)
- AUD (Australian Dollar)
- NZD (New Zealand Dollar)
Currencies must be traded in pairs, with the most common being USD/CAD, EUR/USD, GBP/USD and USD/JPY. There are also “exotic” pairs, which refer to minor currencies that aren’t traded as often, such as MXN (Mexican Peso) and PLN (Polish Zloty). There are pairs for every kind of currency, but most exotic pairs aren’t traded on a regular basis and as a result, the transaction costs are usually higher which makes it more worth your time if you always include a major currency in the pair. Currently, the USD is the most traded currency in forex.
Know Your Limits
Many people see trading as a form of gambling—but that’s simply not true. Trading does come with inherent risks, there’s no denying that. Your investment of $10,000 could turn sour when it falls against another currency, or it could make you a decently sized profit if you sell at the right time. There is an element of luck involved with forex trading, but remaining calm and understanding the market is far better than relying on luck.
At the beginning, focus on a single currency pair. Something often traded such as USD/GBP or USD/CAD would be a good starting point. Get familiar with it, observe the market as best you can and learn what kind of financial activities affect it. Once you learn to read the market and understand the flow, you can begin to make smart trades.
Love Your Losses
Not every trade is going to go in your favour. Every trader loses at some point in their career. The successful traders accept their losses and live to trade another day. The unsuccessful traders are mentally scarred by their first loss and can’t move on. What many people don’t realise is that losing is inevitable. There isn’t a trader alive that has a 100% success rate on all of their trades and remains positive throughout their career. At some point in their lives, no matter how small, they will have made a loss on a trade.
It’s important that you take these losses and accept them. Love them. Use them to teach you how to trade in the future and let the experience flourish into skill. Always set a maximum risk of a low percentage, like 2%, of your total funds. Let’s say you have $20,000 in your trading account. If the losses on your trade are about to exceed $400, then pull out.
Don’t Trade Money You Can’t Afford
Make sure all of your profits stem naturally from the money you make trading, and not because you deposited more money to spend. The money you spend on trading should be separated from your living expenses and they should never, under any circumstances, overlap. Do not get into the habit of reducing your quality of living just to trade something you “think” will be profitable.