March 20, 2023
by Bt Stew
The forex market is growing fast, with an average of almost $7 trillion traded daily by forex traders worldwide.
While some people swear by it, some give it a bad rap and are quick to dismiss it.
Frankly, forex trading isn’t a get-rich scheme, but you can trade forex for a living with hard work and dedication. Employ the right forex trading strategies, and you can earn more than a living and earn a fortune!
In today’s post, we’ll be highlighting the basics of how to trade forex for a living.
If you’re a complete beginner, the first thing you want to learn is what forex trading is. Simply put, forex trading is the buying and selling of forex pairs. It’s buying one currency and later selling it for a profit.
For example, if you think the EUR/USD forex pair will go up, you would buy it and sell it when it reaches your desired price target. Conversely, if you think the forex pair will go down, you would sell it and then repurchase it when it reaches your desired price target.
When you trade forex, you’re essentially betting on the future direction of a currency pair. If your prediction turns out to be correct, you make money; if not, you lose. However, this would be an oversimplification of the entire process.
Forex trading is broad and complex. Traders have to use the right forex trading strategies to earn a profit. Otherwise, their trades will end in losses.
Now that we know what forex trading is, the next question is: how do forex traders make a living from forex trading? The answer to this question isn’t as simple as you might think.
Forex traders can make a living from forex trading in two ways. First, they can trade forex full-time. Alternatively, they can trade forex as a supplemental income source or a “side hustle.”
Full-time forex traders trade forex as their primary source of income. Supplemental forex traders usually have another job or business and use forex trading to supplement their income.
The forex market is open 24 hours, five days a week (business days). This means that forex traders can trade forex anytime during the day or night. However, not all forex pairs are traded around the clock; some only trade during certain times of the day.
There’s no one-size-fits-all forex trading strategy that works for all traders. Different forex traders employ different trading strategies to make money from their trades. Use the right strategy, and you’ll make a killing trading forex.
Some of the most common forex trading strategies that forex traders use include:
Supply and demand is a trading strategy that forex traders use to identify imbalances in the market. It’s a robust forex trading strategy that beginner and experienced forex traders can use.
The basic idea behind this forex trading strategy is that when there’s an imbalance in the market, the price will eventually move to correct it. If there’s more demand than supply, the price will go up. Alternatively, if there’s more supply than demand, the price will decrease.
As a forex trader, you can use this forex trading strategy to your advantage by placing trades in the direction of the imbalance.
Scalping is a forex trading strategy in which forex traders make small but quick profits from their trades. Scalpers hold their trades for a few seconds or minutes and then exit their trades.
The forex market is filled with a lot of noise and false signals. As a scalper, your goal is to filter out the noise and take advantage of the false signals. You can do this by using technical indicators such as moving averages, Bollinger Bands, etc.
Scalping is a high-frequency forex trading strategy that can be stressful and time-consuming. You can easily blow up your forex trading account if you’re not careful. That’s why scalping is only suitable for experienced forex traders.
The advantage of scalping is that it allows forex traders to make quick profits from the forex market.
Day trading is a forex trading strategy where forex traders limit their trading activities to a single day. Day traders hold their trades for a few hours or even the entire day and then exit their trades. They open and close their trades during the same day.
Most day traders use the news to steer their trading activities. Major events like elections, economic statistics, and others impact the forex market. Day traders keep an eye on these events to determine their trades.
Unlike the two we’ve mentioned above, position trading is a long-term trading strategy based on fundamental factors. Position traders hold their trades for weeks, months, or even years.
These traders make decisions based on long-term considerations such as a country’s interest rates, the economic calendar, and other economic indicators. If you’re planning on becoming a position trader, you need to have the patience to wait for the right opportunity before placing your trade.
Most position traders are seasoned traders with tons of experience trading in the forex market. They also have higher profit targets and only open a few trades a year.
While typical traders look at the change in the price of currency pairs, momentum traders look at the rate of change in these prices. These traders take advantage of forex pairs moving in a particular direction and ride the momentum until it dies out.
The forex market is constantly changing, and as a momentum trader, your goal is to identify these changes early enough and take advantage of them. You can use technical indicators such as the Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and others to help you with your momentum trading.
Momentum trading is a high-risk, high-reward forex trading strategy that’s only suitable for experienced forex traders.
You’ll need to find a reputable forex broker before you can start trading forex. Forex brokers are companies that provide traders with access to trading platforms at a fee. These platforms allow traders to buy and sell forex pairs.
Here are a few things to look for in a forex broker:
-The forex broker should be regulated by a reputable financial regulator
-The forex broker should have low spreads and commissions
-The forex broker should offer a user-friendly trading platform
-The forex broker should provide excellent customer support
Scour the internet and find a reputable forex broker to work with or use one our listed brokers. Once you’ve found a forex broker that meets your needs, you can open a forex trading account and start trading forex.
As much as you can make a killing trading forex, you can also lose a bundle when your trade goes south. To avoid this, traders use risk management practices that help minimize losses. Here are a couple of risk management techniques for forex traders.
A stop-loss is an order you place with your forex broker to sell a forex pair when it reaches a certain price. This price is usually lower than the current market price. You’re limiting your losses by placing a stop-loss order if the forex pair moves against your position.
A take-profit order is the opposite of a stop-loss order. You place an order with your forex broker to sell a forex pair when it reaches a certain price.
This price is usually higher than the current market price. Take-profit orders help you lock in your profits when the forex pair moves in your favor.
A risk-reward ratio is a tool traders use to determine how much they’re willing to lose on a trade. For example, if you’re willing to lose $100 on a trade, and your take-profit order is 100 pips away, your risk-reward ratio is 100:100. You’re looking to gain one pip in return for every pip you’re willing to lose.
Many professional forex traders trade for banks or other financial institutions. They typically make a salary plus bonuses and benefits. The average salary for a foreign exchange trader in the United States is around $47,000 per year.
Of course, this doesn’t mean that all professional forex traders make this much money. Some may make less, and some may make MUCH more. It all depends on their trading strategies and how well they perform.
With the right forex trading strategies, earning a living from forex will be a breeze. Plus, you can take advantage of the tons of online resources that can help you make successful trades. Find the right broker, use the right signals, and you’re destined for success.
Are you looking for a forex community to help you trade better? Join the Premier Forex League and get access to our exclusive Forex trading courses, trade signals, and much more.
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