Can You Trade Currencies for A Living?
Forex is one of the most liquid markets globally, with nearly $6 trillion daily trading volume. This is produced by banks, institutions, and retail traders, to name a few. The considerable volume attracts investors from all corners of the world who employ various strategies to profit from currencies.
Before we dive into the topic, let us understand the basic concepts of currency trading.
A currency pair consists of two currencies. The first one is called the base, while the latter is the quote. When you are buying a pair, you purchase the base and sell the quote and vice versa.
Lot size determines the amount of money you’ll make or lose once the market moves in a specific direction. One lot size equals 100000 units of the base currency. A single pip movement would cause a $10 change in profits.
Leverage is the amount of borrowed money that traders can use to their advantage for opening positions with a large lot size. For example, a $1000 with a 1:100 margin can execute trades with a ten lot. The borrowed money is available from the broker but is taken out once the initial account value reaches zero.
Currency trading is available for traders 24/5 from 5 p.m. EST on Sunday until 4 p.m. EST on Friday.
There are multiple trading sessions in the forex market. They refer to the points when the markets open or close in respective continents or countries. Following sessions are important in currency trading:
Depending on the session, the market volatility can increase or decrease for specific pairs. For example, the Tokyo session is hot for JPY pairs as the yen is widely traded during these hours.
Most trading activity occurs during the overlap of the London and Newyork session. This is the time when the markets are the most liquid and volatile.
Investors can access currencies via brokers and respective exchanges. These companies allow traders to have the best trading conditions, including low spreads, fast execution speeds, and customer service.
Signing up with one of these is simple as traders can head over to their website and do the deed within a few minutes. It might be necessary to provide supporting documents such as an ID for verifying your account. Investors can use a demo portfolio or deposit real money and start trading right away.
Treating Currency Trading as Business
Traders should treat currency trading as a business if they hope to succeed in the markets. A proper trading strategy with risk management is essential to stay in the game for the long term.
Many strategies revolve around the forex markets. Traders are generally classified into fundamental and technical investors. The first one refers to those who look for critical economic events to identify changes in the market. They may or may not use charts for analysis and generally trade for the long term as the news settle in.
Technical traders use charts to identify significant market trends. They will use indicators, support and resistance lines, supply and demand zones for trading the markets.
Forex trading for business class can be tough in the early stages as they learn the basic concepts. However, with dedication and passion, it is possible to be consistently profitable in the short term.