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Written by Michael on January 15, 2021

How to make a profit by trading currency pairs

Business Law

If you are looking for a new opportunity to make a profit with a small amount of money, then you are in the right place! You can start your trading career in the Forex market with only $100! You even get to trade 24/7 without the need to go anywhere. If you have a computer and a good internet connection, then you can start your career in this field.

Isn’t that amazing?

Now many of you may ask the question of how you can make a profit by trading currency.

Well, you might be aware that the foreign exchange market is very liquid and always prone to rapid fluctuations. As a result, the exchange rates of currency pairs change frequently. When the demand for any currency against another currency increases or if the supply of a currency decreases, then the value of the currency will also increase.

Based on that, traders make a profit.

It is easier to earn money by trading currencies than sharing stocks. That’s why this market is gaining significant popularity.

However, since this market is very volatile, inexperienced traders can often face losses instead of gaining a profit.

For that reason, we advise that you follow some tricks before you start your trading.

Make a trading plan

Before you start your trading, try to make a plan that works for you. It can either be a plan adopted by a successful trader in Hong Kong or you can customize one yourself. But, make sure to follow a plan because, without a plan, you may feel a bit puzzled about your course of actions which is one of the reasons why new traders fail to gain a profit.  Try to learn about product futures before you make a plan. Having a brief idea about the future market can help you tremendously in the strategy development process.

Manage your risks

One distinct sign of a good trader is that they know how to deal with risk. There may be times when you have to take a risky decision. 

You can typically take risks of up to 2% on each trade. That means, if you have $1000 in your account, you can take the risk up to $20 on a single trade. You can manage your risks by using stop-loss orders. If you use stop-loss orders, you can set a particular point at which the tade will be closed. 

As a result, even if the trend is declining more than predicted, you can sell your currencies without making any loss.

Leverage

Leverage is an important aspect of trading currencies. Traders usually trade their currencies via brokers and brokers are the main provider of leverage.

Leverage is the ratio of loan the brokers provide compared to the amount of capital owned by a trader. If a trader doesn’t have enough capital to trade with or want to trade with a bigger amount of capital, then they can ask for leverage from their broker.

Brokers can provide leverage up to 50:1 ratio on major currencies. But they always place a margin call and if the amount of loss hits the margin call, they can confiscate the trading rights of a trader. Let’s say you have leverage of 20:1. You received a loan of $20000 at $1000. But unfortunately, you faced a loss of 4% which is $800, an amount similar to your original account balance. What’s going to happen now? In such cases, when a broker sees that you are failing to make any profit, they simply take away the leverage they provided earlier. That way, even though leverage enables you to trade with more capital, the risk is still limited to your original capital.

Do your research

The trading market is no place where you can win without a good market analysis. Until you know the recent history of currency exchange rates and the current rates, you won’t be able to understand the market easily. When you have a clear analysis of the market, you will be able to predict future fluctuations within a short span of time.

Having good market research is often the reason you can profit without being experienced.

Conclusion 

When you start investing, don’t think about making profits. First, think about the reasons you might lose.  And if you keep these in mind, you’ll ultimately see yourself making a profit.

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