Is Trading the Forex Market Really Just Gambling?
The foreign exchange market, better known as Forex, is the market where the world’s currencies are traded. Out of all the markets, Forex sits at the top in size. Trading Forex is looked at as a form of gambling, but this is not always the case. Plenty of people think that a trading Forex is a form of gambling because it is associated with trading. However, Forex is a relatively stable market and if used correctly, you can develop a winning strategy. Perhaps, you may be on your way to living a forex lifestyle!
How Do People Make Money Trading Forex?
When people trade the foreign exchange market, they are looking to buy or sell a particular currency in an attempt to buy or sell at a better price. Traders love to trade Forex because the market is open 24/7, unlike the stock market. The foreign exchange market is also a lot more consistent in price which allows for new traders to begin trading without a ton of risk. Even if you are a professional trader, you can make a lot of money in Forex with a winning strategy.
If you have ever gone to a foreign country, you have participated in the foreign exchange market. Recently, I went on a trip to Canada where my United States dollars exchanged for roughly 1.3 Canadian dollars. This was obviously beneficial to me because I was able to have more buying power on my trip. Without even knowing, I was trading Forex.
Professional traders take a more active approach to the foreign exchange market. Instead of exchanging at a currency exchange in an airport, they are using online brokerage accounts. They deposit funds into these accounts and use technical analysis to determine when to buy and sell a particular currency pair. Usually, the trader will have a strategy that wins 60-80% of the time that they swear by.
That is the secret of professional traders. They develop strategies that rely on a mathematical edge. They do not trade looking to hit a home run on each trade, they look for consistent wins.
Can’t I Lose A LOT of Money?
Of course, but it is unlikely if you do take the proper precautions. Think about it, before you got your driver’s license you took all the precautions. You first read the driver’s manual, took the written test to get your permit, drove with a licensed driver, and passed your driver’s test. If you were to avoid all of this, you would have an increased chance of causing an accident. T
This is what you should do with Forex. Do not just begin trading without knowing what you’re doing, learn first. Taking a course that teaches the basics of Forex will dramatically increase your ability to profit from the largest market. You can also read a book related to Forex that is highly reviewed. This is also where you will develop your winning strategy. Win more than you lose through a winning strategy and you are a money-making machine.
You are only gambling if you do not take the proper precautions. If you do not know a thing about trading, you can expect to lose. Take the precautions or face the consequences.
How Can I Trade Forex?
After you have read a Forex related course and built a winning strategy, you should test your strategy. Sign up for a simulated Forex trading platform and implement the strategies. Calculate your winning percentage and if your winning strategy is between the 60-80% range, you are ready for the real deal.
Sign up for a Forex brokerage, deposit money, and apply what you have learned. When you are trading, stick with the winning strategy. Continue to allow your mathematical edge to play out and do not change anything.
When it comes to making money, people often think of a job. Jobs allow people to trade their time for money and happens to be what most people do. The problem is, you have only 24 hours a day, and not all of these hours can be spent working. Forex, on the other hand, is a business model that allows your money to work for you 24 hours a day.
Owning a business is the next reasonable way to make a living, but not everyone has an entrepreneurial spirit. Besides, business requires you to tie up most of your liquidity in inventory, supplies, labor, rent, etc. Anyone who does not already have a lot of money will need a loan, which charges interest.
Luckily, trading the foreign exchange market can be a reasonable and profitable way to earn an income. Forex (foreign exchange) trading is a popular method to make money using the money you have. It allows you to work from your computer, set your hours, and be in charge of yourself. The forex lifestyle is fun and can become your next opportunity.
Unlike a job, forex has no earnings cap. Forex trading is the process of buying or selling currencies to make money. Primarily, people will trade currencies to make money in the forex market.
The currency market can be a long-term solution to earning extra income. What forex traders do is use real money combined with technical analysis on a forex pair. After the review has been done, they will use their forex broker to make an educated decision on where to enter a trade, hoping to make a profit.
Forex and Casinos
Now, if you have never heard of how a casino makes money, you will be shocked. A casino offers people the opportunity to gamble their money with the hope of turning a profit. This is done through table games, slots, and more.
Casinos have what is known as the house edge over a game. Basically, on each contest, the casino will win more than 50% of the time on any game. Using basic mathematics, you will realize that a casino is not concerned with short-term losses. They are in it for the long-run.
Forex traders can learn a lot from casinos. In forex, you should not be worried about being correct 100% of the time while trading. A common misconception is that the only way to be profitable trading forex is to be right, but nobody is right 100%. In reality, forex is not about being right; forex is about being profitable.
How to Trade Forex
The first thing any forex trader should have is an internet connection and a computer. You will also need some cash to start trading on your account with, so make sure to have around $100-$1000, to begin with. If you do not have the money, to start with, consider a demo account as this will allow you to use the trading platform without any risk. A demo account can be a great way to learn.
Risk: Reward Ratio
A risk: reward ratio is a ratio that will define how profitable you will be trading the market. Before entering a trade, you will have to decide how much you are willing to risk to gain a certain amount.
For example, if I have three risks: reward ratio, this means that for every $1 I risk, I have the opportunity to make $3. As a rule of thumb, I keep my risk: reward ratio at a minimum of 5, meaning at a minimum, I need to be right two out of ten times to break even.
In simple terms, positions trading is when you set a stop-loss and a take-profit order based on your risk: reward ratio. I use TradingView connected with Forex.com to do all my trading. Combined, you can easily set your positions with the designated risk: reward ratio.
With positions trading, you are setting entry to the order first. This is where you first decide if you are going to buy (go long) or sell (go short) on the trade. After this, you will set your stop-loss and take-profit orders based on the risk: reward ratio.
Almost every broker will let you choose the appropriate risk: reward ratio. This is not something you need to worry about. What is more important is that you set the positions accordingly, and do not move them.
The reason you do not want to move your positions after setting them is that you are playing probability. If you only need to be right two out of ten times to break even, it will be hard for you to lose money long-term. However, if you start moving your positions, you mess with probability.
Technical analysis is where people use charts, indicators, patterns, to predict where the next move is. Using technical analysis, traders can give themselves a profitable edge over the market. Like a casino, this is the way traders can give themselves an advantage. When it comes to how to make money trading forex, technical analysis is what most people struggle with.
The critical part of using technical analysis is not to rely on one indicator or too many indicators. Babypips.com did a cool article about this, but indicators by themselves are usually not profitable. Forex is something that requires a strategy, not just one indicator will unlock the benefits of forex.
Instead, indicators should be combined with patterns and other technical analysis to develop a strategy. The strategy I use utilizes a combination of three components of technical analysis. Simple chart patterns such as the head and shoulders pattern, Elliot Wave Theory, and double tops are the first component.
The next component I use is the chart overlay Fibonacci retracement. Fibonacci numbers give great points to enter and exit trades on and are critical to the Elliot wave principle. Elliot waves tend to bounce off of Fibonacci retracements, so this is a good point to set your entry orders at.
The third component I will use is the RSI indicator. This indicator will let me know if the market’s trade volume is currently overbought or oversold. If all three of the components signal an entry, I will place my trade using a risk: reward ratio of 5.
Knowing all of this, you can make a decent income. I have now shown you my strategy and explained how to be profitable trading forex, so my suggestion is to go use a demo account. A demo account will let you test these strategies before ever using your own capital.
You can use forex.com to start trading with a demo account and see how profitable you can be using this strategy. You can also check out a few of my other articles such as:
When it comes to getting rich, people are always confused about which path to take. Should I invest in real estate, gold, stocks, or start a business? All of these are plausible options, but having only two to decide from can narrow it down.
People can get rich in our economy through tons of different methods. The asset class I see that most people get rich with is real estate, but starting a business, and investing in the stock market are great options also. Rarely will I see someone who works a 9-5 job able to afford a private jet.
Rich people, in general, are financially literate, goal-driven, and have TONS of connections. Having these characteristics are essential if you would like to be economically successful eventually.
People ask me all the time, “John, should I start a business or invest in the stock market? Which would be better for me to invest my time in?” Now, I am not rich in any sense, but I do have a lot of knowledge around rich people. I am a college student who is a little more successful than my peers due to my understanding of trading forex, but I am by no means wealthy.
I usually like to respond to the question by saying that trading stocks and starting a business are both great options for getting rich. It isn’t easy, but once you get the hang of either you can be on the path to financial freedom, but that is not the first goal.
The first goal a person should have is to reach financial security, where they can live passively and break-even. The break-even point was a point I arrived about a year ago, and it is my proudest achievement I have reached yet. I can live my day-day life, and my fixed expenses are all covered.
The break-even point is priority number one. You should figure out now how much you need to make each month to break-even, and work on having it equal to your passive investments. Now, let’s look into two options for this, stocks and starting a business.
Buying stocks is a long-term solution to people looking to build their wealth. Buying a share of stock is just buying ownership share in a business. You should always think of stocks as owning a business, not anything else.
Stocks are high for people who do not have the skillset to own their own business. They allow you to profit off of the work of someone else. The company also benefits from the sale of stock because it helps raise capital to expand. Everyone should be investing in the stock market for long-term growth and a hedge against inflation.
Sure, stocks do crash, and some say the stock market is risky. This, however, is not the full story. Many of the people who think the stock market is risky are not looking at the whole story.
If you are new to trading stocks, it is probably a little risky to start putting thousands of dollars into penny stocks looking to be a day-trader. That is risky. However, if you are investing in the S&P 500 index on a dollar-cost-averaging strategy, you will probably earn 7-10% a year on average.
Why Stocks over Starting a Business?
Now, what advantages do stocks hold over a business? Well, stocks are a highly liquid investment. This means that your money can be turned into cash from stock almost instantly. Companies do not have this advantage. Businesses have to tie up a lot of money into labor, inventory, marketing, rent, etc. Total expenses for a business can add up pretty quickly.
The expenses in the stock market are a little different. On each transaction, the brokerage will most-likely charge a small commission for the execution of your buy/sell order. Also, you have expenses when your stock declines below the price you bought it for, meaning a capital loss.
The critical thing to remember is you only lose money when you sell. Sometimes, it is a smart decision to sell a stock if you believe it will decline further, but a lot of the time it is best to hold and avoid trying to time the market. The ideal time frame to hold a stock is forever.
Businesses also require a lot of work in the start-up phase. Stock investing is different because it only requires knowledge of companies to make effective decisions. The businesses are already created; you are just buying ownership share in them.
Also, stocks require minimal work after you purchase shares. Once you are buying a share, you have three decisions. Buy more, hold, or sell. Starting a business requires a lot more detailed decision-making.
Who Should Start a Business?
Now, I may have just scared a lot of people out of starting their own business, but this was not my intention. I am the proud owner of Zizzlo LLC, and it has become something I thoroughly enjoy working on.
People who should start a business are people that are passionate about something. I am personally excited about digital marketing and found myself a niche in it. I decided it was worth my time to invest in starting my own social media marketing agency, and it has been a blast.
The people who should start businesses need to also be realistic with themselves. Are you willing to take the risk? Are you ready to invest thousands of dollars into something that may never end up being profitable? These are serious questions you must ask yourself.
Investing in stocks is going to be a much easier route to getting rich due to the advantages they hold. If you are serious about long-term growth, start investing in the S&P 500 index. Invest as much money as you possibly can to benefit from the dividends and capital gains.
Do not fear to start a business; embrace it. It is something that you should be passionate about and willing to invest 60+ hours in a week. Be real with yourself, and make sure to brace for the bumpy ride.
Everyone loves the idea of using their social media presence to generate income for themselves. With successful affiliate marketing, social media can be an excellent platform for spreading your affiliate link. Affiliate marketing is a great personal online business strategy that you can develop. This type of business does not require a whole lot of startup costs. The focus is more on marketing, and less on business strategy.
Twitter can be an essential tool for anyone looking to make extra income from twitter affiliate marketing. Affiliate marketing allows influencers to earn a commission for products they promote through an affiliate link. The job of the influencers is to spread their affiliate link using their social media presence and influence to generate sales.
If you are new on Twitter, it will be hard to earn any profit through affiliate links. At this point, it will be much more important to grow your following than it will be to sign up for an affiliate network. Investing in promotion, putting out relevant content, and building your brand should be your priority.
An affiliate link is a link that a company will give influencers to get free exposure in exchange for a commission on the sale to the influencers. If you have watched YouTube, you will probably see YouTubers promoting products or services with their sign-up link in the description.
Usually, the link will give you an exclusive discount on the product or service. The consumer benefits from a premium, the business benefits from free marketing, and the influencers benefits in the form of commission. Affiliate marketing has become such a big market that businesses cannot afford to ignore.
How to Get an Affiliate Link
If you have a sizeable social media following already, it is time to get sponsored through an affiliate program. Look at your analytics and see what your audience has an interest in searching. If you look at your audience, you will see a few things. Gender, age, interests, and more.
I have a strong male social media following between the ages of 18-25. I used this information to contact Tiege Hanley, a men’s skin care system and offered them my platform in exchange for an affiliate link. With this link, I can market a product I use regularly and earn an income using my Twitter.
Next, you want to make sure the companies you reach out to are high-quality companies. The last thing you need is to promote a product that is of low quality and destroy your online reputation. Use Google to find reputable companies and products to get an affiliate program. Here is a list of a few companies you can promote based on niches:
Dollar Shave Club – Male Demographic
Bluehost – Technology Demographic
Amazon – All Demographics
Bovada – Male Sports Demographic
Using Twitter Marketing
Now, after you have an affiliate link, it is essential to start spreading this link. You will want to use your social media to begin spreading this link. Twitter, Facebook, YouTube, and Instagram, are great platforms for affiliate marketing, but the one we will focus on is Twitter.
The reason I like to use Twitter is that I have had the most success on this platform. The way I use Twitter to get sales is to tweet relevant information to my product with my affiliate link. Suppose I post an article pertinent to men’s skincare, I will put my affiliate link in the tweet also.
Something like “Check out Tiege Hanley, the most uncomplicated men’s skin care system out there. Use promo code: JOHNTOCCI for 20% off your first order! Link: http://bit.ly/2I2cnJr” works perfectly. It is short, to the point, and advertises your product.
First, on a regular schedule, I will retweet this tweet during the busiest hours on Twitter. I check my analytics to find the best time to post. The best time to post is when your followers are most active, allowing for more impressions on your tweet. The more reactions your tweet gets, the more sales are likely.
Using Twitter to spread your affiliate link is a task that requires a lot of time. You will need to build a sizeable social media following, but once you have a platform, you now have a money-making machine. Your Twitter should be able to work for you and earn you passive income through affiliate marketing.
The more sales you get, the better your income will be. If you haven’t already, start researching some target-marketing techniques to help optimize your posts for your niche. Doing whatever you can to help get more sales is vital to your success in affiliate marketing.