There has been a good amount of discussion involving the foreign exchange market (Forex) in recent times. This is no surprise, as a growing number of consumers are finding that their standard income is failing to make ends meet. It is estimated that no less than $5.3 trillion dollars changes hands each day within the Forex marketplace. This equates to a yearly average of a staggering $1.3 quadrillion dollars. The main question is whether or not individual investors can enjoy a piece of this financial “pie”. Let us look at some proven methods which can provide a side income through the use of currency trading.
The Power of Perspective
If one were to sail a boat from one location to another, it would be important to know basic details such as the latitude, the port of arrival and the direction to be travelled. This very same foundation needs to be embraced in terms of Forex trading. There are a few simple questions which should be addressed from the very beginning. These include:
- What is your monthly spending limit?
- What is the average size that you are comfortable trading?
- What is the most efficient online platform?
- How often will you be placing trades?
Once you have addressed these factors, it is much easier to design a financial road map for the future.
Be Cautious with Leveraged Ratios
Many experts will discuss the efficacy of leverages in relation to increased profit margins. In theory, they are absolutely correct. A leveraged trade will require that only a portion of the total value of the asset is purchased. If the movement is predicted correctly, profits can be substantial. Still, an incorrect decision can cause mounting losses within a very short period of time. This is the reason why you need to be comfortable with leveraged trades and ALWAYS calculate the worst-case scenario (2). If this situation proves to be financially crippling, it is best to avoid such an approach.
The Temporal Edge
Assuming that you already have a full-time job, it will be necessary to allocate a certain number of hours each day towards trading. Make certain that there are no distractions, as these will have a negative impact upon your decision-making abilities. It is normally wise to adhere to a strict schedule. Once a time limit has been reached, avoid exceeding this benchmark. The chances of making a wrong decision will increase incrementally after this point.
Learn the Techniques
Once you have established these basic rules, it will be time to begin learning about the different types of trading strategies which are at your disposal. As there is no such concept as “one size fits all”, it is best to consult with authoritative resources. CMC have some great Forex examples to appreciate. These will teach the fundamental principles and provide you with a wealth of knowledge before your trading goes “live”. This learning curve should always be present in order adopt the latest tips and tricks.
We can now clearly see that embracing a game plan from the very beginning will help you to avoid some of the most common pitfalls as well as to maximise your chances of enjoying extra liquidity.