Foreign exchange trading is an increasingly popular way to make money while working from home, and with application, discipline and hard work it can be undertaken as a successful business in its own right.
Essentially you will be monitoring the market in different currencies and exchanging one for the other with the hope of coming out ahead in your home currency. You’ll be following the basic trading rule of buy low and sell high, with the qualification that in forex trading all values are relative to each other, as we shall see.
An introduction to forex trading
As we all know, the value of different currencies in relation to each other is perpetually shifting. The value of the pound against the euro, or the euro against the dollar, is often used as an indicator of the economic health of the nation or common currency area in question. Of course this also affects international trade, banking and may other areas of life in our ever more globally connected world.
Forex traders can capitalise on these shifts in value by using a high performing currency to buy large amounts of a low performing currency, and then waiting until that currency rises in value to exchange it for a low valued currency and so on. Even if the shifts in value are only small and measured in cents or pennies, canny traders with enough leverage can make large profits in a short amount of time.
An ideal market
The forex market is ideal for someone running a business from home. An understanding of different currencies and how they relate to each other is easier for a beginning trader to grasp than the more nebulous concepts of stocks and bonds. Secondly, the forex market is open 24 hours a day. That is because it is truly international, so when the market in one country closes another one is opening for business on the other side of the world.
Forex has the most liquidity of any financial market. It can easily be converted into cash because essentially it already is cash, albeit not necessarily in a form that’s accepted in your home country. Nevertheless, being stuck with euros or yen puts you in a much more flexible position than having all your money tied up in property that you can’t quickly sell or a commodity that no-one is interested in.
As a forex trader you can leave positions open on your computer while you sleep or attend to other business, and you only need to watch a relatively small number of currency pairs compared to the complexity of other financial markets. The main things you need are a reasonably powerful computer with a fast broadband connection and a broker you can trust to execute your trades fairly and efficiently.
When choosing a broker take your time to compare those available so as to select the one that’s right for you. Go to wecomparebrokers for impartial broker reviews and information on what to look out for, as well as helpful tips and advice.
Before you start setting up your own forex trading business you should consider whether you really have the right temperament to do so. While on the surface forex trading might seem like “easy money” it requires the same amount of hard work and dedication from would-be entrepreneurs as any other business. It also requires a certain amount of risk tolerance. There is no guarantee that you’re going to come out ahead at the end of the day, and you shouldn’t invest money that you can’t afford to lose.
If you’re still on board, the next step is to learn the ropes. You should research forex trading thoroughly using books, online resources like articles, webinars and video tutorials, and even dedicated study courses. Familiarise yourself with the many trading tools available, and decide which ones you want to use. Learn the terminology and how to read charts and indicators.
Take it slowly
Once you’re ready to start, find a broker that offers a free demo account. This will let you trade without risking the real consequences as no actual money is involved. Of course you won’t make any money at this stage either, but you will gain invaluable practise time.
When you begin trading for real it’s best to start small. Don’t have more than 10% of your capital invested at any given time. Soon you should start to see a profit, but remain disciplined and don’t be tempted to risk everything for a big pay-off. By treating forex trading as a business you could see long-term extra income in return for your hard work and effort.