Make Money Online via Forex Trading (for Beginners)

Forex trading has always been a mystery for me until about couple of weeks ago when I started reading more about it. For most people forex trading is something that is meant for the corporates & banks and perceived as a very complicated thing to do. Now, after doing enough research, I realized that it is the one of the easiest make money online instrument to get started and make money instantly – of course with its associated risks. In this post, let me explain the basics of forex trading and how easy it is for anybody to get started with online forex trading pretty quickly.

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Forex trading for beginners – Basics

Forex market or currency market (or simply FX) is the place where currency trading takes place. It primarily facilitates the exchange (buy / sell) of currencies from one to another and is the backbone of international trade and investment between countries – major banks being the main parties involved. For example, if a US company has to import something from Japan, it has to pay in Japanese Yen and and hence need to convert the US dollars into the acceptable currency. This happens on a continuous basis round the clock to help with global trades and hence make a mammoth US $7 trillion daily turnover which is bigger than any stock market turnover.

Forex trading by individuals is nothing but the act of involving in the above process with your small amount of money whereby you buy and sell currencies at the prevailing market price.

Basically, when you buy a particular currency (e.g. US Dollar), it is exchanged against another (e.g. Euro) and hence the entity that is traded is known as a pair. For example USDEUR is a pair whereby you are trading US Dollars against Euro and you buy (or sell) that pair at something like 1.5000 per pair.

Just like the stock market, you buy or sell – not shares but pairs.

Difference between Forex trading and Stock trading

Many of us are familiar with the stock markets and share trading. The currency trading is slightly different from stock trading because of the following reasons.

  • In the stock market, there are too many (thousands) companies and their stocks that you need to track. But in the currency market, you mainly deal with those leading currencies in the world. Fourteen of these major currencies count for majority of the transactions. They include US Dollar (USD), Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Canadian Dollar (CAD), Australian Dollar (AUD), New Zealand Dollar (NZD) and Swiss Franc (CHD). The other currencies are traded as well but these are trader’s favorites and high volume currencies
  • The stock market is active only for a certain number of hours per day and you transact in a particular stock market (e.g. NYSE) at a given time. But currency trading is done 24 hours a day in some market or other and you don’t need to worry about where you are trading. The trading system takes care of this part and simplifies things for you
  • Because of the leveraging (margin trading), even a small amount such as $50 can get you exposure to buying 1000s of units of a particular pair
  • Even a small change (such as 0.0001) in the price can result in a significant return on your investment due to leveraging
  • Volume is so high that buy and disposal is easier
  • Usually there is no account opening fee or even brokerage charges – the forex company’s commission is only the difference between the sell and buy price at any time (buy price will be always slightly more than the sell price at any time)
  • There is no physical shares, documents or dematerialized form of the traded currencies maintained anywhere. The trading system just keeps your buy-sell status
  • Due to the huge volume nature and global span, currency market cannot be manipulated by traders where as stocks, sometimes, can be manipulated by insiders and market makers
How to forex trade?

In order to trade forex you need to open an account with one of those online forex trading agencies. There are plenty of them to choose from and I found that eToro is a good platform for the reasons mentioned in the next section. Once you sign up, all that you have to do is to add money to your forex trading account and start trading. Money transfer to the account can be via PayPal, Credit card, bank – wire transfer and many other online money transfer options. Of course, after signing up one still has the option of continuing with the practice account without adding any real money to your account.

It is a matter of couple of minutes before you start trading but wait till you do your homework. All your money can disappear in no time if you are not careful. This is why practice trading accounts are useful. Most trading platforms allow a practice account whereby you can trade using virtual money but use real time features such as price quotes, charts etc.

(Please proceed to the next page to read Forex trading tips and common forex terminologies)

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Comments

  1. Dal :

    Hi Ajith
    Thanks for this informative article. Does eToro charge for their software? if not how do they make their money?

    Thanks.

  2. I would think of smaller pieces of money coming in – something like $1k to $2k at a time and no more than couple of such transaction a month. Well, at the end the whole legality of this business is still questionable. I think government at some point should come hard on this activity (and hopefully when they do that, they will open up forex trading opportunities for residents with Indian participatory banks)

  3. yaseen :

    Hi,
    Is this currency trading illegal. If its illegal, what are the actions taken by RBI to avoid this. Somebody help me.

  4. VIGNESH :

    I am an Indian citizen . As you specified RBI don’t allow the Indian citizen to do Forex trading .Is there is any other option to do this.

  5. Bino :

    It is illegal to do forex trading in India and its a non bailable offence,, can anyone share your views

  6. No use as Indians are not allowed to do any kind of Forex Trading…

  7. thilak :

    ajith i want to know about this trading

  8. arunjit :

    Hi Ajith ,

    One of my friends say that he is going to singapore with all his accumulated wealth from indian stock market investments and trading and is going to open up a proprietorship kind of business and trade in forex with the help of technical analysis which he has been practicing since last 6 years and is pretty good at it. He will first become an NRI and then open up NRE/NRO accounts. Is this really legal as I had a debate with him and he said it is legal but as per RBI guidelines trading in forex international currency pairs is illegal as far as i know. Kindly throw some light in clearing my doubts.

  9. Vinoth kumar :

    Hai Ajith
    I have been trading forex since 2011 July found no difficult in transferring and withdrawing and my broker is Windsor a good from Cyprus and earning a lot invested more than 80 lak will there be any problem as I am indian

  10. Uma :

    Hi ajith,

    How to minimize the losses in forex? How analyse the market to get profit?

    • Well, I am not an expert in technical analysis. Learning a bit of technical analysis is the key to make more profit. And keep changing your stop losses each time the price goes up or down. A lot of people make the mistake of not changing stop loss values thereby losing money in a sudden fluctuation.

  11. abhijit :

    hi,
    how to do legal forex trading in india? OR can NRI do legally ? if i want to migrate to another country for only forex trading purpose , for which type of visa i want to apply ? any consultancy in india?

  12. Nicole :

    Article is very useful. To start trading it’s very useful to have some knowledge. Thanks to article such as yours it’s much more easier to understand what is forex trading and don’t do mistakes.

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