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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Without Putting Your REAL Money

(Same Account can Help a Beginner to Practice Commodity & Stock Trading as well)

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. Melvin :

    Thanks for this post Ajith! I am a complete fool when it comes to Forex trading and this comprehensive post just helped me understand it more.

  2. Rajeel :

    Thanks for the post, Ajith.

    Me too don’t have much knowledge about forex trading. But your article has helped me to understand it to an extend. I’ll try to read more about it and i’m interested in it.
    But i’m afraid of it’s legal problems in India. Anyway i won’t play it now, as a kid. But, I’ll try the practising accounts !

    • Rajeel, Practice a lot before putting your real money :) And yes, as resident Indians let us not do it (unless you use a NRI’s account to trade)

      • Kumar :

        Hi Ajith,

        thanks for your info, i have few question below and need your assistance
        1. Is forex broker and traders are same
        2. how to find good and trust company to invest and start trading
        3. As i tried with four companies and find error in their meta trade, so now looking for the best company to invest

        • Kumar,
          1. Trader is the person who’s trading and the broker is whoever or the system that’s providing the trading services to you
          2. Best way to find a good broker is to go with those who have been regulated
          3. I wish I could recommend a company. Unfortunately without trading with them, I can’t recommend any.

  3. Forex is a keyword which gives the highest earning of $8 per click through adsense :)

  4. ajeet :

    thanks for the article, it help me a lot….

  5. Nihar :

    I will read the post again when i am free and think of diving into this.

    Thanks. Looks like you have done research and come up with this post

  6. Swastik :

    Excellent article! I don’t know a lot about forex so this definitely helps!

  7. misseb :

    Hi Ajith :-)

    It’s Ebele here. I’ve been thinking about dabbling in some form of trading this year. Curious about it. So, thanks for the post. Was quite comprehensive.

    Have you personally traded yourself? If so, what’s been your experience?

    • Ebele :)
      Yes… I have done some amount of Forex trading in the past (right now more into stock trading). It works but very risky stuff as well. Also, you should never keep your orders open and go to sleep :) A couple of times I lost badly due to this reason.. Overleverage is another thing that beginners should avoid.

  8. Wonderful post. I’ll be including it in my Friday’s Post roundup as many folks have been asking me how to show them how they can trade forex. Forex trading is way too risky for me so I’m sticking to blogging and affiliate marketing 😉

  9. different topic other than blogging…forex is again making money online… I heard that it needs huge initial investment…is it true?

  10. sp.mahadhevan :

    hi ajith. thanks for your information about forex trading thru online. is there any developments in knowing the legal implications and impact of government regulations of online forex trading ? pls inform me if you know. thanx

    • @magadhevan, as far as I know the RBI is still not allowing individuals to operate forex accounts. However, I see that 1000s of people are involved in online forex trading from India.

      As for me, I completely stopped doing it after using it a for a few days. Thanks to a good soul who alerted me of the legal implications. I am clean now :) If you want to forex trade, use accounts setup by an NRI friend or family member.

  11. Tijo Mathew :

    Hi Ajith
    I registered an account with etoro soon after i had a call from a representative she is insisting me to deposit 1000 $ . she says that starting with 50$ is useless and i cannot learn or make any profit. since i am new to forex i dont want to deposit a big amount . pls help me to finda solution

    • @Tijo,
      They always push new customers to start with more. You should not fall those tricks. But I have to tell you a couple of points.

      – You have to start with a $500 deposit to get a PAM (personal account manager). If you are starting with bigger amounts like that NEVER EVER start trading without PAM instructions. You may lose all your money instantly. If you already an expert, you may take your trading decisions.
      – To experiment with trading it’s always better to start with smaller amounts like $100. However, there’s a catch. When you have a small amount, your margin leverage will be higher. Something like 1:100 or 1:400 which is very very risky if movement is on the negative side. You can lose all you money in no time. In the best case, you can double or triple the money as well. Starting with higher amounts allows you to trade at lower leverage ratios where volatility is low.

      I shall leave it to you to decide. By the way, I myself am not an expert in this area :)

    • eToro Team :

      Dear Tijo,

      Our representatives are only there to give strategic advice. Sorry, if they were a little pushy with you. As Ajith said, it’s risky to trade with small amounts and high leverages. What’s more, if you start out with a small account then any loss is much harder to recover. For example, if you have a $50 account and you invest $25 on a trade, and you happen to lose, you only have $25 left and you have to make 100% profit on the next trade in order to recover your losses. It’s never a good idea to invest more than 5% of your trading account on a trade – that is called money management, and our personal account managers can help you work out a good money management system. Plus, it’s also a good idea to take advantage of eToro’s first deposit bonus – because you only get it once.

      However, if you do end up depositing only a small amount, we recommend that you start off trading micro-lots (lots of 1000 currency units), so that you can invest as little as $2.5 per trade.

      I hope this helped, and we wish you happy trading!

      Best regards,
      The eToro Team

  12. Tijo Mathew :

    Thaks a lot for your comments

  13. Hey Guys,

    I know there’s a lot of marketing gimmicks for Forex trading on the internet. So here’s the truth, you can make loads of money fast with Forex.

    BUT…

    i) You’ll need at least a few thousand dollars in order to earn some income to pay for your bills etc.
    ii) You’ll need to have good money management, emotions control, discipline, some experience, technical skills etc.

    Yes, you still can make quite a lot of money if you just start with $50 or a few hundred dollars, but in that case you taking too much leverage and the risks involved is very high.

    Anyway, there’s still a lot to talk regarding Forex trading. It’s not something that can be explained in just a short while, but with the right education, you can be successful.

    Dan

  14. Gokul :

    I want to start forex trading and my minimun investment is 2 dollars.which is the website which has a low investment like this???and i am absolute beginner and i need information about its terms and all

  15. Ranjith :

    Hi I have invested some amount in Forex through credit card. could you please explain how can I withdraw the amount. Many say it is done by paypal but in Etoro it is clearly said that they will credit in the same means how I deposited. I am not sure how we can link credit card with Paypal account. Please share your knowledge on this

    • @Ranjith, I do not have the experience of withdrawing via credit cards.

      • pon :

        hi ajith, do we need an International bank account to practice forex trading from india? I need to know that in order for me to trade from chennai , do i need to have an account like natwest , llyods tsb or other international accounts since the trading is done in dollars . can you please assist . thank you .

  16. cooltimi :

    hi ajith….

    iam timi from punjab …am into designing business and earning money from ptc sites and some times forex comp.

    i would like to contact u on phone…can i have ur contact details

    regards

  17. Very interesting Ajith… have gone thru your post in detail… will need to check this out…

    Im not much of a risk taker , nor do i dabble too much in the stock market…. but this surely looks interesting..

    Thanks
    Sandeep
    P.S – Ran a few keywords on Google Monitor, it worked very well.. thks for a good solution

  18. kjagannasdha reddy :

    i am an investor in swissfinservices.com with liberty
    sign when i try to open the said website i am getting
    Go to Daddy.com what is this i am not getting the deatils of member area since 1st October Can you help
    to get the said website

    K.Jagannadha Reddy
    chennai

    • Mr. Reddy,
      Yeah, this particular site is down. I am not sure if they are doing legitimate business. The website itself was registered hardly 4 months back. If they don’t respond to your mails, it may be more or less clear that they are frauds. However, I do not rule out a technical issue with the site. Usually, due to non-payment of hosting charges, sites may be down. It cold be deliberately disabled as well.

      By the way, please note that Forex trading in India (except for USD-INR via Indian participatory banks) is illegal in India for resident Indians operating with Indian addresses and bank accounts.

  19. Forex trading is not for everyone. You will lose a lot of money unless you have good experience in trading in futures and Options. Plus, all the big banks ranging from Goldman Sachs to HSBC are involved in currency trading. If you are entering the Forex Trading market, make sure you have done your groundwork and read books like Options and Futures by Hull.

  20. Gillu :

    Hi Ajith,
    Why did you say start with gold/silver? What’s the advantage starting with gold/silver? Is it an easier starting point for beginners?
    One more question: Can you choose to refuse the leverage thing? Do you have to take that? So then if you deposit $50 and lose at a high leverage do you owe the brokers a big sum of $$$$???? (By the way as you can probably guess, I’m a forex dummie …. so far)

    I’m guessing this leverage thing is like a loan and that is how they make their money – a bit like bookies for horses (!)? So in that case I’m going to look up micro accounts… I don’t know what the difference is here, just that you can work with small amounts? Is there a leverage pushed on here too?

    Sorry about all the questions and thanks for the very informative article

    • @Gillu, silver and gold are good for starters because volatility will be low and chances of sudden loss is minimal. However, this requires more investment then. Leverage is just like your margin trading in the stock market. If you have small amounts with you then you have to leverage 50 or 100 or even 400 times and that can cause a huge loss (read lose all investment in no time) or huge gain. It’s very tricky and higher number of leverages are not advisable.

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