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. Phani :

    Hi Ajith!
    thank Q for ur Information
    you told etoro is one of the best for trading, my friend opened account in etoro. he invested some ammout but they locked his account all the money has gone. Please give reply

    Tell me the beter sites to do forex trading and how

    • I do not know about any account locking. Probably he didn’t provide enough documentation to support or prove his identity?

      Every forex trading engine/site out there is risky because they all leverage margins. To reduce your risk you may reduce the leverage and play like twice, five times of max ten times margin.

      There may be better platforms out there but I cannot suggest any other trading platform without using the same. You may experiment and find out or ask experienced traders.

      Nevertheless, be very careful as you can lose money very very fast without proper knowledge of the trends and terminologies.

  2. phani :

    Than Q Ajith
    Please mail the best sites to trade
    what is your opinion about investing in istaforex and what is the present rating & Position of instaforex at present.
    Please suggest me

    Thank Q

  3. Suhan :

    Ajith, is paypal the only system to widrow money? plz discuss on this topic…

    • No. As I remember, if you paid via PayPal the withdrawal will be via the same. If you swiped the credit card, the same card has to be used for withdrawal. And I doubt if any of the online forex trading sites offer anything other than PayPal to withdraw.

      • sushant :

        ajith maine online iforex account open kiya hai mujhe currency trading knowledge bhi aya hai par mujhe dar lagta hai isme yane iforex online account open kiya kuch problem to nahi hai please help me

        • @Sushant, I do not give trading advices nor am I good at that. If you switch from practice account to real account, I would just like to caution you not to leverage too much and stick to stable pairs. If you do risky trades in the beginning itself, it can either make you big or totally break you :)

  4. satyanarayana :

    Hi.

    I do not have any experience in FX trading. Can i be successful in this. pl explain.

  5. farooque shaikh :

    ajeth thanks it is very informative dis.pls let me know what is leverage available in india and at what margin. Why indian govt has stopped us from trading? Do u think they are really concern for garib janata will loose money as they are saying? Don’t they beleive in indian mind, MORE PEOPLE CAN BRING FOREX RESERVE TO INDIA. IF THEY LOOSE THEY CAN LOOSE IN USDINR AS WELL.

  6. vints :

    hi mr ajith can you plz suggest any ptc site wich really pays

  7. karim :

    hey ajith hw r u lukin gud may god bless u and your family ameen. pls help me ialso wnt to invest in forex pls gve me ur contact number so we can tok pls.

  8. sir,
    which indian bank is best for opening the account of forex trading and debit card transaction.

  9. K.J.Haroon Basha :

    My initial investment was $ 480, I made $ 3000 in only two days. WIthdraw $ 2000. And lost the remaining balance $1000 the third day due to sudden drop in Gold price (Thursday, June 7, 2012). Lesson: Try to withdraw your money as early as possible and keep only a small amount in the equity, because sudden raise in price (if you are on short position) or decrease in price ( if you are on long), will eat all your money if you do not adhere to Stop Loss or Take Profit policy.

    • @Haroon Basha,
      Periodically booking profits and more importantly withdrawing your initial investment (and subsequently gains) seem to be a good strategy. Yeah, a lot of people hit gold mines in the gold rally despite that one day big dip you are talking about.

    • Deepak :

      I opened a account with iforex and practised , I am confident. Kindly let me know which forex trader is best , along with method of payment. and also tell me about the withdrawal , do we really get back our amount.

      • I do not know about other trading platforms. If you liked the iforex trading platform, you should go ahead and use it. There are so many platforms out there, unfortunately I am not in a position to compare them without actually using.

  10. mahaboobkhan :

    hello
    how earn exactly from Google adsene and Google ad word please help me.

  11. mahaboobkhan :

    hello any forex company can provide fixed income weekly or monthly. i interest to invest

  12. Gururaj m :

    hi ajith could you please brief me about forex trading using NRI bank account. I was trading since 2006 in etoro. SGFX who is partner with Etoro just stopped their biz. I completely depend on forex trading, made a huge profits. My cousin has a DUBAI NRI bank account. Can i use that to deposit?

    • Hmm.. That’s a tough question. I think the best option would be to operate with an account opened by your NRI cousin and his PayPal address.

      • Gururaj M :

        thanks for the reply ajith. Paypal won’t allow us to deposit, we can only withdraw money from paypal. When I asked my Axis bank manager about wire transfer to etoro account, he denied. They only wire transfer money to individual unless you get a letter from our CA or Auditor, I dont understand that.
        My question is, can we wire transfer money from our NRI bank account to etoro RetailFX account? I am actually from Bangalore.

  13. deenhazza :

    How Can we take back the earned money ? Should we link bank account or they will issue check ?

  14. Haider :

    Hi Ajit,

    In what all conditions Indians are eligible to invest their amount. I am also a part time blogger. And I want to try with etoro. After going through a search on Google I read many websites telling that Forex Trading is illegal in India. Could you please give details that how can an Indian invest in Forex Trading.

    Regards,
    Haider.

    • Haider,
      It’s illegal in India as per my understanding and that’s what I have mentioned in this post. If you have your family people/close friends working abroad, you may do it using their PayPal/Bank account and eToro account created under their name and address. Of course, in that case you have to bear with the losses incurred via exchange rates etc. Also, if there are tax implications for your friend/relative, you have to support them with that as well.

      There’s no way Indians can do it although I have seen a lot of them doing it online. It’s just a matter of time before the government cracks down or stops these sites, I think. Personal disclosure: I do not do any kind of Forex trading and that’s why I am unable to write more forex reviews now. I had an account that I stopped using as soon as I got to know that it’s illegal in India.

  15. reni :

    hi this reni, my fren suggested me to join forex, by investing 10,000, and he told me in return i will be getting double than the money i had invested, is this true.

    • Don’t fall prey to such false assumptions. In forex trading, you can double or triple your money if you play safe and smart and at the same time you can lose all your money in a matter of minutes as well. Learn and practice using free accounts well before investing any real money.

  16. Shirin :

    Hi,
    I m in Bangladesh. there is no Pay pal support in my country, is there another option to withdraw money?

  17. Harish :

    Ajith, you said, Resident Indians have to stay away from forex trading. Is it we have to permanently stay away from it or do we can have any alternative forex trading platform or website?. I have seen a site Iforex where many resident indians are already trading since very long. Do you recommend this iforex?

    • Every single trading platform out there is the same. If you ask the customer support people of these trading companies about the legality, they will say ‘There are a lot of traders from India’, they won’t say that it’s illegal and leave that part to you. As I mentioned above, if you want to trade from India, it’s safe to use an associate/friend’s account abroad.

      • Harish :

        Thanks Ajith for your prompt reply. I have my friend who stays in US and asked him to create a etoro account with his credit card details. But, i have few questions over that. If i deposit some amount into that credit card paypal account, then Rupee to Dollar conversion may buy me only few dollars. And after trading too, if my friend wants to deposit the amount in my account also, he may have to go over that conversion right, which may have the potential to overthrow all our profits. Please enlighten. If we need not worry about it, please also clearly let me know to what exactly ask my US friend to do so that i can do some legal and hassle free trading.

        • Well, exchange rate is always a problem. And that’s the exact principle behind forex trading as well :) However, yes, as Indian citizens we always have huge exchange rate differential between buy/sell prices of INR/USD.

          The steps involved in your kind of set up would be:
          – He opens an account with his address and money in his bank a/c, PayPal ID or using his credi card
          – You trade using that account after reimbursing him for his expenses (including any exchange rate)
          – Any withdrawal has to be into his credit card (or the mode he used to fund his eToro account – could be wire transfer as well).
          – By your agreement with him, you may arrange for a proper repayment mechanism to you. Of course, you have to bear any exchange rate loss.

          (This is no way a long term solution nor my recommendation to all Indian traders. However, it may be the only legally correct option)

        • kingkedi :

          hi,i have this doubt please answer kindly

          if we trade with dollars we earn online in forextrading,will there be any problem to india? as i am not using indian currency and i am using my free dollars earned online for posting in forums

          please reply to this

        • It’s something to do with FEMA regulations whereby individuals cannot trade Forex except for USD-INR via Indian participatory banks. By doing this, the government has better understanding and control over the in and out flow of our currency.

          Even if you earn something online (via blogging, ad sales, forum posting, adsense whatever), you have to completely withdraw that money into Indian currency (e.g. recent PayPal rule changes etc), pay taxes and invest in something that is legally allowed – not Forex trading other than USD-INR.

  18. Smita Dhumal :

    Please tell me in marathi about Forex Trading,

  19. Harry Allan :

    Forex Trading is one of the riskiest investment if you are not having the complete knowledge. Its better to avoid trading if you do not have a strategy. Fear and greed are two major elements needs to be checked while trading. If you have a good technical and fundamental understanding of the markets you can earn a decent returns on your investment.

    For Indians forex trading is not permitted as per the RBI guidelines. But as of I know, there must be at least few thousands of people have accounts with overseas brokers and trading regularly. In fact, there are few brokerage houses actively promote the forex trading in major Indian cities.

    However, RBI permits commodity trading and having an account with brokerage houses like etoro, avafx etc one can start trading with commodities like Gold, silver, Crude Oil, copper etc .

    There are few good articles on Forex trading, which is a collection of top articles on various subjects on Forex Trading.

  20. Mahesh :

    Hi Ajith,

    Thanks for sharing this article, very useful for FX traders. I have been trading from 2 months and opened an trading account with 4XP.com. I made an investment of $5000 USD and made some profit to. However I have never requested to 4XP for withdrawal as I will withdrawal when I will have pretty big amount in FX account. You said in the article that Indian do not do currency trading so will I face any iSsue from banks???

    Many thanks!!!

    • Hi Mahesh,
      Banks WILL ask for a ‘reason’ for deposit but there’s no reason specific to Forex I think. I am not sure about this. In my opinion, you should try withdrawing smaller amounts.

      By the way, though Indians are not supposed to do currency trading, I have seen 1000s of them doing it. RBI is getting stricter and have made it clear that it’s illegal. Perhaps, it’s time to stop trading altogether!

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