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Pros and Cons of Currency Trading in 2020
This year, online trading in India is in the mainstream. Around the world, millions of people take part in currency exchange through the internet. Many of them have only recently discovered it due to lockdowns. This activity can bring you a steady income, but it does not suit everyone. Discover the benefits and downsides of joining the global trading community.
How It Works
First, how do traders make money? Through brokerage firms, they access a system where trillions of dollars circulate every single day. The foreign exchange is tremendous — it is the largest market in the world. Until the 1990s, it was only open for institutions.
Big banks, hedge funds, and businesses still exchange currencies. Now, they are joined by retail traders. These are individuals who use software to buy and sell the same instruments.
As exchange rates are changeable, traders can buy low and sell high. Their thinking is not very different from the stock trading philosophy. As the instrument increases or decreases in worth, careful timing results in profit. Some traders prefer frequent trades throughout the day. Others are focused on longer-term strategies. Their positions may last for days, weeks, or even months. So, what are the advantages?
You Are Your Boss
When you trade Forex, there is no employer to report to. No more cubicles, no more reports. You can decide when to work and how. No boss is breathing down your neck. It is a path to financial freedom.
Everything depends on your skills and eagerness to learn. In highly volatile markets, or when volumes are big, you can really reap sizable profits. The more persistent, open-minded, and resilient you are — the higher the odds of triumph.
Profits Are Unlimited
Modern platforms and apps provide 24-hour access to the market. For some, trading is a full-time job. For instance, scalpers open and close multiple positions within the same day. How much time can you devote to Forex?
Day trading is not the only approach. Do what you feel comfortable with. Naturally, the more time you dedicate to trading — the more you can possibly earn. Financial results depend on your skills and foresight, as well as market factors like volatility and liquidity. Prices for some instruments see frequent dramatic changes. You can make a hefty profit if you know how they move.
Currencies are not the only option. As traders master their art, they move on to other assets, like stocks and derivatives. Trustworthy brokers like ForexTime allow the creation of diverse portfolios. The more different markets you trade — the higher your potential profits, and the narrower the risks. Learn how to trade currency, and advance further!
Problem 1: No Universal Solution
If profits were guaranteed, there would be millions of victorious traders. Still, this is not true. If you dream of making 1 million on Forex, this is a very tall order.
Skilled players may achieve a 10% return on their capital per month. Your results depend on the size of your investment, your abilities, and market forces. The latter are beyond your control.
Finding Your Way
Over the decades, professionals have devised quite a few approaches that may work for you. None of them guarantees a profit. Choose a system which fits your personality, needs, and available resources. It is possible to make money from scalping or swing trading, as long as you stick to your plan. All too often, newbies are tempted to stray away. They begin chasing losses or overtrading. Dismiss any urges that contradict your strategy.
Problem 2: It Is Risky
Currency trading requires a certain degree of bravery and resilience. The possibility of adverse turnarounds is always present. Supply and demand on the global market are beyond any person’s control. The sheer number of potentially disruptive factors may seem daunting.
For example, you cannot manage inflation or GDP. Nor can you influence prices for natural resources, like crude oil or gold. What you can do, though, is to predict those movements using available data.
Risks are also manageable. Traders may set exit parameters via stop loss and take profit. Both tools are found on all popular trading terminals, and they make your life easier. In the event of failure, you know exactly how much you lose.
The Bottom Line
Currency trading is feasible, and sometimes extremely profitable. Still, it demands a special set of skills, personality traits and resources. Forex has its own learning curve. Find a regulated broker, and take advantage of all educational opportunities.
As long as you are consistent, composed, and careful, you can expect to achieve a lot. There is no universal roadmap to riches. Keep your eyes open, and use every mistake as a stimulus for improvement.
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