Forex Trading: Can You Really Make Money Trading Forex?

The idea of Forex (or foreign exchange) trading sounds too good to be true. You're doubtless asking yourself if there is any possibility that you can earn cash trading Forex?

If the prices on the Forex markets stayed the same all the time then you would think there would a definite winner and loser for each Forex deal that took place. But that view is way, way too simple. OK, if the deal was for me to sell you real dollars for real dollar notes, there's unlikely to be a winner or a loser. Of course, if you offered to sell me $500 for $400 then you'd lose $100 on the trade and I'd win the same amount.

Of course, since it's real life, Forex trading isn't quite as easy as in that example.

Despite what you might think from the signs in a travel agent's window, the exchange rate between currencies is almost always changing. Take a glance at the Forex currency graphs and take a note of the amount they move in as little as an hour. Then remember that whilst dealing Forex can be simply selling Euros to buy Yen. I could change my dollars into euros first, if the mood took me. Of maybe it would make sense that two (or three or more) currency exchanges would benefit me more than just a single trade. Even after the trading fees.

If you're a Forex beginner, take the time to go through one of the many excellent online Forex courses.

Then dip your toe in the water by placing some money in a Forex trading account.

For the most part, demo accounts aren't worth your time. You'll learn faster with real money. It's just not the same. If it's not your own money it's unlikely you'll make the same decisions (think how your tax dollars get spent, for example). Feel free to open a demo Forex account and check this for yourself. But pay attention to your stomach when you make a trade. If it doesn't tense up with worry in case you lose your fictional dollars (and it probably won't) then ask yourself whether you'd have the same reaction with real cash. Unless you're superhuman, my guess is that the deals you make with actual cash won't be anything like the deals you make with play money.

Which means your first foray into Forex trading should be with real cash. As with any form of gambling (and Forex counts as gambling, at least to start with), make sure it's cash you don't care if you lose. But cash nonetheless.

Next up, unless you want to be glued to your computer screen 24 hours a day, get some Forex software to help you. At the very least, you want a program that will quit out of a winning or losing trade at a given level. It's called a stop loss if the trade is losing. Like a bird in the hand being worth two in the bush, it pays to quit a trade when you're ahead.

Find out more about automatically trading Forex here.