What Is Online Forex Trading

Online Forex Trading is the name given to the buying and selling of currencies from economies all over the world through a forex broker on the internet.

Online Forex Trading is becoming increasingly popular due to the ease of opening online trading accounts and the growing global internet accessibility. You’ll also find that many people who have been laid off and cannot find new jobs turn to forex trading as a way to make their livings.

How Does Online Forex Trading Work?

The foreign exchange (forex) markets are where exchanges take place between the currency of one country and the currency of another country. Due to the different economies of countries, the currency of every country in the world has a different value, but the value of these currencies fluctuate every minute of every day based on politics, global events, traders and many other factors.

As a trader you make money in the online forex markets by taking advantage of the constant fluctuations in currencies.

In Online Forex Trading, currencies are always bought or sold in pairs. You always buy one currency and sell another.

If you buy a currency pair and the price goes up, you make a profit.

If you sell a currency pair and the price goes down, you make a profit.

Through the availability and reach of the internet it is possible for anyone with access to a computer and internet connection to participate in the global forex markets.

Which Skills Do You Need For Online Forex Trading?

To become a forex trader and to get started with Online Forex Trading is actually rather simple.

You do not need to have any qualifications related to finance or economics. You actually don’t need to have any knowledge about the forex markets or trading.

All you need for Online Forex Trading is patience, discipline and the desire to become a good trader.

You can learn all you need to know about making money with online forex trading for a very small price. There are a few books about technical analysis and trading that I recommend, and for the rest you can learn tons from various free forums, resource sites and youtube.

I personally think that if you spend 1 month reading, studying and learning about online forex trading and technical analysis, and another month practicing your skills on a free demo account on e.g. eToro that you’re ready to start trading the forex markets with real money.

How Much Capital Do You Need For Online Forex Trading?

The first thing you need to be very aware of is that if you’re a losing trader, it doesn’t matter whether you have $100 or $1,000,000 in your trading account.

It’s very important that you have a trading system that allows you to be correct 60%+ of the time, and that you have the discipline to stick to that trading system. This means you need to have very strict trading rules regarding the risk you take per trade.

As for how much capital you need to get started with Online Forex Trading, it depends on your personal goals.

The more time and patience you have, the smaller the amount can be that you start with. If you’re a good trader (meaning being right 60%+ of your trades) then you’ll build that small amount up to a big amount over time and thus increase your income as your account gets bigger.

If you want to depend on Online Forex Trading to replace your monthly income, then you’re going to need a considerably bigger initial capital to trade with.

If you have a lot of time and patience to build up your forex account, then you can start trading with as little as $100, although I’d recommend starting with $1000+.

If you want to start replacing your monthly income with your profits from Online Forex Trading, then you’re probably going to need $10,000+ in your account.

How Much Can You Make With Online Forex Trading?

As a good and profitable forex trader who actively trades the markets 4-5 days per week, you can probably make around 100% return on your account size without excessive risk.

This means that you can expect to make 8.33% return on your account per month on average.

So, this means that as a good trader, you’ll be able to double your account size in a year without taking excessive risk (i.e. risking your entire account on a single trade).

If you start with $100, you’ll be able to turn that into $200 in a year. That sounds like a very slow way to make money, and although you can probably trade much riskier with $100 and turn it into $1000 in a few months, that is not a good habit to get into. If you want to trade with very high risk on your small account because you don’t mind the risk of losing $100 for the possible gain of $1000, that’s okay, but you have to be very careful to not get in the habit of risking big parts of your trading account on a single trade. If you get into this habit then it’s only a matter of time before you lose your entire account.

If you want to start making enough from Online Forex Trading to replace your full-time income, take the 100% return per year as a general rule. This means that if you want to make $1000 per month, you need to start with $12,000 in your trading account. If you want to make $2000 per month, you need to start with $24,000 in your account. Etc.

Keep in mind that you won’t make exactly 8.33% return on your account every month. You may have multiple months in a row where you make nothing, or even lose money and then you may have a few months where you make 15%+.

Benefits of Online Forex Trading

No boss, no employees.
Online Forex Trading is a one-man operation. You are your own boss and you don’t need to answer to anybody but yourself. You also don’t need any employees and neither do you work with clients. This eliminates any hassle that 99% of businesses have, i.e. people.
People usually cause stress and problems in your work, but with Online Forex Trading you don’t have that.

Work from anywhere in the world with a computer and internet connection.
It’s called Online Forex Trading for a reason; you trade the global forex markets on the internet.
This gives you the freedom to work from anywhere in the world where you have access to a computer and the internet.
This allows you to work from your home, saving you money and time you would normally spend commuting back and forth to work.
As a profitable forex trader, you can even travel from city to city, for as long as you want to stay there, all while making money trading the forex markets from your laptop. It sounds like a dream, and it can be a dream come true. This is the main reason why I find Online Forex Trading such an interesting profession.

Work your own hours, decide your own vacation times.
Just as you can choose your work location, with Online Forex Trading you are also able to choose the hours you work and the days you take off for personal pleasure or vacation.
This depends on your trading strategy.
For example, you could have a strategy where you only trade the U.S. markets between 9am and 5pm.
Or you could have a strategy and schedule where you only trade under specific circumstances and if those circumstances are not present, you take the day or the week off.
Heck, you may even have a very profitable week or month and decide to take a few weeks vacation after that.
This is what is possible when having Online Forex Trading as your profession.

No limit to your monthly earnings.
Besides not having a boss, employees or clients and besides being able to work your own hours from anywhere in the world, Online Forex Trading has another significant advantage:
There is no limit to your monthly earnings.

Essentially you are responsible for your own monthly paycheck, but this paycheck is not limited to a fixed amount every month. You could make $1,000, $10,000 or even as much as $100,000+ in a month (depending on your account size and trading strategy).

What you should also keep in mind is that as a profitable forex trader, your monthly income on average will keep going up because as your trading account gets bigger, so do the profits you make on your trades. (Assuming you maintain the same percentage of risk per trade, the bigger the account, the bigger the profits in dollar terms).

The Downside of Online Forex Trading

As I always strive to be completely honest, I have to mention that there are downsides to Online Forex Trading. It’s definitely not something that everyone will enjoy doing or even something that can be mentally exhausting, causing severe stress.
So before you consider getting started with Online Forex Trading, please read the following points that I consider the downsides of this profession or hobby and be honest with yourself whether you feel you are or are not capable of being unaffected by these downsides:

Online Forex Trading Is Antisocial
To me personally, not having to work with any people is a huge plus because I am very comfortable working on my own.
However, you may be someone who needs to have contact with others or have people around you. As a forex trader you may find yourself getting lonely, so you need to have your own social life outside of your work in order to not feel all alone.

You Need To Be Very Disciplined
In order to be a profitable forex trader you need to have a trading system and strict rules that determine when you enter a trade, how much you risk on that trade and when you’ll exit the trade.

Without a trading system and strict rules to govern your risk per trade, you’re just gambling and we all know that when you gamble, the house always wins. In other words, when you gamble with your forex account, it’s only a matter of time before you suffer severe losses or blow your trading account.

Online Forex Trading requires you to be very disciplined and stick to your trading system and rules religiously. There is no room for bending the rules because all it takes for you to blow your account is one single mistake, one time. There is no ‘reset’ button once you blow your account. If your money is gone, it ain’t coming back.

If you’re not a very disciplined person in other areas of your life, you may struggle to be disciplined with Online Forex Trading and thus trading may not be something that you should be doing with your money.

You need to be able to detach your emotions from trading.

When working with your own money as a tool to make more money, fear and greed are your two biggest enemies. If you get greedy you may take unnecessary risks that cause you to lose a lot of money and if you’re too scared you may miss out on profit.

Luckily there is a way to overcome the enemies of fear and greed by having a trading system and fixed money management rules. When you stick to this trading system and rules then you have guidelines that will protect you from the effects of fear and greed.

But once again, you need to be very disciplined to stick to your trading system and your rules, without ever bending those rules. If you think you can do this, then Online Forex Trading is something you may be very good at.

Do you think you have what it takes to be a forex trader?
Learn how to open a trading account here.

FILED UNDER: ONLINE FOREX TRADING