Financial markets have long become individuals’ main direction for investment and earnings. Business and entrepreneurial activity are labour-intensive, and the results often need to be more predictable. On the stock exchange, in this regard, it is a little more straightforward – the trader sees the result online, can close transactions at any time and take a break from work. But only some things are as complex as it might seem.
To succeed, you need to know how to make money on Forex, and for this, you need to understand the principle of the market and the algorithm of action. You can also use Cheap VPS for Forex Trading for this purpose. This can be called a full-time job, but it is much more comfortable than other income-generating activities. In this article, we will tell you whether it is possible to make money on Forex and what you need to do for this, and we will give a personal example of making money on Forex and other markets.
WHAT IS THE FOREX MARKET, AND HOW DOES IT WORK
First of all, it is necessary to understand the operation algorithm of exchange platforms. This is the only way to get an idea of what is happening on the market and to grasp the relationship between specific events and changes in the price of a currency. Let’s start with a simple one, namely the definition.
Forex is an international foreign exchange market. It operates 24 hours, 5 days a week worldwide, with trading stopping on weekends. Trading participants from different countries enter into transactions to purchase and sell this or that currency; the total turnover is more than 5 trillion dollars per day. In fact, this is a huge indicator. Regarding daily turnover, only American debt securities, in other words, government debt, can compete with the euro/dollar (EUR/USD) currency pair. From the above, we can draw a simple conclusion – currency trading is prevalent; even though the foreign exchange market is relatively young, it has existed in its modern form for over 50 years. Let’s move on to the trading process, as it looks in theory:
We come to the bank and buy currency or convert it in our accounts;
The bank simultaneously carries out exchanges in a trading environment within which a vast number of participants operate;
The most prominent participants exchange themselves, and the exchange rate shifts.
This is the most primitive idea of what the cheap forex vps market is. You can earn money by exchanging currency at a bank only if there are ten per cent fluctuations. But such events occur infrequently; therefore, let’s consider stock trading. So, as already said, some banks in the market make exchanges. But the matter is not limited to banks alone; the following categories of participants are present:
Retail traders like you;
Brokers collect exchange requests from all their clients and relay them further;
Banks, investment funds, liquidity providers. These are all significant participants with billion-dollar turnover.
How a trader makes money on changes in exchange rates
The EUR/USD currency pair fluctuates by approximately 0.5 % per day. Sometimes more, sometimes less, it could be more critical. We are talking about a range; the daily price change can be 0· %. This happens when the closing price in the evening is equal to the opening price in the morning. At the same time, the price fell and rose during the day, but by closing, it returned to the opening level. A natural question arises: how to earn 5-10% per month on Forex, which is often discussed. T
His question is logical, and here we come to the concept of leverage. This means the broker allows us to trade a much more significant amount than we have. For example, a leverage of 1:100 makes it possible to operate with an amount of $10,000 with a deposit of only $100. How much would we earn if the exchange rate changed by 0·, 5% without leverage? We multiply and get $ 0·, 5. And with leverage, it is $50. The difference is noticeable. But it would help if you had to understand that not only profits grow, but also possible losses. The price will go against us, and we will no longer get $ -0·, 5, but all $-50. The ability to control risks and calculate opportunities is the basis of competent trading and success in the market.
How to start earning money without investment
It may seem strange, but you can get a starting amount in the foreign exchange market. How does this happen? Simply put, it offers conditions for opening a transaction that are slightly worse than those we receive from the liquidity provider. The difference between the purchase and sale prices is called the spread.
Let us immediately recall a bank branch where you can usually buy a much higher price than sell currency. The principle is the same here: the client receives a more extensive spread compared to what the broker has from the supplier. This is what a Forex broker’s earnings are based on.
Logically, the broker is interested in more significant turnover, so his profit grows. Therefore, companies do their best to lure customers to them by offering various bonuses. This is done with only one purpose – so that more clients trade more significant amounts and, as a result, increase the broker’s income. The most commonly offered bonus is:
Replenishment bonus: Some companies give up to 100% bonus funds from the deposit amount. An ideal option if the bonus can be worked off. This means transferring $2-5 to the actual fund’s section from the bonus funds for every 1 standard lot of turnover.
In general, only the 1st and 3rd options fit the “no investment” concept. But this is an entirely working algorithm; many traders use it. You need to carefully read the terms of such promotions and fulfil the requirements; then, you can start trading without investing.
Making money on Forex is a sequence of profits and losses; sometimes, you must wait out unfavourable conditions without leaving the market. This approach is more suitable for long-term investors. Still, even in the event of significant events in politics or economics, brokers can change the conditions so that the trader will need additional capital. This will avoid the forced closing of positions. A typical example is an increase in margin provision and a reduction in the leverage ratio.