Forex Trading: Can You Really Make Money Trading Forex?

The idea of Forex (or foreign exchange) trading sounds too good to be true. Is it really possible to make money with Forex trading?

If Forex prices stayed fixed then you'd expect there to be a clear win/lose for every currency deal made. But that view is way, way too simple. Sure, if I was selling you actual cash dollars in exchange for dollar notes, there'd likely be a no-win situation. 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.

Forex trading is no way near as easy to understand as that example though.

Despite what you might think from the signs in a travel agent's window, the exchange rate between currencies is almost always changing. Just look at the graphs and you'll see how much movement there is in an hour, let alone a day. Then figure that it doesn't have to be as easy as me selling Dollars 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 fees involved.

If you're just starting Forex trading, it will pay you to go through at least one of the online Forex courses available.

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 just isn't the same thing. 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. Make sure you take note of what your stomach tells you whenever you make a currency 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. My bet is that you won't trade real cash anywhere near the same way.

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. A "stop loss" is set when you place a trade to make sure that you don't lose all your cash if the trade goes against you. 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.