Profit is the prior reason we think of investment, especially when it is to be invested in forex trading. No matter whether you are an experienced trader or a novice trader, profitability is the first matter of cause we all head to.
So, Is Forex trading profitable? How can we make a profit from it? Does it have a chance of loss? Is there any percentage of making a profit or incurring a loss?
Well, there might be a few more questions added in the queue, if you are thinking of starting with forex trading. And, guess what we have tried to cover all your profit-related queries in this blog. So, all you need is to worry less and read more. Let’s start!
Forex Trading
Before jumping on the profit part, here is a quick briefing on forex trading to give you a clear idea. So, in simple terms, forex trading refers to the exchange of currencies over the global market to make a profit. Generally, trading occurs on the currency pairs where one buys currency through the owned currencies and sells it as per the trends to incur profit. However, when you sell the currency then it is predicted that either you will incur a profit or a loss.
Forex trading mostly involves central banks, government and private banks, financial institutions, speculators, and hedgers. However, where banks and governments are more focused on regulation and economic development, hedgers and speculators are focused on making a profit.
Hedgers are the business owners or importers who tend to purchase one currency to make a profit in the future. For example, if USD is going to rise in the future in terms of INR, the owner is likely to buy more USD to maintain its stability in the market.
Speculators are the individuals who trade to meet sudden occurrences. For example, if there is a rise in the price of petrol, the importer tends to buy more USD to meet the upcoming liability.
Is Forex trading profitable?
Now, coming back to the awaited question. So, forex trading is profitable, but not for everyone. As per the market speculations, profit can only occur by the few, and the rest face loss. Let’s get into detail to have a clear face of it!
As we know trading occurs with the exchange of currencies. So, let’s say you are trading on the currency pair of EUR/USD, and want to buy 10 Euros when 1 EUR = 1 USD. Now, the market finds another trader who wants to buy USD and then proceeds the trade. Now, you have 10 EUR, and the other person has 10 USD.
Let’s say the next day, the rates changed and the USD depreciated with 10 cents. That means, 1 EUR = 1.10 USD. This depicts that, Euros have strengthened as compared to USD and you have gained profit, whereas the other person with whom you traded has incurred a loss. Check our previously published article on how to open forex trading account.
So, this is how the trade works. Once you facilitate the trade and market rate changes, this depicts that either you have made a profit or a loss. However, it is important to notice that your one trade doesn’t decide the profitability of your trading, but the balance at the end gives you the actual result.
Moreover, this kind of trade happens 24 hours a day and 5 days a week where millions of people trade and gain profit or loss as per the market rate changes.
So, are you thinking that there is any possibility or any way that you can maintain stability in profit? Any tips or tricks? Well, yes there is a way! And guess what we have discussed below. Here you go!
Steps to maintain profitability while forex trading
Maintaining stability in your profit is one of the biggest priorities of traders. However, it is important to note that any factor or any tip does not guarantee 100 percent profitability success due to the comprehensive nature of the market. Still, here are a few potential ways to gain profit:
Gain a good knowledge
This is the basic factor that is liable for trading. Until you have the tip-to-bottom knowledge of trading you can’t do healthy trading. To gain the knowledge you can prefer enrolling in courses, watching videos, reading case studies, and stories of successful traders, being updated with the news, events, and factors affecting the market, a constant technical analysis of the market rates, and consistency in learning will help you to get the tricks and market study at your fingertips.
Trading through a registered broker
If you don’t have prior knowledge, you can prefer trading through the SEBI registered broker who has the expertise of trading. However, before opting for any of the traders you must confirm your years of experience, and compare the pricing, learnings, and client testimonials to ensure you get the best at the lower cost.
Risk management capabilities
You must be aware and have the capabilities to manage risk. For example, investing smaller parts of your investment to avoid great loss, either stopping or selling your loss orders in order to avoid more losses. Third, sticking to a well-proof trading plan in order to do wealthy trading rather than having emotional or sudden market effects. Check our previously published article on Is Forex trading legal?
A planned strategy
Any investment begins with a planned strategy and the same for trading. Developing a consistent and tested strategy plan is the key to success. However, it is noticed that market changes, environmental factors, or any political occurrence are to be considered for a timely alteration in the strategy towards safe trading.
Adherence to compliance
It is one of the leading factors in determining your profitability., SEBI and RBI regulations do possess strict laws and standard rules which makes it difficult for any individual to trade through. So, you must choose an official broker to avoid any kind of penalties.
Conclusion
Forex trading can be profitable if one has good knowledge, a constant update of market trends, adherence to legal policies, and the ability to manage the risk. However, it is also important to note that loss and profit are the two sides of the investment coin. So, you need to be consistent with your trading with an optimized strategy to gain a good amount through forex trading.
