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Forex Trading - An Income Source For the Intelligent Investors

Forex trading has been viewed as one source of income in an investor's portfolio. Not only does it require minimal capital outlay, the potential for income is infinite, depending on the forex trader's strategies and money management system. There are several advantages in foreign currency trading when compared to shares trading.

1. Small capital outlay.
To start trading, you only need a minimum of USD250 to open an account. Most forex brokers offers what is known as a 'mini' and 'micro' trading account. This will enable beginners to get a feel of the market before they start putting in more money to trade. Unlike shares, futures, bonds or options, the minimum investment amount is USD1000, 4 times that to start trading forex. Even with a small investment of USD250, you have the potential of doubling this amount in a month's time, depending on your skills and the frequency of your trade.

2. Low transaction cost.
Unlike shares, we are not requires to pay the normal fees incurred when trading shares such as clearing fees, government fees, stamp duties and others. We also don't pay broker fees, although we still need trade through a broker. They are compensated for their services by the bid-ask spread i.e. the selling and buying price difference.

3. You can trade anytime of the day.
The forex or fx market opens 24 hours a day. If you reside in Singapore or Malayisa, the market opens from 6 am on Monday morning and closes at 6 am on Saturday morning. Whether you are a home-maker or a professional, you have the luxury of choosing your preferred trading hours to suit your personal schedule. Therefore, you may start to trade forex on a part-time basis before taking plunge to go into it full-time. You will not be able to do this if you were to trade other instruments.

4. A USD 4 trillion market
The foreign exchange market is extremely liquid with a daily trading volume that surpasses even that of the New York Stock Exchange. Hence, no one person or company can manipulate or corner the market. Therefore, you will not see instances such as insider trading in the forex market. Because of the high liquidity too, each transaction is done almost instantaneously. This would mean, once you have determined your entry point and profit take, you can set it into your trading platform and go about your daily routine.

THE BEGINNER’S ULTIMATE STEP-BY-STEP GUIDE TO FOREX TRADING

Learn to Trade Forex Around Your Day Job

Learn to Trade the higher timeframes.

If you're going to fit trading into your lifestyle you have 2 options. Firstly trade really small timeframes such as 30 second and 1 minute charts, which funnily enough is what most amateurs start doing. They feel they have to make money in those 30 minutes in front of the screen in a state of heightened tension. This is certainly one way to do it, however it seems a stressful, difficult, not to mention scary way of trading! Trading small timeframes like the 1 minute chart is incredibly difficult, as you may have a 3 pip stop loss with a 1 pip spread. This means that 33% of your trade is just the transaction cost. This means making money rather difficult. Not to mention the spread could be 2 or 3, and you land yourself in a whole world of pain.

Why not take the sensible and practical approach of trading higher timeframes like Daily charts. This way you only need to be at the charts once a day when the New York market closes, which you can quite easily fit into your lifestyle. Trading for 20-30 minutes at the end of the trading day allows you to trade multiple currency pairs, and benefit from their movement over the course of the trading day.

Trading less, to make more.

Lots of new traders believe that the more that you trade, the more profit you stand to make. Stands to reason, right? With almost everything else, the more time and effort you put in, the more you get out. Learn how to trade less, to make more.

Trading is slightly different. While you're learning to trade, the more time and effort you put in, the quicker it is likely that you'll see improvements in your learning, understanding and results. However when it comes to trading itself, it is knowing when not to trade that is as equally important as when to trade. The market will produce a certain number of high probability opportunities every month, and no matter how hard you try, you can't force any more. Instead focus on trading those high probability price action signals when they present themselves and stand by to reap the rewards.