How to make money on Forex from scratch - theory and tips for beginners

Forex is a large exchange where people make money by buying and selling currencies, commodities, stocks and indices. The daily turnover of this foreign exchange market is four trillion dollars. This is where traders from different parts of the world buy and sell, making money on the difference in rates.

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In this article you will learn:

1. Forex instructions for beginners
2. Basic rules for successful forex trading
3. Example of a successful newbie deal

There are no restrictions on the amount of earnings in Forex. Trading financial assets provides everyone with a good opportunity to increase their money. Here you can start making money even with a small initial capital. This will only require time, desire and basic knowledge.

This is confirmed by the results of many traders who started their work with three to five hundred dollars and were able to become millionaires. In dollars, of course.

What is Forex in simple words

Forex is an international over-the-counter foreign exchange market. The currencies of most existing countries are traded on it; the price is formed based on current supply and demand.

Forex market participants are:

• central banks of different countries;
• private banks;
• brokerage and dealing centers;
• Insurance companies;
• public and private pension funds;
• investment funds;
• private investors;
• traders.

The market itself was formed at the turn of 1970-1980 and since then has shown continuous growth in capitalization. This fact is confirmed by studies of the Bank for International Settlements, which are conducted every 3 years.

Dynamics of daily turnover growth (According to reports from the Bank for International Settlements)

The graph shows that between 2001 and 2021, daily turnover has increased almost 5 times. According to leading economists, by 2020-2021 the amount of day trades could reach $10 trillion.

Forex is a system without any center. Its stable operation is ensured by:

• brokers;
• dealers;
• liquidity providers.

Each element of the system performs its own task. Brokers receive and withdraw orders from traders, dealers receive quotes from suppliers and accept bids from clients, suppliers directly transmit quotes and provide contracts.

There is no single center for trading (like a specialized exchange), just as there is no official Forex website.

Forex trading sessions

Forex works 5 days a week (Monday to Friday) 24 hours a day. Some currency pairs are only available for a certain period: if it is night in Russia (Moscow time zone), then you will not be able to sell or buy rubles.

In the Forex market there is such a thing as a trading session. The largest international sites exhibit peak activity at different times because they are located in several time zones.

When evening comes and one site closes, another opens. This is the reason why the financial market operates around the clock. It is very important for a trader to know the time of each trading session, because they have their own characteristics that affect trading.

In total, there are 4 types of trading sessions in Forex:

• Asian;
• European;
• American;
• Pacific.

Trading begins with the opening of the Tokyo Stock Exchange and ends with the closing of the Chicago Stock Exchange before the weekend.

Let's look at the features of each trading session.

Session 1. Asian

It is characterized by low volatility of traded currencies and a calm market situation. During the Asian session, sharp rises and falls in rates are an exception to the rule. Traders are most active in relation to the yen, yuan and other monetary units of this region.

Despite the calm atmosphere, the importance of the Asian session cannot be underestimated: it is it that sets the vector of movement for subsequent trading on other international platforms.

Volatility of currency pairs during the Asian session

Session 2. European

The opening of trading is usually calm; traders' activity reaches its peak only with the start of the London Stock Exchange, which occurs an hour after the start of trading on the Frankfurt and Paris stock exchanges. The main currencies participating in trading are: US dollar, euro, franc and pound sterling.

The European session is the largest in the Forex market, and the London Exchange is the most influential in Europe: it accounts for more than 30% of the total trading volume.

Volatility of currency pairs during the European session

Session 3. American

The start of the first exchange coincides with the resumption of activity by European traders who had finished their lunch break. After the opening of the New York Stock Exchange, trading volume reaches its peak.

The American trading session is considered the most aggressive, so trading on it is recommended only for experienced traders. The most popular financial instrument is the American dollar. The second most popular currency is the Canadian currency.

Volatility of currency pairs during the American session

Session 4. Pacific

In general, the session has very little impact on the overall market picture. Most often, no major exchange rate movements occur during its period.

The Pacific trading period is considered the quietest; the main participants are traders from Australia and New Zealand. Accordingly, the most liquid currencies are the Australian and New Zealand dollars.

Features of trading by day of the week

In addition to the session, for successful trading you should correctly assess the influence of the day of the week:

• Monday is the calmest day . Most market participants do not carry out any serious transactions; they evaluate the news, analyze exchange rates and adjust the weekly strategy;
• the period from Tuesday to Thursday is characterized by active trading, traders pay special attention to news that comes from the governments of leading countries;
• Friday is the most active day of the week . Before the stock market weekend, most traders try to close all their transactions.

Below is a graph of the volatility of the main currency pairs, depending on the day of the week:

*there is no trading on Sunday, the item was added due to the difference in time zones: when trading begins on Asian exchanges, Monday has not yet arrived in most countries.

When drawing up a trading strategy, it is important to take into account the influence of the day of the week and the trading session. Without this, the chances of canceling the deposit increase sharply.

What is traded on Forex

There are several financial instruments available to the trader. Depending on the broker, they may vary; not every company provides its clients with access to the entire list of assets.

Instrument 1. Currency

Currency is the most popular trading object. Allows you to get the greatest profit due to its volatility. All currencies are traded in pairs, which show how many units of one currency can be purchased for a unit of another.

Example: AUD/JPY = 0.02 means that for one yen a trader will buy 0.02 Australian dollars. The currency in first place is called the base currency (Australian dollar), and the currency in second place is called the quoted currency (yen).

According to the classification, all currency pairs are:

• major;
• minor;
• exotic.

Major include all pairs containing the US dollar or euro.

Minor ones are made up of a major currency (monetary units of developed countries) and a minor one (funds of developing countries).

Exotics represent a ratio of little-known banknotes.

Beginners are advised to trade minor or exotic currencies. Majors are of interest to experienced traders, so competition is very high.

Tool 2. Precious metals

Precious metals are another way to make money on Forex.
This is the sale and purchase of gold, platinum, silver, palladium and other assets. The main financial instruments in this group are gold and silver, others are supported only by a small number of brokers.

Forex brokers and dealing centers

An individual can gain access to the Forex market with the help of special organizations: brokers and dealers.

The essence of their work differs from each other:

• broker is an organization that acts as a link between the client and the foreign exchange market. It outputs the user's order directly to the exchange. The broker’s income is a commission for user transactions, so it is beneficial for him that they trade more actively and make more profitable transactions;
• dealer or dealing center is an organization that makes transactions with a client on its own behalf. In other words, it simply obtains quotes from suppliers and accepts bids from its clients. The dealer's earnings are the difference between the purchase and sale prices of the currency. It turns out that the trader’s gain is a loss for the company and vice versa.

A broker is the most preferred option. However, the minimum threshold to enter Forex is $100,000. Naturally, not everyone has such an amount. In this case, dealing centers come to the rescue. Despite some disadvantages of this type of organization, they provide credit funds to their clients.

The credit facilities provided to users to carry out transactions are called credit limits. For most Forex brokers it ranges from 1:200 to 1:500. This allows you to start trading with a modest amount at your disposal: just a few tens of dollars.

High leverage is both a plus and a minus. With a leverage of 1:100, a trader with $1,000 of personal funds can reset his balance if the currency rate falls just 1% down.

Most organizations operating in Russia and the CIS countries are dealers. To find out exactly what type of organization the organization belongs to, just read the documents located on the website and the user agreement.

To better understand the difference between a broker and a dealer, it is recommended to watch an educational video.

The best sites for exchanging electronic money

Exchanging currencies online is much easier. More dangerous - no doubt about it. But this is only for stupid people. It is much easier to check reviews about a site than to go to a stationary exchange office and even stand in line.

If progress allows, why not make money on currency exchange right from home?

The best sites for exchanging electronic currencies are collected on the B estchange .

More than 100 exchange directions are available on Bestchange , a user-friendly interface and current prices of popular exchangers. The latter will help you choose the most favorable exchange rate.

You can trade on exchanges. The INDX exchange from Webmoney is an ideal option for beginners. The ability to trade small volumes and the absence of commissions when buying/selling will help a beginner quickly learn how to trade currency pairs.

Is it possible to make money on Forex without investments?

Beginners often wonder: is it really possible to make money on Forex? The best way to answer this is to conduct an experiment from personal experience. I would like to say right away that it is difficult to make money on Forex without any investments : you will need minimal funds for the first deposit.

Some dealing centers have affiliate programs and pay a reward for each attracted user, but this path to obtaining initial capital is very long and difficult to implement.

User reviews

Oleg, 35 years old, Moscow: “In my life there was a period of searching for easy money. Over the course of a year, I tried many methods, wasting almost all my savings. Tried to trade Forex. I heard that using the stock exchange you can earn a large sum. I didn't succeed. I attribute failures in transactions to hasty decisions. I concluded that trading on the stock exchange is a difficult job that takes years to learn. You should not be guided by momentary desires. You need to develop your own strategy for making a profit and strictly adhere to it.”

Maria, 32 years old, Sevastopol: “Now everyone is trying to find a source of additional income. You can make money on Forex. There are different examples, articles, success stories. You should start by studying educational programs. I recommend opening a demo account at the first stage. Enough time is devoted to training, otherwise transactions with your own money will become unprofitable. It is worth studying all the pitfalls of the chosen strategy in advance. You can’t stop abruptly and abandon the matter for a long time.”

Advantages of Forex

1. You can work at any time of the day or night. Thanks to the 24-hour operation of the exchange on weekdays, each trader can choose the optimal schedule for himself. If desired, trading can be combined with other activities.
2. Operations are carried out instantly. To buy or sell currency, you do not need to wait for the operation to complete or confirmation from the system.
3. Good profitability. The average trader earns from 10 to 30% of invested capital per month. In a year you can multiply the initial funds by 3 or more times. Few financial instruments allow you to make such a profit.
4. Low entry threshold . You can start trading as early as $10. For comparison, to enter the American stock market through a broker, the client must have at least 3 thousand.
5. There is no binding to one place . You can work from anywhere, as long as there is a computer with Internet access.
6. Availability of information . The Internet is full of free books and courses that allow you to learn stock trading. You don't have to spend money on your education.

Disadvantages of Forex

1. Risk of running into scammers. The Internet is full of offers from various companies that carry out brokerage activities. Not all of them are real market participants, so you need to be very careful when choosing a broker or dealing center.
2. No guaranteed income . The foreign exchange market is volatile: even professionals cannot accurately predict its behavior. It often happens that in one month you can earn 500 dollars, and in another only 100.
3. Specific knowledge required. Trading at random has never made anyone rich. For profitable trading, you need to read a whole mountain of literature, have an understanding of various financial instruments and methods of their analysis.
4. Risk of loss of capital. This point is especially important for beginners. They are not recommended to start trading with large amounts: almost always the first deposit will be lost.
5. There is a commission. For each transaction carried out, the broker will withdraw a commission from the client. It doesn't matter whether it's profitable or not.

Making money on Forex cannot be called simple. Because of its pros and cons, Forex will always have fans and detractors, but none of them will deny that the market has global prospects.

Earning Features

So, let's start with the fact that you must decide how exactly you will work. There are many ways to earn money, you can even combine them, but in the beginning it is better to choose one path and develop in this direction. You'll be chasing two birds with one stone... In general, there's no need to rush. An in-depth study in the role of each of the parties (exchanger, user, referrer) will bear fruit.

If you often work with documents, consider a home paper shredder. This tool will allow you to quickly get rid of a large amount of paper and free up your work space.

It is recommended to start from the user's perspective. Minimal investment, relative simplicity of the process and invaluable experience. Ideal conditions for a beginner.

Then you can try to attract users to exchangers and receive affiliate rewards from your referrals. This step is extremely important, especially if you want to open your own currency exchange.

Referral managers provide overwhelming assistance in the development of projects. If we walk in their shoes, we can find out what exactly referral leaders are looking for, create attractive conditions for them and wait until they promote your project, after which you will simply count the profit.

At the last stage we will act as an exchanger. By creating your own currency exchange online, you can earn a very solid passive income.

Let's look at each "stage".

How to make money on Forex - TOP 6 ways

Most people are sure that you can make money on Forex solely by speculating with currencies. In fact, the foreign exchange market provides many more opportunities: some of them can be used even by people without knowledge and experience.

Method 1. Trading

A classic way to make money. Its essence is to buy a currency cheaper and sell it when the price rises.

At first glance, everything is simple. However, the market is unpredictable, exchange rates may change depending on news, political events, economic sanctions and other external factors.

The most important quality of a trader is calm. He must be able to keep his mind cool in any situation. Panic and excitement lead to incorrect transactions, which lead to loss of deposit.

Depending on the chosen trading strategy, the following types of trading are distinguished:

• scalping - characterized by a large number (from 15) transactions in one trading day. The peculiarity is that only diligent people with a strong nervous system can engage in scalping, otherwise the risk of making a mistake is very high. The income from each operation is calculated in several points, but in total they provide a good profit;
• intraday - traders using this strategy make up to 10 trades within one business day. Each of them is precisely verified based on technical analysis signals;
• positional - transactions are made quite rarely (from 1 to 5 times a week). Typically, trading operations are tied to some economic events: the company pays dividends, a new package of economic sanctions, etc.

Beginners like to start their trading with scalping, considering it the simplest method. In some ways, this is true, however, without good risk management, such a trading strategy is guaranteed to fail. Those who started making money on Forex from scratch are recommended to engage in intraday trading.

Professional traders are not limited to choosing one strategy; they often combine the above or come up with their own.

Method 2. Opening your own PAMM

A PAMM account is close to trust management. The trader accepts funds from other people and manages them. At the same time, he keeps part of the profit for himself, and gives the other to the investor.

The procedure for opening a PAMM account is simple; some brokers and dealing centers provide this opportunity in your personal account. To do this, the trader must deposit his funds into the account. This is done so that he is more careful when making transactions and risks not only other people’s money.

Investors don't trust new accounts. To ensure an influx of people to the created PAMM, you need to conduct profitable trading for a long time.

Detailed information about opening your own PAMM is contained in this video.

Method 3. Copying transactions of experienced traders

This is a great option for a beginner to make money on Forex. One trader completely repeats the trades of another automatically.

From a technical point of view, the process of copying trades looks like this:

• an experienced trader trades on his account;
• signals emanating from it are transmitted to the servers of the copying site;
• after the site, the signals are transmitted to the broker’s servers;
• the broker delivers signals to other traders.

This allows a novice trader not to have to build his own trading strategy, but to completely rely on a professional.

Unlike investing in PAMMs, funds are not transferred to another account.

Popular platforms for copying trades:

• share4you.com;
• zulutrade.com;
• copyfx.com.

For the purpose of diversification, it is recommended to use several platforms at the same time, then the user will be able to continue working if one of the companies closes.

Method 4. Financial betting

Financial betting is betting on the foreign exchange market . The user can predict the behavior of the currency and place a bet on the event. If she plays, the client will make a profit.

Benefits of betting:

• you can start with just 10-20 dollars;
• the user personally selects the betting conditions;
• the bets are absolutely transparent: the outcome of any event can be verified.

Disadvantages of financial betting:

• it is necessary to understand the processes taking place in the market; thoughtless bets will not bring profit;
• small profit if you win;
• In case of an unsuccessful outcome, the entire bet is lost.

It is safe to say that financial betting is not suitable for bettors. A person must understand the foreign exchange market and know the basics of technical analysis. The risk of losing a deposit is even higher than with trading, since in case of an unsuccessful outcome only part of the funds is lost, but with betting the entire bet is lost.

How to make money on Forex for a beginner - step-by-step instructions

After learning the basics of trading, beginners can start trading. To avoid mistakes in the initial stages, use the step-by-step instructions below.

Step 1. Choosing a broker

Before starting to make money on Forex, the user must choose a partner company. It is through it that the trader will enter into transactions, since an individual cannot personally enter the foreign exchange market.

To compare brokers, the following indicators are used:

1. Working hours . You should not cooperate with organizations that have been operating for less than 3-4 years.
2. Legal reliability . The company must be officially registered as a broker and have documents confirming this fact on its website.
3. Minimum deposit . Each broker sets its own minimum balance for trading. When assessing, you should proceed from your financial capabilities.
4. Spread This concept hides the difference between the buying and selling rates. The smaller the spread, the more profitable the broker is for the trader.
5. Support service. It is best to communicate with its employees in advance and assess the level of their competence and loyalty to their clients.
6. Bonuses . Some companies provide their clients with discounts and bonuses and hold promotions. For example, they may give you a bonus on your first deposit.

All factors are assessed only in aggregate. None of them can cancel out the others.

To assess the reliability of brokers, traders use the website brokers.ru, on the main page of which a rating of organizations is presented.

The best brokers according to brokers.ru

Step 2. Installation of the trading terminal

Trading is carried out using special software. The most popular programs are Meta Trader versions 4 and 5.

Each broker recommends certain software to its clients. It is better to use exactly what is indicated on the company’s website.

A trader must thoroughly study the platform with which he will have to work. Before starting trading, you need to spend a couple of hours mastering the terminal. You can search for a user manual on the Internet or ask the broker's support team.

Step 3. Trading on a demo account

After a novice trader has mastered the terminal, you can start trading. Those who want to understand how to start making money on Forex from scratch should practice on a demo account.

The broker issues virtual money to the user, which he can use to conduct trading operations. Of course, these funds are fictitious and it will not be possible to withdraw them.

It is recommended to open a demo account for the amount of the future deposit. This way the trader will put himself in a situation as close as possible to the real one.

Even though the funds are virtual, they need to be treated as if they were real in order to understand the emotions that arise when trading. It often happens that people increase their funds on a demo account several times, and the real deposit is quickly lost. This happens due to poor control over the emotional state.

Step 4. Open a live account and make a deposit

You need to open a real account only after receiving a stable result on a demo account. If a broker gives you the opportunity to open a cent account, it is better to take advantage of it.

A novice Forex trader will be able to work with small amounts, so the loss of a deposit will not be critical. Only after making a profit on a cent account should you open a dollar account. It is necessary to increase the deposit gradually. After the first successes, you should not succumb to euphoria and “fill” your account with money.

It is recommended to trade no more than a couple of hours a day. Excessive tension at the initial stage will lead to weakening concentration and loss of money.

Step 5. Making a profit

The trader’s primary task is to break even. At the initial stage, you should not chase profit; the main thing is to learn to control risks, money and prevent your account from being reset to zero.

Once the break-even point has been passed, you can think about maximizing income. It is important to understand that it must be stable: it is better to close many transactions with a small profit than one with a good one.

Professionalism in trading is considered to be a confident increase in the account balance without large drawdowns over a long period of time.

It is necessary to constantly analyze your actions, identify errors and strive to eliminate them.

Risk as a percentage versus a fixed amount of risk.

What is the true measure of traders’ performance?”

I prefer the fixed-sum risk model to the 2% Rule and here's why.

The 2% Rule will only increase the size of a trading account relatively quickly when the trader has many winning trades in a row. However, in the event of a series of losses, the growth of the trading account will slow down. So, returning it to its original size will be quite problematic.

This is because with the 2% Rule risk model, you trade fewer lots as your account size decreases. You might say this is good because it limits losses. At the same time, you essentially find yourself in a position from which it is difficult to get out.

For example, if you lost 50% of $10,000, that's $5,000. Now, in order to get back to the initial deposit of $10,000, you will have to earn 100% of the profit. Agree that following the “2% Rule”, it will be a very long way back to the break-even level (not to mention profitability), since you will be trading effectively with a much smaller position size.

It turns out that the 2% Rule leads to very slow profit growth as the position size decreases after each loss. This reduces the trader's confidence and ultimately leads to over-trading. Many people start thinking, “since my position size is decreasing with each trade, nothing will happen if I trade more often.” They may not think so, but in practice this happens quite often.

I personally believe that the “2% Rule” makes traders lazy...it causes them to take dubious signals into trades that they otherwise would not...All because they are now risking less money (the smaller the amount, the less It's human nature to worry if you lose.)

Tips for Profitable Trading

Professional traders have their own secrets of successful trading. They do not reveal their strategies, but give advice on behavior.

Here are a few rules formulated by successful stock traders:

1. Control of emotions is the most important thing. You cannot be guided by feelings when making decisions in the foreign exchange market. Each operation must be carried out based on news and analysis of the situation. Trading using intuition is comparable to playing in a casino: sooner or later the trader will lose.
2. Risk management is a necessary thing in the foreign exchange market. It is necessary to close the transaction if the loss exceeds the planned amount. You can't wait for a trend reversal.
3. You need to trade strictly according to plan. Strategies are presented in trading literature and on online forums. Most of them have been time-tested, so at the initial stage you should not make adjustments yourself.
4. Constant learning is the key to success. A trader should follow the latest trading literature and draw information from them, attend stock exchange courses and trainings, and watch educational videos. This will allow you to learn new tricks and avoid mistakes.

The last piece of advice from experts is to find yourself a mentor. It is advisable that he be an active trader. He will point out mistakes, tell you how to act in various situations, and help you form a trading strategy. My free basic video course on trading will help you get started. And if you have any questions, write them in the comments, I will be glad to help you.

So, how do you correctly calculate the amount of risk and reward in each trade?

The answer is much less complicated than you might think. I believe that you need to determine a dollar amount that you can safely lose on each trade, and stick to that amount until the deposit doubles (or triples) - in which case, this amount can be increased.

The fixed amount of risk must satisfy the following requirements:

1. By risking this dollar amount, you can sleep peacefully at night without worrying about trades or checking them from your phone or other device.
2. When you risk this dollar amount, you are not tied to a monitor; you do not have strong emotions every time the price moves both in the direction and against the transaction.
3. By risking this amount, you should be able to almost "forget" about your trade for a day or two if you need to... and NOT be surprised by the outcome when you check your trade again. That is, trade according to the “set it and forget it” principle.
4. When you risk this amount, you should be able to comfortably accept 10 consecutive losses as a buffer without experiencing significant emotional or financial pain. It is not necessary that you will have those 10 consecutive losing trades, but it is important that you mentally allow it for psychological reasons.