How to Currency Trade for Profit

Buying and selling international currency, like commodity trading and investing in stocks, is one way that some people make huge profits. However, currency trading is also highly speculative and risky unless you have a solid background in international finance. The rule of thumb is invest only what you can afford to lose. With practice and diligence, you can make a profit and have fun too.

Learn how the foreign currency market works. Learn the vocabulary of forex trading and get up to speed on the countries whose currencies are traded most frequently. Study the earnings trends for major currencies that dominate the international economy. Pay particular attention to events that resulted in extraordinary profits and losses for major currencies.

Investigate the problems in this industry. The United States Commodities Futures Trade Commission receives thousands of complaints annually about unsavory business practices, unscrupulous brokers and outright fraud. Read the Fraud Advisories on its website before you invest your money in forex.

Sign up for RSS updates from trading websites and other trusted financial advice sources. Get answers to your questions by participating in forums and discussion boards. Allow some time to digest what you read about potential profits and verify the information by tracking the currency market for a couple of weeks or more. Track currency trading prices on a spreadsheet.

Develop a plan of attack based on your research and results. Open a practice account and practice trading with only those currencies that you researched. Listen to the hype, but do not get caught up in a trading fever.

Anticipate financial market changes that could affect your earnings. Research commodity prices, mortgage interest rates, major trade agreements, stock and mutual fund activities that affect currency rates. Currency trading does not stop on weekends or for most holidays. Because of international time differences, a market is open somewhere in the world 24 hours a day.

Search for reputable currency dealers while you are learning about this industry. Get recommendations from other traders or trusted websites. Specialize and invest small amounts of money until you prove your theories. Review your results as often as possible. Expand to one additional currency pair at a time, after conducting the proper research yourself.

Limit your trading when the market is volatile. Reliable currencies that lose value one week are likely to rebound over time. Growing your currency portfolio slowly is the real key to successful trading. Don't worry about missed opportunities that you don't feel comfortable with or those that don't fit your profit strategy.

Tips

  • Expect losses. Stand pat.

About the Author

Carol Luther has published feature articles in print magazines, ghostwritten blogs, and produced digital content since 2007. She has published personal finance and small business articles for the Houston Chronicle, Mahalo, the Nest, USA Today, Wahm, and Zacks. Carol has designed, implemented and managed multi-year, multimillion-dollar domestic and international projects services for higher education, nonprofits, and small to medium businesses for more than 20 years.