Top 5 Tips On How To Improve Your Forex Trading

While there is no doubt that each and every one who is in the foreign exchange market wants to make it big, there are many who are not able to make it big. This is mainly because they do not understand the main steps that need to be followed for making it reasonably big in the forex market. 

There is no doubt that there is money to be made in the forex market. However it is very important to understand how to trade well at forex. Here are five important tips that could help to see people making decent money in the foreign exchange market.

Forex Trading is a Serious Business

If you wish to be successful in the forex trading you should understand that it is serious business and one cannot afford to dabble it in it as they do in an online casino game. Yes, there is risk involved in forex trading. Which business does not have risk for that matter? 

The onus therefore lies on you to find out ways and means by which you can mitigate the risks. Hence every time you get into the forex market keeping in mind that there is risk involved, you will learn to be careful and avoid taking rash or impulsive decisions. 

Your main objective should be to ensure that the revenues that you generate from your forex business for a specific period should be more than the expenses and costs that you incur. So, you should learn to look at each and every forex transaction as a cost. This will help you to be more careful and more research and information oriented. 

Learn To Manage Risk And Reward Efficiently

If you are keen on making money in the forex market it is very important for you to draw the right line between risk and reward, and manage that risk effectively. Understanding the basics of position sizing is something that could be considered as indispensable. You should know reasonably well as to how many lots you should trade for each trade setup. This will help you to remain within the risk band-width that you have chosen for yourself.

This will help you to gradually grow your business and avoid massive slipups which could be highly demoralizing or even financially devastating for many. One of the main reasons why people fail in forex trading is because they overshoot their risk appetite or they do not how to adjust their position sizes and activate the much needed stop loss option. 

Over Trading Should Be Avoided

This could be considered as a continuation of the above paragraph. Biting off more than one can chew is perhaps the biggest reasons for massive losses in Forex trading. The biggest challenge is to understand and stop at the point where the risk of overtrading begins. 

This is where many people make the mistake and cross the red line without knowing that they have done it. Being aware of the red line and still continuing with it is akin to taking forex trading as a gambling option than as a serious business. 

Master A Few Strategies

At the end of the day there is no denying the fact that the secret lies in avoid overtrading. To enable this to happen it would not be a bad idea to learn trading off on simplistic price based strategies. It might also be necessary to master them. 

This is because it will provide you with the knowledge that could be helpful in not falling prey to overtrading. Further it will also be not a bad idea to get into some demo trading for the first few months before going to trade with hard money. It will be a good learning ground.

Come Out With a Trading Plan

The next important point is to always have a pre-defined forex trading plan so that you start treating it as a serious business instead of dabbling at it once in a while. You should have a reasonably foolproof business model without which you will not be able to move from one level to another. 

All actions in forex market must be predefined to get the right results. Hence having a plan is of paramount importance.

How to Make Money with Binary Options?

Binary options trading is the newest form of online trading on the Internet. The Industry was established in 2008 when US authorities officially legalized this form of online trading and gave the permission for US companies to apply for a financial trading service provider license at the CFTC.

But what are binary options and can you really make money with them? 

What are Binary Options? How do they Work?

Binary options trading is basically speculating on the future movement of various underlying assets. An underlying asset can be anything that’s publicly traded, such as the exchange rate between various currencies, stocks of companies, commodities like gold, silver and more. And to make it easy, online trading binary options is so convenient.

Unlike in regular stock trading, in binary options trading you will not have to actually purchase any asset. You will merely be betting on the future movement of an asset of your choice. One might even say that this type of trading is more like sports betting; and while there is certainly some truth in it, in reality in binary trading you can actually influence the outcome of your “bets”.

Lets take a concrete example in order to illustrate how binary options trading works:

• Imagine that the stocks of Microsoft are at $300 at this very moment
• You predict that the value of Microsoft’s stocks will increase above $300 within 2 days.

Now, at a binary broker you will have the possibility to purchase a binary options contract that predicts that the value of Microsoft’s stocks will increase in the future. 

• Imagine that the broker offers a payout rate of 90%
• You intend to invest a total sum of $100

In case your prediction will come true, then you will be receiving a total payout of $190. This is calculated by multiplying your initial investment with the payout percentage, which will be your profit margin. The broker will also return your initial investment, hence the $190 price.

So, as a concept, binary options indeed work like sports betting however here if you have expertise in financial matters then you will be able to predict the outcome of your bets. Many people who are involved in business and finance are perfectly capable of making correct predictions.

And the great part about binary trading is the fact that you will be paid out with very high payouts. Like in the example above, if you invested $100, you won $190. You would have won that amount even if the value of Microsoft’s stocks had increased to just only $301 from the initial $300.

However, would this have been normal stock trading, then to earn $90 profits you would have had to buy stocks worth $27,000 at the price of $300 to gain $90 profits while selling them at $301. – So, as you can see, the difference is huge.

Can you Really Make Money?

If you paid attention to the above example, then for sure you have noticed that yes you can indeed make money with binary options. However, you will have to treat binary options as a form of investment and not sports betting. If you buy binary options contracts by random then you will obviously lose.

If, however, you have the patience and discipline to conduct serious market research, then yes, you can indeed make large sums of money. Take the Microsoft example above. If for example you have researched that Microsoft will release a new product next week, then you can be 99% sure that the stocks of the company will increase after the product launch.

Instead of purchasing Microsoft stocks for like $10,000 hoping make around $100 profits, you can just invest $300 in a binary options contract that predicts that the value of Microsoft will increase make $200 profits that way. Doesn’t this sound easier?

But where’s the catch?

Well, there isn’t really a catch in the traditional sense of the word. However, if your prediction will not come true then you will lose all your investment. – But as explained, IF you are determined to conduct a proper research before investing, then you will be able to achieve a winning ratio of around 80% at any moment (just for reference purposes: Most of the time if you achieve a winning ratio of around 55% you will be making guaranteed profits.

Is Binary Options Trading Legal?

In most countries binary trading is at this moment either not regulated or legal. Options trading is not explicitly illegal in any country. If you live in a country where binary trading is not regulated then you should only invest at brokers that are regulated in other countries.

Laws in the United States

At this moment in the United States only NADEX (North American Exchange Derivative) is legal and licensed. All other brokers operate outside of the law. NADEX is officially licensed and regulated by the CFTC and SEC.

Laws in Europe and other jurisdictions

In most places outside of the United States binary options trading is not regulated. In Europe binary trading is regulated only in Cyprus, Italy and the United Kingdom. Brokers that are licensed in one of these countries are legally allowed to operate in other European countries as well.

In most other countries binaries are not regulated however this does not mean that they are not legal. This merely means that the government of those countries is at this moment not invested in this form of financial trading and it allows citizen’s to decide what to do in this regard.

However, people living in unregulated markets are recommended to only trade at brokers licensed in other countries, preferably in Europe. This is an absolute must, since brokers “licensed” in some weird places like Cayman Islands are fraudulent.

Future Regulation and Money Making Potential

It’s expected that more and more countries will in the future decide to regulate binary options. This will result in a much safer industry and much more advantageous and safer services. However, until then, people interested in this form of online trading are recommended to stick to the trusted USA or European brokers only.

So, in short, binary options trading is indeed a good method to generate money online. However, this form of trading should not be underestimated and treated lightly. If you treat it professionally and do your homework then you will definitely be able to make consistent profits.