How to Earn a Side Income with Currency Trading
Listen up folks, I found a good way to gain some more weight. I’m not talking about my belly, obviously, but about my wallet. And about yours, too. I’m talking about currency trading, I just discovered that recently and I’ve made some money with it. This is another way to earn extra money for paying off debt, saving for the future, or whatever you have on your financial to-do list.
For those of you who have no clue what currency trading is, no worries, it’s not rocket science. Basically, it means to sell one currency and buy another. Fairly simple. If you think the US dollar will gain in value compared to the Euro, you will exchange your Euros into US dollars. If the dollar really goes up, tadda, you will be richer.
That’s the basic idea behind it. It doesn’t require much technical skill and it doesn’t even require much money. Do I have your attention? Great, read on and learn more about it.
Currency pairs describe the relation of two currencies to each other; stick to the most common currencies, at least in the beginning!
The first thing you need to learn is that when trading currencies, you always look at two currencies and their relative value. When you check out these currency pairs, you will see that they are published like this: EUR/USD = 1.09. That means 1 EUR equals 1.09 USD.
The most commonly traded currencies are:
- USD – US dollar
- EUR – Euro
- GBP – British pound sterling
- JPY – Japanese yen
- CHF – Swiss Franc
- SEK – Swedish krona
- AUD – Australian dollar
- CAD – Canadian dollar
Of course, you can also trade other currencies, but at least in the beginning, I would stick to those because they provide more liquidity and it’s easier to find trading information.
One last word about currency pairs: There will be a bid price and an ask price. The bid price is the price that you will get if you sell the currency. The ask price is – you guessed it – the price that you will have to pay if you want to buy the currency. Obviously, the ask price will always be slightly higher than the bid price…the dealer wants to earn money as well.
Open a margin account and trade with higher volumes – that means you can earn more money, but you can also lose more
Ok, now that you know all that, let’s get to the point. How to make money? If you ever went on holidays abroad, you may have noticed that the value of a currency fluctuates, but not that much. Normally, the major currencies listed above don’t move more than 1 cent per day, which is less than 1%.
Hence, if you invested $1,000, you could gain up to $10. Not that much, huh? Obviously, it will take quite a long time to pay back your debt with such a margin. That’s why you need to open a margin account, for example with the broker Trade24.
A margin account will enable you to trade higher volumes. Basically, your broker will provide a short term loan. Usually, these accounts provide a leverage of 50:1 or 100:1. That means you only need to bring $1,000 and you can trade $100,000.
That will change your absolute return significantly. Let’s say you get the direction of the currency move right and you gain 1% per day. With an investment sum of $100,000, that’ll be $1,000. Much better, isn’t it? However, be careful!!! You can not only win more money, you can also lose more. It’s still trading after all, that means there is risk.
Learn the fundamentals of currency trading first, that will reduce your risk and increase your earnings potential!
We’ve always been told risk is not good, but honestly, it’s also not that bad. If there is no risk, there won’t be any return at all. Now having that said, you shouldn’t take any excessive risks, but Forex trading is actually not that risky, if you know what you are doing.
The internet offers a variety of tools that can assist you with your analysis. Definitely check out the Trade24 analytical tools. In the end, it comes down to predicting the right direction of the currency move. Therefore, you should understand economics and what drives the value of a currency.
Learn how to interpret GDP data, interest rates, monetary policies and geopolitical events. These things have an effect on currency valuation and if you know how to read the signs, currency trading will make you a decent amount of money. You don’t want your wallet to remain skinny for the rest of your life, do you?
© 2016 – 2017, Ruddigar Simpson. All rights reserved.