There’s no doubt that the coronavirus has had a devastating impact on the socio-economic climate in the UK, with the nation’s economy contracting by a staggering 9.9% through 2020.
With this in mind, it’s little wonder that people and households have been seeking out new ways of increasing their income in 2021, with a view to optimising their earnings and avoiding the worst financial consequences of Covid-19.
But is forex trading a viable option? Here’s our brief guide to helping you generate a viable income from trading international currencies.
- Make Research Your Watchword
Let’s start with the basics; as you’ll need to learn about the forex market fundamentals and understand the underlying rules that govern change and volatility within this space.
At its core, forex is a market in which you can trade international currencies in pairs and as derivative products, which enables you to speculate on price shifts and profit without assuming ownership of the underlying instrument.
Of course, you can also use margin to create leverage of up to 100:1 when trading forex through a licensed brokerage site, which allows you to control positions that are far larger than your initial deposit. This can lead to disproportionate gains and losses, depending on how your orders perform over time.
This type of knowledge can also generate a sense of determinism, which helps you to avoid emotive trading and knee-jerk market reactions.
- Make the Most of a Demo Account
While building a strong foundation of knowledge is all well and good, it means little unless you’re able to execute this in a practical trading environment.
Fortunately, most reputable trading platforms afford you access to a so-called 2demo account”, through which you can access a simulated and real-time market environment that creates risk-free investment opportunities.
You can usually use a demo account for a period of between three and six months, with a view to reviewing your knowledge base in context and honing your carefully cultivated trading strategies.
In this respect, a demo account bridges the often cavernous gap between theoretical learning and practical market experience, which is central to every successful forex trader.
- Start Small and Scale Your Efforts Cautiously
Incredibly, there are more than 170 currencies in the world, while many forex brokers allow access to 60 major, minor and exotic currency pairings.
However, we’d recommend that you start small when entering the forex market, before scaling your efforts organically in line with increased experience and profitability.
It’s also wise to focus on major currency pairings such as EUR/USD when starting out, as these entities offer excellent liquidity and tend to trade within a relatively narrow price range. They’re also not particularly volatile, so trading a couple of major pairs could deliver incremental returns over time.
From here, you can look to trade minor and exotic pairs as part of a wider diversification process, with these entities considerably more volatile and less widely traded in the daily marketplace.