One of the easiest ways to make money is by trading currency, in other words, the buying and selling of foreign currency, or Forex. Here are 3 tips to help you:
1. Don’t diversify
Diversification spreads the risk, but it also cuts your profit potential. If you are a small trader, meaning that you are playing with less than $50,000, diversification means that you are diluting your profits.
When you see a worthwhile trade, risk as much money as you can. Many traders will tell you that you should risk between 2% and 5%. That will not make you any money. Risking 5% on a $10,000 account is only $500 and this will not get you very far in the way of open positions. So risk at least up to 10% if you want to get somewhere.
Many currency traders restrict risk by placing their stops close and they never make good profits. They lose out on good trends even though they have the direction right. This is a typical novice’s error. You must study standard deviation if you want to trade successfully; if you don’t know what this is, look it up.
Currency trading is a game of risks, but the more you know and understand, the lower the risks involved. If you cannot handle risk, don't trade currencies.
2. Be patient
Patience is the key to successful currency trading. Many Forex traders think the more they trade, the greater their chance of success, but this is not always true. You make money by making the correct trades, not by making many trades.
3. Trade in relation to what's in the bank
Check your success by what you have in your bank account. If you are having a good run and conditions are right, you can afford to be more aggressive and risk bigger trades.
Try not to hold too many open positions. Once you reach your target, move on. This will keep you focused and help you build confidence. I like to have only one or two trades open at any one time. I then shift position, size and risk, depending on how well I am doing. Always risk profits you have already made rather than adding more cash.
I hope these tips help you make big profits in this risky but rewarding business!