Currency trading is a lucrative field that continues to grow in popularity every year. In fact, as of 2020, there are over 300 million active users on various social media sites alone who engage with cryptocurrency traders on a daily basis. Many of these users are looking for inspiration on how to make money from forex trading, crypto trading, and CFDs (contracts for differences), so they can replicate or improve their success. If you’re looking for inspiration on how to make money with currency trading, you’ve come to the right place.
Top Ways to Make Money With Currency Trading
There are a number of ways in which you can make money with currency trading. However, before you start spending your money on luxury goods, you should first consider whether you’re making enough to cover your costs. Fortunately, with the right approach, you can easily become a profitable and sustainable trader. Here are some of the most popular ways to make money with currency trading:
In many ways, scalping is the simplest way to make money with currency trading. All you need is a pair of eyes and a computer or mobile device capable of running a platform like MetaTrader 4, 5, or cTrader. Once you’ve set up shop, all you need to do is sit back and watch the trades come in. You’re probably wondering what scalping even means. In simple terms, it means short-term trading. For example, if you see a currency moving in your favor, you might decide to enter a buy order at a slightly higher price. When a sell order is matched, you’d then cancel the original buy order and replace it with a fresh one at a lower cost. This strategy of entering a trade, waiting for a reaction, and then adjusting your position accordingly is one of the most basic and effective ways to make money with currency trading. Even the most experienced and sophisticated day traders have admitted to using this no-frills method to make extra cash on the side. If you’re looking for an easy way to make money, you could do worse than look no further than scalping.
2. Position Sizing
Position sizing is all about adjusting your positions according to the amount of money you have available to spend. The size of your position will determine how many units you’re buying or selling, and in some cases, it will affect the price you’re paying for a trade. You can generally use this method to ensure profitability or to meet your targets for a chosen strategy. For example, if you’re using a long-term investing strategy, you might opt to use a $20,000 account (this amount varies by broker, of course) to limit your losses in an ill-advised pursuit of big gains. In an effort to improve profitability, many high-profile currency traders have adopted this approach and report considerable success. If you’d like to explore this approach further, you could do worse than look to the pros for advice. They might just have some things to teach you about combining profitability with lower stress levels.
3. Making Money With Options
Options are another popular way to make money with currency trading. Simply put, options allow you to speculate on the price of a currency moving forward or backward in value. For example, you might decide to take a long position on the Japanese yen (JPY) if you think the U.S. dollar (USD) will decline in value against the yen. You’d then choose to sell calls on the USD/JPY pair to limit your losses in case the dollar drops significantly versus the yen. In some cases, you might even make money when the price of a currency moves in the opposite direction to your expectations. However, for the most part, options are most effective when combined with other methods of trading.
Short-selling is all about borrowing money to invest in a contract in the hope of profitably exiting the position at a later date. Many brokers will actually allow you to enter short positions for free, which means you can start your shorting journey without risking a penny of your own money. The most popular short-selling currencies are the Japanese yen (JPY), the Swiss franc (CHF), and the pound sterling (GBP). You might want to opt for a short-selling strategy if you think a currency is going to decline in value against the U.S. dollar. In most cases, you’ll need to find a reputable broker that fully supports U.S. dollars and Japanese yen in order to take advantage of this relatively simple approach.
5. Using CFDs
CFDs or constant futures contracts for differences are the technical enablers of the futures industry. Essentially, CFDs give you the ability to trade futures contracts without actually having to own or store anything. All you need is a PC or Mac equipped with a platform like MetaTrader 4, 5, or cTrader. Because CFDs don’t require you to own actual commodities, you might want to use this strategy to enter the market if you think a particular currency is going to rise in value against the U.S. dollar. In most cases, you’ll need to do some research before committing to this method and make sure your chosen CFD provider is reputable and has the resources to sustain high volumes of trading activity.
In some cases, you might decide to stake (also known as ‘betting’) on the direction a currency will move in. For example, if you think the Japanese yen is going to sharply decline in value against the U.S. dollar, you might want to put down a $10,000 bet. When someone else makes a similar bet against the yen, your bet will be deemed a winner. In most cases, you’ll have to find a safe and reliable way to accept wagers in the form of hard currency like Euros, rupees, or pounds. Although this strategy is a little more involved, it can be highly profitable if done right. Just make sure you’re prepared to lose all your money if your wagers go wrong.
7. Scalping And Options Together
Scalping and options represent the most flexible and effective way to make money with currencies. If you’re looking to make some extra cash, you could try this combination out. For example, if you think the Japanese yen is going to decline in value against the U.S. dollar, you could take a long position on the USD/JPY pair and simultaneously sell (or write) calls on the yen. Most experts recommend combining this approach with a short-selling strategy in order to reduce risk, protect capital, and increase returns. Furthermore, many high-profile traders have openly admitted to using this approach to improve their bottom lines. If you’d like to explore this option further, you could do worse than look to the pros for advice. They might just have some things to teach you about effectively combining flexibility with higher returns.
8. Taking Advantage Of Margin Trading
Margin trading is all about trading with borrowed money. When you put down a ‘margin’ (a sum of money paid by way of security) as collateral, your broker will allow you to make trades with minimal financial obligations. Essentially, you’re borrowing money to make money, and this is why many experts consider margin trading to be one of the most profitable and sustainable ways to make money with currency trading. Even during the recent global COVID-19 pandemic, which caused stocks and most fiat currencies to tumble, margin traders were quick to point out that this is the type of person they rely on to stay afloat during these trying times. If you’re looking for a way to make money without having to worry about commissions or slaving away at a desk, margin trading could be an option worth exploring.