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Can You Make Extra Money With Active Trading?

By Frugaling Leave a Comment

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Forex trading
Forex trading

My favorite trading has always been forex. I travel a lot, have accounts in several countries, so it makes sense to try and trade currencies in order to take advantage of a low exchange rate.

For example, the Euro is now 1.12 to the US dollar, when back in October 2014, it was as low as 1.28.

Simply put, that means that 1,000 euros would buy $1,120 today, when they used to buy $1,280 24 months ago. A 12% decrease in the amount of dollars you can get. That is bad news if you are planning a US holiday next year and live in a European country, however, the other way around, if you have US dollars and need Euros, you can now buy more Euros than you would have last year.

This is why I use Forex trading. I can buy Euros when the rate gets weaker, and buy dollars when they are at a cheap price. There are many sites for learning Forex trading made easy with technologies nowadays. You can download a demo and start trading at no risk. I am no wizard, so I have no idea of what the future brings, but there are tools to help you make a decision to buy or sell.

For example, currencies depend a lot on economic data. If the US announces a low GDP and low manufacturing sales, the Dollar is likely to weaken. Politics also play a role, as well as a ton of minor factors, so do not expect only the economic announcements to influence currencies.

That is when it gets complicated. An unexpected report outcome, or an external event can shake currencies a lot. Meaning you can either make a lot of money, or lose a lot. I would recommend first that you never fund your trading account with money you are not comfortable losing. While this is not the aim, it can certainly happen, even experienced traders lose money sometimes.

Second, active trading can be as intense as you want it to be. I used to take big positions, with a high margin, and do some day trading, meaning I would sometimes be up in the middle of the night waiting for an economic announcement, stressed to the max, watching the screen tick and tick, sometimes in the opposite direction I wanted it to go. It can eat you up.

Now I take long term positions, I check my accounts once a week or so, close a few trades, open some new ones… always with a very low margin, so I can afford to hold a position until it goes where I want it to go. Active trading is interesting in that you are the master of your investments. However, you should try up a demo account first and see how you are doing, because you can’t get emotional, or do any mistakes, when it is your money on the line.

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