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Everyone has heard of Forex trading, cryptocurrencies and investing.
Opening a brokerage account is an increasingly popular way to make money, and investing has become virtually synonymous with competent financial management.
Let's learn more about the differences between ways to make money in the financial markets, how income is generated for trading different instruments, and where to start if you have no trading experience. You will also learn how to make money on the financial market with minimal financial risks and even without investments.
- Forex Income from currency exchange
- Stocks How to make money on a share in a company
- Copy trading Making money by copying trades of experienced traders
Forex: Income from currency exchange
Forex is an international exchange market where national currencies of different countries are represented. Brokers are a bridge that gives traders access to the market, where they can buy and sell currencies, earning on the price difference: they buy lower, sell higher.
Currency pairs presented on Forex are divided into three types:
- 1 Major (most liquid currency pairs);
- 2 Minor (cross exchange rate);
- 3 Exotic.
Major pairs are those in which both currencies are from developed economies: the US, Japan, Canada, Switzerland, Australia, the UK, New Zealand and EU countries. Example: USD/JPY. Such pairs take up most of the market. They are liquid and feature low spreads.
Cross exchange rates (minor pairs) are those that do not contain the dollar, but do contain currencies of developed economies (listed above). Example: AUD/NZD. The spread for such pairs is higher.
Exotic pairs are those with a major currency on the left and the currency of a country with a less developed economy on the right. For example, USD/KZT. The spread for exotic pairs is higher, and their liquidity is lower.
There are two main ways to make money on Forex.
The first way is to make money on rising prices. In this case, the trader buys the currency and holds it until the price rises and only then sells it. This is also called long position trading, that's how "bulls" trade.
The other way is to make money on falling prices. Before the price of an asset falls, a trader sells it at a higher price, after which he waits for the price to fall and buys it at a lower price. It's a short position trading, that's how "bears" trade.
In the chart below you can see how the price of EUR/USD has changed over 5 years.
ADVANTAGES OF MAKING MONEY ON FOREX
There are plenty of reasons why Forex trading has become one of the most popular ways to make money. Let's review the most important of these:
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Flexible hours
To make money on Forex, a trader will only need a laptop, smartphone or other device with internet access. All transactions are done online and the market operates around the clock, allowing you to work at any time and from anywhere in the world.
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Demo account
If you have no experience in trading or you want to test trading strategies without risking your own money, feel free to open a demo account. It is a kind of simulator where you can practice for free and get your first trading experience.
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Minimum input
You won't become a millionaire by starting with a minimal investment, but you will get a good idea of the scale of the business and the opportunities. Forex trading is in demand among novice traders as the market is highly competitive and therefore offers lucrative investment opportunities.
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Automatic income
Experienced traders can create their own trading algorithm and orders will open and close automatically. Such algorithms are called robots or advisors, and many brokers support this type of trading.
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Training
We offer the support of a personal financial advisor to all clients with accounts of 500 USD or more.
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Fast income
Opportunity to earn income fast. Traders can make money on trading during the day if they choose scalping or intraday trading.
WHO CAN MAKE MONEY ON FOREX
Making money with Forex is suitable for those who already have knowledge of economics and finance, as well as those who are ready to learn how to analyze the market. You can get income here both in the short and long term, depending on the chosen trading strategy.
Stocks: how to make money on a share in a company
Trading stocks and other securities is another way to earn income. Company stock is placed on the stock market, among which common stock and preferred stock can be distinguished. Common stock gives you the right to vote at meetings, while preference shares guarantee income, and often this is a fixed percentage or amount. Receiving income when buying common stock depends on the success of the company, its growth and increased trading turnover.
You can earn income from stock in a number of ways. The most common one is buying stock when it gets cheaper and selling it when its price goes up. It is also possible to make money on the decline in the stock price: to do this, you need to borrow stock from a broker, sell it at a high price, wait for the value to fall, buy the stock back and return it to the broker. The difference between the sale and purchase price will be the profit.
In the chart below, you can see the movement of Apple's stock price over the last 5 years.
ADVANTAGES OF MAKING MONEY IN STOCKS
Buying stock has a number of advantages over other trading tools, namely:
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Outlook
If you invest in a company that is actively developing, you have the opportunity to receive decent dividends in the future.
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Risk minimization
The probability of being in the red when buying stock is minimal.
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Availability
Cooperation with brokers gives access to international markets and a wide range of stocks, including foreign ones.
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Simplicity
You don't have to be a professional stock market participant to generate income: novice investors can choose companies that are actively growing and subsequently generate income.
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Variability
Different ways to make money in stocks are available, including active trading and passive investing.
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Diversification
You can invest money in stocks of different companies and thus protect yourself from possible risks: if shares of one of the companies show low profitability, you still have stocks of other companies.
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Earnings season
Every public company is required to publish quarterly financial results. If a company has a positive report its stock rises in value and this provides an opportunity to capitalize on the rise in stock price.
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Analysis
To get a stable income from stocks and make balanced decisions, it is necessary to analyze the performance of the company, monitor the market situation, including political and economic events.
WHO CAN MAKE MONEY IN STOCKS
Nowadays, both a beginner and an experienced investor can make money in stocks, but you still should take time to analyze and study statistics to increase your income. This will allow you to choose the right companies and profit with a higher probability. Stocks are not suitable for getting quick results, this option is for traders who prefer medium and long term strategies.
Copy trading means making money by copying trades of experienced traders
Copy trading is an opportunity to make money on Forex without having knowledge, skills and trading experience. The way it works is this: you need to register on the copy trading service, fund your trading account and subscribe to an expert trader, whose trades will be automatically copied to your account in real time. An expert will make the decisions and you will make the profits.
Copy services deal with a variety of tools, from currency pairs to commodities and stocks. Different trading strategies are also allowed, so when choosing a trader, you should pay attention to what strategy the expert uses, profitability, drawdowns, number of subscribers, etc.
ADVANTAGES OF MAKING MONEY ON COPY TRADING
The use of copy services is becoming more and more popular, because this way of earning money has many advantages. For example:
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You don't need knowledge or experience
To earn income, all you need to do is open a trading account and subscribe to an expert trader; his trading is your income.
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For beginners and professionals
Even unexperienced beginners can make money, and the professionals can earn passive income.
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Automation
The user does not have to participate in the process or copy orders by himself—trades are copied automatically by signals.
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Regulation
If necessary, you can regulate your trading: limit the number of trades, set a deposit limit, close trades that you think are not profitable.
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Safety
Money can only be managed by the user and is stored in the user's trading account.
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Risk control
The user can subscribe to different traders to minimize financial risks and cancel the subscription if copying trades did not bring the desired results.