How do you make money trading? Which assets are the best to start with? By the end of this guide, you'll have everything you need to know to get started trading. Our team at Trading Strategy Guides understands that each asset class or instrument you’re trading (FX currencies, stocks, Bitcoin, cryptocurrencies, commodities) comes with its own opportunities to make money.
There are many ways to skin a cat and there are different ways to learn how to make money trading. There are short-term trading strategies like the Best Short Term Trading Strategy – Profitable Short Term Trading Tips which will allow you to make money fast and there are long-term trading strategies like the MACD Trend Following Strategy- Simple to learn Trading Strategy which will allow you to make money in the long run. No matter which approach you adopt you’ll have to make sure you choose the trading strategy that fits your own personality.
How to make money trading will be the theme of this article.
The starting point to learn how to make money in general not just from trading is to have a strategy. It might be obvious, but there are many traders out there who are merely guessing when trading and not have a strict trading strategy.
Develop Your Edge and Trading Strategy
Our team at Trading Strategy Guides has put a lot of time and effort into developing trading strategies with proven trading edges and trading strategies that work in different trading environments. The difference between trading with a strategy and trading without a plan is the difference between making money and losing money.
You can find plenty of evidence on our blog about what a good trading strategy should really look like, but more importantly, what you can really learn is how to make money trading.
Our trading strategies are suitable for trading multiple asset classes but are more focused on the Forex currency market. However, from time to time we might focus on strategies that are particular to one instrument like our article on How to Trade Stock Options for Beginners – Best Options Trading Strategy.
How to Make Money Trading
In order to make money on the Forex market or any other market, all you really have to do is to buy low and sell high. Pretty simple wouldn’t you say?
Let’s take a look at an example: How much money can you theoretically make by trading Forex currencies?
Let’s assume that you have a $10,000 account balance and the current EUR/USD exchange rate is 1.1500. In other words, for 1 Euro you get 1.25 US dollars. You forecast that during the current trading session the EUR/USD exchange rate will rise and based on this forecast, you buy around €8700 for your $10,000.
Your forecast is correct! The EUR/USD exchange rate rises from 1.1500 to 1.1600. Being in the profit you decide to close the trade and exchange your €8700 back to $10,092. Your profit from this trade is $92.
Not that much, right?
Would it be possible to increase your profits? To learn how to make money or to maximize your trading potential, you can use leverage which can be up to 500 times more than your initial capital, which also increases your profit potential 500 times.
However, we have to keep in mind that leverage is a double-edged sword and while it increases the money you can make, it also means you can lose more money. The partial answer to the question: How to make money trading is through the use of leverage.
How to Make Money Fast
We all love to make money, but unfortunately, life is too short and this begs the question: how do I make money fast? There is no correct answer as there are many approaches that can help you make money fast.
Being in and out of the market is the most common trading approach that can give you instant gratification and fast money. You can use our powerful scalping strategy Simple Scalping Strategy: The Best Scalping System which can help you make money fast.
You can fine-tune the price at which you buy and sell Forex currency pairs by using the most popular trading approaches like support and resistance trading.
You have to be disciplined and manage your risk. Money management is a key part to making money trading. Understanding the risk associated with trading and the reward that the market might provide to you can help you make money faster.
In conclusion, if you’re good at short-term trading and you have the specific trading profile, you have to be glued to the trading screen and constantly monitoring the market in order to make money fast.
Trading for a Living: Can It Be Done?
Our team at Trading Strategy Guides thinks that you can certainly make a living by trading as we have seen many traders succeed. However, trading for a living is not easy. You need to be absorbed by the market and spend a lot of time and effort in understanding the particular instrument they’re trading.
On the flip side, if you don’t put any efforts whatsoever, then the probability to make money trading is diminishing.
The secret to how to make money and build your wealth is through COMPOUNDING!
Let’s get straight to the point and see how compounding can help you make money.
How to Make Money Through Compounding
The most important ally you have as a trader is compounding. You may have heard that Albert Einstein describes compound interest as “the most powerful force in the universe.” The force of compounding can produce pretty spectacular returns for traders.
But what exactly does compounding means and how it can help you make profits trading?
Basically, compounding means reinvesting your previous profits and using those profits to generate more profits. Compounding is a long-term trading strategy that can help you make more profits as time goes by.
Let’s look at an example:
We’re going to start with a $10,000 trading account, and on average our trading strategy produces a 10% return per month. This means that in 24 months or two years by reinvesting the previous profits through the power of compounding you end up with an amazing profit of $98,497.33.
Show me any other investment strategy that can do that.
If you want to have a detailed overview of the power of compounding and examine how to make money through reinvesting the previous profits, please take a look at the below figures which breaks down a list of the potential profits you can make each month:
We can easily see how each month our account steadily grows.
Because of the way compounding works, it’s the later months or years that really build your trading account in a big way. So, staying focused on the long-term is critical. If you reinvest all your profits and you make regular contributions to your portfolio, compounding will produce even more amazing results.
You don’t need to be an Einstein to appreciate compounding.
Conclusion - How to Make Money Trading
Learning how to make money trading is no easy endeavor. That said if you equip yourself with the right trading strategy and the right mindset great things can be achieved. If you want to learn how to make money fast you need to adopt a short-term trading strategy that will give you many more opportunities to make money. You may also be interested in the best forex trading strategies article.
The two keys to making money trading are leverage and compounding which will help you making money in Forex trading.
In the end, the more trading skills you acquire, and the more discipline you exercise, the more money you’ll make. Remember, trading is not a "one size fits all" scenario, but hard work and dedication will ultimately pay off. If you want to learn about how to make money and discover the secrets behind the scenes of trading, don’t miss our previous article: How to Profit from Trading- Make Money Trading Today!
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