2Bull Forex Blog

What is Online Paper Trading?

Online paper trading involves the use of ‘paper’ or virtual money in your trading account. It is almost identical to live trading, except that your profits (and losses) do not involve any real money at all.

Why Paper Trade?

But why would people wish to trade using ‘fake’ money? After all, isn’t the point of trading to make real money? At first glance, paper trading may seem to be pointless, but I’ll soon explain why paper trading is an essential aspect of every successful trader’s overall trading methodology.

The Point of Paper Trading

Paper trading allows beginner traders to practice entering and exiting into trades, which includes learning how to place stop loss orders as well as orders to take their profits. Without the ability to paper trade, new traders would be paying real cash for all the mistakes that they make when they first start out.

For example, a beginner trader may mistakenly click on the ‘Sell’ button instead of the ‘Buy’ button, causing him to lose hundreds of dollars in only a matter of minutes. With paper trading however, the beginner trader is able to learn from his mistakes without paying any real cash to learn from it. Paper trading is thus a great way for new traders to familiarize themselves with trading in the currency market. Once they have learnt the basics and can be consistently profitable in their paper trading, they can next move on to live trading to reap in real profits.

Paper Trading is not just for Beginners

It should also be known that experienced traders still practice some form of paper trading, even though they are already making a good living in trading with real money. They do this to test out the profitability of new trading strategies and are constantly working to improve and refine them, without having to pay any money to do so.

Everyone knows that the Forex market holds tremendous potential for profits. With more than $3 trillion dollars being traded every single day in the market, capturing even a miniscule percentage of these profits would turn one into an instant millionaire.

But it is obvious enough that becoming a millionaire in Forex trading is not an easy task. After all, if it was to easy to become rich in currency trading, then why doesn’t everyone manage to do it?

The Best Kept Forex Trading Secret

I may become extremely unpopular with what I’m about to reveal next, but it’s the truth you’ll need to understand this if you want to become a consistently profitable trader.

The best kept secret in profitable Forex trading is denial.

Like most other things in life, people always wish for there to be some magical short-cut to becoming successful. We will always wish for there to be an easy way to accomplish our dreams and desires.

For example, when we want to lose weight, instead of exercising regularly and eating healthy meals, we try to ‘cheat’ by ingesting expensive diet pills and paying for premium gym memberships in the hope that we will lose the extra pounds. As you know, in the end, the only winners of this deal are the pill sellers and gym owners.

And this is exactly what’s happening in the Forex market. The lazy traders who think they can make easy money are promptly ‘swallowed up’ by the traders who put in the hard work and extra effort.

So stop being in denial. Stop telling yourself that there’s some magical way to suddenly become rich. You can certainly become wealthy by trading currencies, but I can assure you that this won’t happen if you keep spending money on magical ‘automatic trading systems’ that claim to make you lots of money without any work on your part.

The people who really make money in the Forex market are those that rely on the natural human tendency of denial.

Don’t fall into this manner of thinking!

Forex trading has always been ahead of the game in competing with other types of investments. The Forex market has oftentimes been referred to as the epitome of perfect competition in that things are on an equal playing field despite all the opportunities to profit that present themselves. Never get discouraged when a currency is falling in value because it always means that another one is rising and that just opens another door for opportunity. Here are the 10 ways that Forex trading stacks up against other investments.

1. Forex trading operates on a 24 hour clock - from Australia, to Japan, to the UK, to the US, and then back again, you have the ability to trade currencies 24 hours every day except weekends. Remember that the stock market is like Dolly Parton once sang — “Working 9 to 5.”

2. Start trading for as little as $300 - open a “mini-account” and play like the big boys. That large wad of capital that was required at the NYSE won’t happen when you trade in the Forex market. Trades start for as little as $300, and that’s a lot easier to deal with than what you’re up against with other markets.

3. The most liquid market in investments - when you engage in trading in the Forex market, your capital is not tied up for long periods of time. Even better than this, you have full control of your investment.

4. An unlimited earnings potential - $1.5 trillion per day in Forex trades alone means that the potential for unlimited earnings is in your reach. Not only is the Forex market the most liquid anywhere in the world, it reflects the highest day trading volume of any of the investment markets.

5. Bull, Bear, Up, Down — who cares - whether its bullish or bearish, and whether it’s on an upswing or a downswing in the other markets, those are mere factors that don’t apply in the Forex market. In fact, there is more growth potential whether the commodities, futures, or stock markets are ascending or descending.

6. Purchasing = selling - what??? It’s a true story when your trading currencies. In other words, when you are purchasing one, you are normally selling another. So it doesn’t really matter is the market is climbing or falling. All that matters is that you make the right choice when picking a currency.

7. Accuracy in predictability is possible on a regular basis - once you have the knowledge and you get some experience under your belt, your ability to predict becomes more accurate. You’ll soon be able to identify the cycles that regularly occur in the forex market, and predicting the outcomes will be easier each time around.

8. It’s a transparent market - the use of the technical analysis that is available will help you see the trends mentioned in #7 above. Manage all the risks, execute your orders, and profit from it.

9. Take advantage of the signals - forex online signals come out 3 times each day and last for short periods. Don’t let these slip by you. Because of how they can be sent electronically (PC, laptop, cell phone, etc.) you can receive them anywhere and these will tell you when to purchase of sell.

10. Have laptop — will trade - you can trade anywhere, anytime if you do it right. Having a laptop with wireless connectivity allows you to conduct trades no matter where in the world you happen to be.

Trading currencies can be a very lucrative activity and thousands, if not millions of people around the world are learning more about it every day. However, some people may be reluctant to learn more about currency trading because they fear it is too complicated or difficult to understand. In this article, I will briefly explain to you how currency trading works, and how money is made in the Forex market.

Currency As A Tradable Object

Whenever we make a purchase, let’s say that of a chocolate bar, we trade our money for it. We pay the shop owner a pre-determined price in exchange for the chocolate. The price of the chocolate bar is fixed by the shop keeper, and you can only get it if you pay the price that is set by the shop keeper.

This is what basically happens in the Forex market. Instead of trading money for chocolate, we are trading money for money. And just like in the chocolate example, certain currencies can be bought or sold at a certain price. If you wish to purchase the U.S dollar for example, you will have to pay a certain amount in a different currency for it. This is why currencies are traded in the Forex market as pairs. You cannot buy a certain amount of currency unless you pay for it using a different currency.

If I wish to buy the Euro for example, I may have to pay for it in U.S. Dollars. And just like in the chocolate example, there is a certain price (in U.S. Dollars) that I have to pay for in order to get the amount of Euros that I want. If the price of 1 Euro is 1.5 U.S. Dollars, I have to pay $15,000 in order to get the 10,000 Euros that I want. Thus, the price of this currency pair (denoted by EUR/USD) is 1.5.

But unlike the chocolate example, the price of Euros is not fixed. Indeed, the prices of all tradable currencies around the world are constantly changing. Today, the 1 Euro may be worth 1.5 U.S. Dollars, but next week it may be worth 1.6 U.S. Dollars instead. And this is how profits are made in the Forex market.

If I purchase 1 Euro at 1.5 USD today, I may be able to sell the 1 Euro (that I purchased) to get 1.6 USD back next week! In these two transactions, I would have made a 0.1 USD profit!

This is the gist of how money is made in the Forex market. It’s really not that hard once you learn how it’s done!

Few people will deny that the Forex market is one of the most lucrative financial markets to trade in. With the large daily price trends and market volatility, it is not uncommon for an experienced and successful trader to make hundreds or even thousands of dollars a day.

However, trading in this high leverage and high volatility market does have its potential drawbacks. Although one can potentially make a lot of money in a short period of time, it is equally possible to lose a lot of money within a short period of time too.

The trick to profitable trading is to limit your losses while letting your profits ride.

The Most Consistent Strategy for Profits

There are many traders who like to scalp the Forex market. In other words, they like to enter and exit their trades numerous times a day, each time gaining a small amount of profits. Over a few days or weeks, these small profits start to accumulate to form a large sum of money.

However, such methods of trading require a large amount of effort and concentrate. You’ll have to sit in front of your trading terminal for hours upon hours, as you watch intently at each small fluctuation in price. Unless you are a full time trader, this will form of trading will be tough for you to adopt.

A much better (and consistently) strategy to adopt when trading Forex is to trade on breakouts. There are various forms of breakout strategies, but they generally all work on the same premise: prices cannot keep ranging forever. The moment there is a price break (either upwards or downwards) from a market consolidation, huge profits can be usually be captured. All you’ll have to do is to place your relevant buy or sell stop orders, and you can just step away from the computer and go about your daily routine.

This form of trading is much more consistent, easy to implement and potentially much more profitable.