Updated: January 31, 2021
Online forex trading has been gaining steady popularity in the country for the past several years. A good number of people I know, who used to be day traders in the stock market have found greener pastures in the currency market, and almost all of them say that they wish they learned it sooner.
They now prefer forex over stocks because of three main reasons. First, because making money in forex is faster. Someone with average trading skills can increase their capital by at least 5% in just one day and double their money in just a few weeks.
Second, it is a 24/5 market – it is open 24 hours a day, 5 days a week – from Monday 5:00 AM up to Saturday 5:00 AM in the Philippines. This allows them to trade when it’s most convenient for them.
This means there’s no more looking at charts and monitoring prices during office hours, and you can just trade at home instead of wasting time on social media.
Lastly, you can make money in forex regardless of the direction of the market. When prices are going up, you can buy low and sell high.
However, when prices are falling, you can still make money through short selling – unlike currently in the Philippine stock market where you can only profit when prices rally.
What exactly is forex trading?
When you travel to another country, then you would usually need to find a currency exchange booth and have the money in your wallet changed to the currency of the country you are visiting.
If you’re going to the United States, then you’d have to convert your Philippine Pesos to U.S. Dollars. If you’re going to Germany, then you’d have to exchange your money for Euros.
Or if you’re visiting Japan, then you’ll have to trade your bills into Yen if you plan to spend on anything in the country, which I’m sure you would. And when you do this, you’ve essentially become part of the forex market.
The act of converting your money to another currency is also called trading. And when you do this electronically through online platforms, instead of manually through banks or money changers, then that’s essentially what online forex trading is.
How do you make money in forex trading?
Let’s say you have P25,000 and the exchange rate is 1.00 USD = PHP 50.00 in your bank. When you trade your PHP to USD, you’ll receive $500.
Now after a couple of weeks, the exchange rate has changed and it’s now 1.00 USD = PHP 52.00 in your bank. When you convert your $500 back to PHP, you’ll receive P26,000 and you’ve just earned P1,000 in the process.
Imagine doing what you just did above, but online, and instead of waiting for weeks, you only have to wait for a few minutes or a few hours, and then doing it several times in a day. That’s how you can make lots of money in forex.
You should know that the exchange rates of all currencies actually change every second. It is dictated by the supply and demand of each currency in the market and communicated through a global network of banks and financial institutions that are all electronically speaking to each other simultaneously.
The exchange rate of the Philippine Peso to the U.S. Dollar may not change much in a day, but major world currencies do with respect to each other – specifically the U.S. Dollar (USD), Canadian Dollar (CAD), Euro (EUR), British Pound (GBP), Swiss Franc (CHF), Australian Dollar (AUD), New Zealand Dollar (NZD), and the Japanese Yen (JPY). When you go into forex trading, these are the eight currencies that you’d be working with most, if not all of the time.
What do you need to get started in forex trading?
Forex trading is very high-risk. A lot of people lose more money in it than in stock market trading. So the first thing you really need to get started is capital that you can afford to lose.
When you buy shares of a company in the stock market and prices go down, you can simply hold on to the shares and wait for the price to go up.
You can’t do this in forex trading because all accounts are leveraged and when rates go against your positions, your account balance can go down to zero, and you can lose all your money.
Second, forex trading, like any other worthwhile endeavor, requires time and effort to be successful. It will take lots of practice and continuous study to learn the necessary skills to make it into a regular source of income.
Based on observation from others who ventured into currency trading, it takes almost a year of committed learning to start making consistent profits.
Lastly, you need to choose a reliable and legitimate forex broker to be able to learn hands-on how to trade and get acquainted with how everything works online.
Furthermore, it is recommended that you open a Practice Account first and trade the actual forex markets with “virtual play money” until you can develop a trading strategy that suits your schedule and personality.
When choosing a forex broker, be sure to ask what their licenses and regulations are. Countries such as Australia, United Kingdom, and the United States have strict regulations, so if the forex broker has an office or has a permit to operate in at least one of these countries, then that’s a good sign.
Moreover, the SEC and BSP currently have no set regulations for forex brokers. Thus, they don’t give out licenses for them to operate in the country.
This means you should be comfortable in opening an account and sending money to a forex broker that’s based in another country. Most legitimate forex brokers that Filipino forex traders trust has office branches in Hong Kong or Singapore.
Furthermore, you don’t have to physically go to their office to open a forex trading account. Almost all of them allow individuals to apply and open an account online. And you’ll just fund your account via credit card or bank wire transfer.
I know what you’re thinking… what’s my forex broker? I’ve had several forex brokers since I started currency trading back in 2012. At present, my forex broker is eToro and I’ve been very happy with them.
Forex trading is fast and furious
If you’re getting bored in the stock market, then forex trading offers a faster albeit riskier alternative. It’s an active income source that gives you access to the largest and most liquid financial market in the world.
With a trading volume of more than $5 trillion per day, it’s a furious monster that a lot of people have learned to tame, and you can too with proper discipline and dedication.