One of the most widely used instruments in the field of trading by traders is forex. Forex is the value of foreign exchange currencies that are commonly traded in the capital market.
 
You could say, forex trading is a source of side income that you can do in your free time. The income is also quite promising, with a small capital you can get a big profit from the trading results. The advantages of forex trading itself are also very numerous. Therefore, many traders prefer to trade forex rather than trade anything else. For the advantages of forex trading itself, you can read the article below.

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Advantages of Forex Trading

There are various advantages of forex trading. As mentioned earlier, this forex trading requires relatively less capital than other trades. For more details, you can see below.
  1. In terms of commissions for brokers, these forex trades do not charge any additional fees, as they will usually take advantage of the spread.
  2. The next advantage of forex trading is the forex market which is open 24 hours. Unlike other markets that are only open at certain times. With this you can trade whenever you want.
  3. The next advantage of forex trading is that the liquidity value is quite high, meaning that you can withdraw funds for other transactions at any time.
  4. Another advantage of forex trading is that forex trading has a low level of complexity. This trading will not be as complicated as stock trading which has to research each stock to be traded. There are several types of forex that you can choose to trade such as dollars, euros, pounds, and yen.
  5. The last advantage of forex trading is that forex trading has a margin system which can make the purchasing power of traders higher than the initial capital you have. So that the profits obtained are from two directions, namely when the market rises and prices fall. This will not apply to other types of trading such as stocks.

How to Trade Forex Profitably

Even though the economic condition is not good as a result of this pandemic, everyone is still competing to continue carrying out business activities. Of course, everyone also wants a profit in every business. One of them is forex trading. There are various ways that you can do to get the benefits of forex trading that you are engaged in. You can apply the methods below so that you can continue to make a profit.

Use a Minimal Risk Strategy

In making a trade, of course, a strategy is needed that must be done in order to continue to make a profit. Each trader will have a different strategy for each use. Even though they are different, they will still have the same goal, which is to generate maximum profits by minimizing the existing risks. Maximum profit does not mean a lot of profit.

However, it depends on the capital you have invested. If you already have consistent profits, you should not change your existing strategy because in addition to being confusing, this method will also not help you get a profit.

Thinking Like a Businessman

Improving a mindset is indispensable to get forex trading profits. Thinking as a businessman will be very helpful for you in making a trade. Trading is not only about making profits, but you can also experience losses like any other business. Traders must always be ready for all the risks that exist because there are also many forex trading that provides great profits with high risks.

Discipline

Another way to gain forex trading profits is by being disciplined. In other words, traders must consistently use the trading strategy that you have set. In addition, traders must also dare to cut losses or cut profits at any time when needed. Forex trading carries a high level of risk, which means you have to take decisive steps in deciding on your next move. This is done as a step to increase the likelihood of consistent profits.

Open Position When the Moment Fits

For some beginner traders, they will usually take steps carelessly. This should not be done because it can be something that can be detrimental later. Every trader, both beginners and professionals, still has to be careful, especially when opening positions. To determine the right position, you can do it by monitoring the movement of the foreign currency or forex.

Identifying this stock market movement will help you determine how the right moment is. Although it is a little difficult, this must be done well. Without doing this, you could lose some money at any time if you make the wrong decision. Likewise with stop loss. Traders must be able to determine when the right time is to know when to buy or sell the instruments you have.

Also Read : What Is Forex Trading: Definition, How It Works & Its Advantages

Open a trend-following position

For those of you who are professional traders, it's a good idea for you to follow the trend. Because opening positions by considering trends has many benefits. One of them is to minimize existing losses, so as to make the risk borne smaller and more profitable. The way to see the trend is also very easy, starting from moving averages, MACD, and others.
 
Meanwhile, you can find out the formula for the calculation from literary sources that are available anywhere, ranging from books to the internet. Seeking information is also a form of possibility to get a larger amount of profit.

Open a Position with Small Lots

The most important trading formula is that when you invest a large lot, it means that the profit you will get will also be higher. In installing lots, it should not be forced because later it will be more risky if you take the wrong step and lead to the loss of the capital you have invested. Please note that in making a trade, it must be adjusted to the capital and the opposition.
 
For example, if you have an initial capital of 10 million, then the maximum slot that you can place is only 0.10 to avoid losses. This can encourage the possibility of getting a bigger profit or even if it loses, the value will not be bankrupt.

Open a Position on Close Candle

As explained earlier, traders should be able to know when is the right time to open a position in your trades with a special time calculation. Of the many options for the right time to open a position, this Close Candle is the most recommended. Because it is not uncommon for both the shape and direction of the candle to change at any time.
 
Plus indicators that can change in unexpected situations. That way, if traders have received a good signal, they will immediately open a position. These are signs of a good signal, which is the most appropriate time to close the candle. So if you want to get a maximum profit, you can consider this method.

Developing a Trading Plan and Journal

Compiling this trading plan and journal must be done regularly by making it in writing. This trading plan should include the forex pair to be traded, the preferred timeframe, the buy conditions, the sell conditions, the risk or reward ratio, the target profit level (TP), and the stop loss (SL) level. Traders can also add about the time of opening positions, closing positions, realization of profits/losses, as well as notes mentioning how profits/losses occur.
 
You must compile a journal and plan from the moment you practice using a demo account, so that you can review how your performance is periodically. Then you can learn from the mistakes you have made by correcting them next time, and also find out what kind of trading strategy will be most profitable for you later.

Choosing a Regulated Broker

The last way to get the benefits of forex trading is to choose a broker that has been regulated. In order to prevent a scam under the guise of forex that makes you lose capital, it is necessary to do research on finding out which brokers have been regulated. These types of scams are also very numerous, but beginner traders are often unaware because they are eager to make quick profits.
 
There are also many beginner traders who do not learn beforehand so they are immediately interested in the promotion of fake brochures by immediately depositing capital without thinking about other possibilities. Or beginner traders who prefer to buy robots or signals on the internet that promise to multiply profits. In fact, forex trading is an investment whose profits cannot be guaranteed from the beginning.

How to Calculate Forex Trading Profits

In forex trading, the smallest unit/price movement in it is calculated on a unit of points or pips. The value of each point also varies, depending on the currency pair or pair. The number of contract sizes or contract sizes used is in lots, namely:

  1. Standard lot = $100.000
  2. Mini lot = $10.000
  3. Micro lot = $1.000
To calculate the profit of forex trading, you can use this simple formula. 1 pip in decimal/US dollar exchange rate = value per pip. This pip value will be your advantage. For example, if you enter a EUR/USD position at 1.0500 and the price moves higher at 1.0550, then the profit is 50 pips. Then to calculate the pip itself, the method is 0.0001 divided by 1.0550 = 0.00009478 USD. This amount is the advantage you get.
 
More specifically, in the forex calculation for Direct Rate Pair which is a currency pair GBP, EUR, AUD with USD as the suffix, the formula used is, Profit/loss = (selling price-buying price) x contract size x lot.

For example, if you want to trade with a capital of $5,000 (or a quantity contract of $100,000) and we buy 1 lot on EUR/USD at 1.2000 then close to take profit at 1.2010, then the profit will be as follows: Profit = (1.2010-1.2000) x 1 lot x 100,000 = $100.
 
Meanwhile, the calculation of forex trading profits for Indirect Rate Pairs is a pair of JPY, CHF, and CAD with USD as a prefix. The way to calculate profit/loss is: Profit/loss = (sell price-buy price) / liquidation price x contract size x lot For example, if you trade with a capital of $5000 (or a quantity contract size of $100,000) and we sell 1 lot on USD/JPY at 110.10 and then close to take profit at 110.00 then, Profit = ((110.10-110.00) x 1 lot x 100000 / close position 110.00 = $90.91 profit you will get.

As for the calculation of forex trading profits for Cross Rate currencies with pairs that do not contain USD such as GBP/JPY, EUR/JPY, AUD/JPY, EUR/GBP, the method of calculating profit/loss is, Profit/loss = (selling price-buying price) x current base currency rate/rate pair x contract size x lot.
 
For example, if you sell 1 lot of EUR/GBP at the price of 0.6760 (EUR/USD is the base currency of EUR/GBP, because the front of EUR/GBP is the base currency) with a close at the price of 0.6750, the rate of EUR/USD is 1.1840 then, Profit = (0.6760-0.6750) x 1.1840 / 0.6750 x 100,000 = $175.4 you will get a profit.

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Take a Peek at How to Trade Forex Profit Continuously


After knowing about the advantages of forex trading, how to trade to continue to make profits, and how to calculate the profit itself, it is hoped that traders will continue to learn other things about forex trading itself in order to maintain the safety of your own capital.

FAQs about Forex Trading Advantages
Question: How to trade forex profitably?
Answer: To make forex trading profitable, there are a few things to consider:
  1. Learn and develop knowledge: Understand the fundamental and technical aspects of forex trading and continuously improve your trading knowledge and skills.
  2. Use good risk management: Set position sizes, use stop losses and take profits to protect your capital, and manage risk in a disciplined manner.
  3. Using proper market analysis: Applying technical and fundamental analysis to identify potentially profitable trading opportunities.
  4. Seeking opportunities with a balanced risk-reward ratio: Identifying trades with potential profits that outweigh the risks.
  5. Discipline and consistency: Follow a proven trading strategy and adhere to a predetermined trading plan.
Question 2: What are the advantages of using leverage in forex trading?
Answer: The use of leverage in forex trading allows traders to control positions that are larger than their actual capital. Some of the advantages of using leverage are:
  1. Increased profit potential: With leverage, traders can increase their profit potential because they can take larger positions.
  2. More efficient capital: With leverage, traders can use their capital more efficiently, as they only need to set aside a small portion of the total transaction value.
  3. Access to a wider range of markets: Leverage allows traders with limited capital to access larger markets and trade on a variety of currency pairs.
  4. While leverage can increase potential profits, it's important to remember that using leverage also involves higher risks and can magnify losses.
Question 3: Are there any advantages to trading forex automatically?
Answer: No forex trading method is fully automated and guarantees definite profits. However, there are automated trading tools and systems that can help in conducting market analysis and trade execution. Automated trading systems use pre-established algorithms and rules to generate trading signals. While it can help optimize the trading process, the success of trading still depends on the decisions and risk management taken by the trader.
 
Question 4: What are the advantages of forex trading compared to other types of investments?
Answer: There are several advantages of forex trading compared to other types of investments, including:a
  1. High liquidity: The forex market is the largest financial market in the world with high liquidity, allowing traders to easily buy and sell currencies at fair prices.
  2. Time flexibility: The forex market is open 24 hours a day, five days a week, so traders can choose a trading time that suits their schedule.
  3. Two-way trading opportunities: In forex trading, traders can take positions as both buyers (buys) and sellers (sells), thus taking advantage of currency price movements that go up and down.
  4. High profit potential: Compared to some other types of investments, forex has a higher profit potential due to rapid price movements and high volatility.
Question 5: How can I minimize risk in forex trading?
Answer: Some steps to minimize risk in forex trading are:
  1. Good risk management: Define your risk limits and use stop losses and take profits to protect your capital.
  2. Diversify your portfolio: Don't rely on just one currency pair, but diversify your trading with a variety of instruments and currency pairs.
  3. Wise use of leverage: Do not use leverage that is too high, adjust it according to the level of risk you can bear.
  4. Structured trading plan: Establish a clear trading plan, including tested entry and exit strategies, and stick to it disciplinedly.
  5. Learn and continue to develop: Improve your trading knowledge and skills through continuous education, training, and evaluation.
Please keep in mind that forex trading involves risk, and individual trading results may vary. It is important to always do your research, understand the risks involved, and consult with a financial professional before investing or trading.
 
Thus the discussion from GICTrade regarding what are the advantages of forex trading. Don't forget to also keep learning about information related to commodities, stocks, and other finances, such as "How to Invest in Mutual Funds with Minimal Risk for Beginners", only in the GIC Journal. Also make sure you deepen your forex knowledge at GICTrade, via the scalping ebook, and also NFP live trading.