How Lessons From Trading Forex Can Help With Affiliate Marketing

byEdwinBernard

9.2K followers

2 years ago

Hello fellow members. I want to show that the challenges we face in building our affiliate marketing busines is not unique. It applies to any venture worth doing. I'd like to use my experience in Forex trading to illustrate this point.

Forex Trading Progress

Look at the graph in the cover image. Slow progress with some ups and downs that eventually result in a dramatic uptick in results.

This is an example of 100 trades. It was only after 90% of slow gains that I saw significant results. Doesn't that sound familiar?

I'd like to elabnorate using a few graphics below.

Added Details To The Graph In The Cover Image

Can you see a pattern? I went thrpough a process where I was making little trades. The green bars represent profits and the brown bars, losses. It was only after I had learned a lot of lessons that I took the plunge and made a big change in my last 5 trades. Notice the difference?

In the earlier trades I went in and out of the trades within minutes. In the middle I let a few trades ride overnight. Some did well and others not so much. However, I leaded many details about the relationship betweem the Euro and the US Dollar that I was trading the most.

The Euro Slide And The Dollar Rise

Why is the US Dollar doing so well against most currencies in the world during these challenging times? Aren't we all worried about the finaicial stress we face in the US?

And we shnould be. Did you know that the rest of the world is having a much more difficult time than the US? Hence, traders are dumping their currencies and buying more US Dollars.

When this occurs, the value of the Dollar rises and their curreneices fall. Let me show you the following daily chart to illustrate this graphically.

Forex Chart Of The Euro (EUR) and the US Dollar. (USD) Pair

It is diffucult to read the small print so I shall explain. The horizontal axis is time and the vertical axis is the exchange rate of what the Euro is worth in US Dollars.

The peak levels on the left were at the start ot 2022. At that time 1Euro would exchange for 1 Dollar and 15 cents. Notice the steady decline to the present? 1 Euro today will get you about 95 cents. That is about a 20% decline in the value of the Euro.

Notice that exchange rates do not move in a straight line. They go up and down as the downward channel shows. It is the long term trend that matters most.

International Consequences

No matter what currency you check out you will see their values are declining with respect to the US Dollar. This is a direct result of their economic situation being much more worse that what we are experiencing in the US.

But can't Governments waive their magic wands and prevent this from happening? What do you think?

Since the members of Wealthy Affiliate live all over the world I am sure they all feel their financial situations not doing so well either. It's all about the dynamics of macroeconomics.

Most countries are interconnected financially. When bad things happen in one, it affects us all.

How Can One Innoculate Oneself From This Situation?

Clearly, there are certain groups of people whose wealth had been increasing during these trying times. They are those who have investments in industries where prices are rising. In other words, people who own assets that are in demand.

And those who make financial decisions based on research and careful planning.

As members of Wealthy Affiliate we have this option available to us. But it takes time.

You Lose Some, You Win Some!

I'd like to show you how my trades last 100 trades i made using the image below.

Since I am trading using a relatively small account, I only use the smallest lot size available to me. This is 0.01. When I experience a gain of 100 pips, my profit is about $10. Since one pip movement is the equivalent of ten cents. If I traded a lot size of one, each pip would be ten dollars.

Out of 100 trades, I had 76 winners and 24 losers. My net gain in pips was 523. Since I had some trades that did not include the USD, the pip value in dollars was about 9 cents. Hence, that 523 pip net gain was $48. Until I gain more experience and graduate to a larger account, I am happy stickling to using small lot sizes.

How Does This Relate To Affiliate Marketing

Let me see. When we start our businesses we make little or nothing. When we do earn commissions, they are usuallhy very modest.

As we gain more experience nad confidence, we take commensurate action that in time will result in larger commissions.

When that happens, we can adopt techniques to scale up our business to yield bigger profits. And that is exactly how I am approaching my Forex trading.

After I am able to duplicate these results over and over again, the company who I trade for will increase the capital to trade with. I will do exactly the same thing, but will use larger lot sizes that a larger account will permit. I get to keep a percentage of the profits. This starts at 65% and rises to 85%. In this way, I do not have to risk my own money.

Risk Protection

The trading systems are set up to close my trades automatically if I make bad decisions so that losses are limited. Instead of paying back the losses, I will have to make trades that will get my account back to a certain level.

In affiliate marketing our risk is also managed by not having to invest a significant of money. Instead, most of our investment is in time. That is a key difference between forex trading and affiliate marketing. I only need a few minutes each day to set up trades. Unless I have a good reason to keep watching the screen.

A Forex Primer Using My Last 5 Trades

When you study the first image in this article you will see how the last 5 trades I made yielded the most profits. Let me show you graphically how I did that below. The following is an hourly chart. Unlike the chart above where each vertical bar representerd 24 hours, in the following chart, each bar represents 60 minutes.

The bars consist of a solod body with wicks on either end. The yellow bars represent the Euro rising in value while the blus bars represent a drop in value.

In the yellow bar, the start of the solid area below is the exchange rate that the currenty pair started that hour. When the solid bar ends at the top, that is where the currenty pair ended its value at the end of that hour. During that hour, the value can rise and fall above the solid area before settling down. That is what the wicks, or tails, represent.

The blue bar is the same in reverse. At the start of the hour, the solid bar starts at the top, and at the end of the hour it terminates at the bottom. When the next hour begins, this sequence repeats itself.

Charts always follow just three paterns as indicated by the yellow markings in the chart.

1. An Upward Trend
2. A Doenward Trend
3. A Sideways Movement Called Consolidation

How To Make Winning Trades And Losing Ones Too

When you decuce that an upward trend has begin, you open the trade with a buy order. Once that trend peaks, you close the trade with a sell order. You make a profit. If you for some reason entered the trade with a sell order, and didn't get out in time, you will lose.

The opposite holds for a downward trend. You enter the trade with a sell order. You close the trade with a buy order.

When the charts are moving horizontally as shown in that yellow rectangle, that is one of the most difficult times to trade. The only options are to buy at the bottom and sell at the top and keep doing this. Some people love the excitement of jumping in and out of trades quickly., In fact, it is possible to make more money during the same period of time trading consolidation movements. But it takes more time and higher risk.

Risk Mitigation Moves

When you see a trend you set up a entry point , a closing point and a stop loss level. The stop loss risk should NEVER be more than 2% of capital. I usually keep it at 0,25% of capital at the most since I am trading a small accoiunt. In other words, if a trade goes against me the most I will lose will be $5. I set my profit level at least twice that much pr $10.

My Big Winners

Look at the downward trend line on the right. It shows the area where I entered 5 staggerd trades. I set up a take profit level well below where I closed the trades, not shown.

I set this up before going to bed. When I awoke, I noticed that the downward trend had stalled.

Instead of waiting for the trades to reach my take profit area, I exited all of them. As the day progressed, the direction of the chart moved up again. My decision to exit was vindicated.

I made my biggest gain in pips ever, 377. My biggest loss to date was about 200. Hence, I feel I am making significant progress. There are experts who make gains of 1000 to 2000 pips a day. But then, they are also making trades all day too and are trading with significantly larger accounts.

It is much more profitable to make small gains every day rather than make make large swings of profit and loss. I hope to repeat something close when the Euro and the Geat British Pound (GBP) sink further.

The Euro is going to fall some more. Before that happens, there will be a small upward trend. Rather than trading that, I will wait till the downward trend resumes and make some trade entries then.

Confusing, Right?

Ah ha, I know how that feels. When I started to learn about Forex trading this was all a mystery to me. Join the club.

Like affiliate marketing, it takes training, action, failing, overcoming failure etc. to really know how affiliate marketing works. There were times when I left trades overnight only to wake up to nasty surprises in the morning.

No matter how much we learn, there is always room to learn some more. However, we never try to learn it all in one bite.

There is a saying, how do you eat an elephant. The anwers that I am sure you know is one bite at a time. Of course we don't really eat elephants ha!

I have bought a domain name called theforexniche.com When I am ready, I shall create a new niche website. At the moment it lies dormant. I have much more to learn.

Any Questions Or Comments?

If you have any, please let me know below. Even this is a make money online business, don't go and get into Forex trading. You can loose your shirt very easily. It is not for the faint hearted. You have been warned!

All the best in your affiliate marketing journey.

Cheers.

Edwin