Making Profits in Currency Trading
Foreign exchange is basically about trading the currency that you have to another currency wherewith you believe that you can take advantage of it in the end. So that's how trading works. In the forex market, you need to consider money, regardless of currency you will use it as a commodity.
In forex, you always buy low and sell high. It can't be the other way around. Just like any other commodity, the price of currencies is displayed in quotes in the so called spot market, and traded in currency pairs. An example of pairs can be US dollar and Canadian dollar (USD/CAD) or the US dollar and Japanese Yen (USD/JPY).
One of the advantages of Forex is that you can trade wherever you are with Internet, or a platform, or a broker. Therefore, no physical exchange of money takes place no matter where you are.
But unlike the stock market, the forex market doesn't have a central exchange like the New York Stock Exchange for instance. As an interbank market, banks can directly transact with one another through brokering platforms.
Now, to make money in the Forex, you need to convert your money into a different currency. Consider the timing when is the best time to trade your currency. Then when you exchange back to your original currency, preferably you will have more money than you started with.
To demonstrate, a basic example of how someone can make money from a forex transaction. You purchased 10,000 Euros at the EUR/USD rate of 1.1800. Two weeks later, you exchange your 10,000 Euros back into USD at the exchange rate of 1.2500. You earn a profit of $700.
The opposite of buying is selling short a currency pair.. To illustrate, you expect the USD/JPY to decrease in value and you sold 10,000 Japanese Yen at the USDP/JPY exchange rate of 78.040 and after a few minutes you later buy it back at a lower price say 76.040, you earned 20,000 Yen or in US dollar you earned $265. This is how you short sell in forex.
So do not be confused with the fact that an exchange rate is simply the ratio of one currency appreciated against a new currency. To understand it better, you can read USD/JPY as an indication of how many US dollars can be used to buy a Japanese Yen, or how much Japanese Yen you will need to buy one US dollar.
Remember though, that Forex is intended to SELL and not to BUY. Of course, timing, understanding the trends and charts are important to determine how you could earn. If you look at the banks, they earn more in selling foreign currencies than buying. I think that's more logical explanation how to earn in Forex.
In forex, you always buy low and sell high. It can't be the other way around. Just like any other commodity, the price of currencies is displayed in quotes in the so called spot market, and traded in currency pairs. An example of pairs can be US dollar and Canadian dollar (USD/CAD) or the US dollar and Japanese Yen (USD/JPY).
One of the advantages of Forex is that you can trade wherever you are with Internet, or a platform, or a broker. Therefore, no physical exchange of money takes place no matter where you are.
But unlike the stock market, the forex market doesn't have a central exchange like the New York Stock Exchange for instance. As an interbank market, banks can directly transact with one another through brokering platforms.
Now, to make money in the Forex, you need to convert your money into a different currency. Consider the timing when is the best time to trade your currency. Then when you exchange back to your original currency, preferably you will have more money than you started with.
To demonstrate, a basic example of how someone can make money from a forex transaction. You purchased 10,000 Euros at the EUR/USD rate of 1.1800. Two weeks later, you exchange your 10,000 Euros back into USD at the exchange rate of 1.2500. You earn a profit of $700.
The opposite of buying is selling short a currency pair.. To illustrate, you expect the USD/JPY to decrease in value and you sold 10,000 Japanese Yen at the USDP/JPY exchange rate of 78.040 and after a few minutes you later buy it back at a lower price say 76.040, you earned 20,000 Yen or in US dollar you earned $265. This is how you short sell in forex.
So do not be confused with the fact that an exchange rate is simply the ratio of one currency appreciated against a new currency. To understand it better, you can read USD/JPY as an indication of how many US dollars can be used to buy a Japanese Yen, or how much Japanese Yen you will need to buy one US dollar.
Remember though, that Forex is intended to SELL and not to BUY. Of course, timing, understanding the trends and charts are important to determine how you could earn. If you look at the banks, they earn more in selling foreign currencies than buying. I think that's more logical explanation how to earn in Forex.
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Now that you understand how it works, check out the novice guide at best trading advices. Additionally, be sure to choose the right brokerage by reading through choosing trusted brokerage.
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