How To Make Money Trading Forex
Trading Money in Forex
Make Money Trading Forex!
Make Money Trading Forex! Ever wondered how money trading happens? Or how banks trade currencies? Well, sure enough, you have or know a person who travels to different countries and has different money currencies. How do they exchange the money to a different currency? Most people do not know that there is also a risk of losing money in the Forex market. You might be wondering what Forex is and what happens in the Forex market.
Forex is the acronymic name for foreign exchange. Some people might know or easily understand it by the term currency trading. Foreign exchange is whereby you try to trade in the hope to make a profit on a value of one currency when compared to another.
Forex market is where the exchange or trading of different currencies take place by either, corporations who are doing business or financial institutions or individual retail investors. The companies usually trade, in the proper course of managing businesses diversely in the world markets. As for the banks and the retail investors, they often trade to make profits. Retail trading of currency happens through market makers and brokers. Brokers place the corresponding trades made by the traders on the interbank market. So how does the money trading work and take place?
How does money trading work?
Money trading is buying one currency at a lower price and selling another at the same price. That is the reason why there are currency pairs. Due to exchange rates currencies are in pairs. Examples are like the USD/JPY and EUR/USD. Currency values always change. They never remain the same and always change for different reasons. They can change due to external economic and political news. A great example is when the Great Britain proposed to exit from the European Union. The kind of trading in the market itself influences the currency too. Make Money Trading Forex!
How to make money trading Forex
For you to make money in Foreign Exchange, you will be buying and selling currencies. The currency that you buy or sell always depends on the currency pair and the position you take. In the currency pair, there are two types of currencies. There is a base currency which is the first currency and team or counter currency that is the second in the pair. For example, EUR/USD, the EUR is the base and USD is the counter currency.
For you to make money in Forex, you have to exchange the currency to another, expecting that the price of the currency you bought will change and increase in comparison to the one you sold. But before you do all this, you need to have a trading plan to help you be organized in all that you going to be doing. You also need to try to understand all the Forex terms for you to be able to know what to do or not do and also what is needed to attain as the terms suggest. You should then open a brokerage account, but it is advisable to try a demo account first, for you to understand and practice on how to use the brokerage account. The brokerage account always helps you to invest for long-term growth in funds. After doing all the above, you can start trading with money to make money.
How to Read a Forex Quote
A Forex quote consists of the base and the counter currency. For example, the quote might be, EUR/USD 1.3600. It means that a Euro is worth 1.36 US Dollars. No matter the currency used as the base currency, the base currency always equals to 1.
If the US Dollar was the base, the quote would be, USD/EURO .7352. This hypothetical quote means that 1 US Dollar is equal to 0.7352 Euros. The relationship between the two is not different since when you divide one by the 0.7352, you will still get 1.36 hence they remain the same.
Buy or Sell?
When you sell the base by purchasing the quote currency is known as the sale of a currency pair, and when you purchase a base currency by selling the quote currency, this is buying a currency pair. The quote currency is the counter currency. When you sell a currency pair, you are known to be going short, and when you buy the currency pair, you are said to be going long. The above is known as taking a position in the Forex market. Make Money Trading Forex!
What do you mean by Bid, Ask and Spread?
The bid and ask are both parts of a Forex quote. Let us say that the given a quote of EUR/USD to be 1.3600/05, the bid is the 1.3600 and 1.3605 is the ask. When you spell this out it would be 1.3600/1.3605. The reason is that the difference between the two is a tiny fraction, the difference is that the last two digits (05) shown from the four trailing digits. A broker uses both. Thus this is not the price you will bid when buying a currency pair. The broker will always ask for a bit more than what he is willing to bid if you were to be selling. Thus, a spread is the difference between the bid and ask hence it is the commission on the trade for the broker.
When should you buy or sell a currency pair?
You should purchase a currency pair when you think that there will be an appreciation in base currency when you compare to the quote currency. Likewise, you can sell a currency pair when you reckon that there will be a depreciation in base currency when compared to the currency quoted.
Currency trading (Make Money Trading Forex) is not for everyone as it carries a high level of risk. You should always consider your level of experience, investment objectives, and risk appetite before you decide to trade. If you feel that you have doubts, it is always advisable to seek advice about investing from a Financial Advisor.