Learn About The FOREX Trading

The foreign exchange market, also called FOREX or FX, is the world market for foreign exchange. With a daily turnover of over $ 5.3 trillion, it is the largest and most dynamic financial market in the world. If you sell 100 EUR to buy US dollars at the airport or a bank to exchange 100 million US dollars into Japanese yen with another bank, the two transactions will FOREX. Negotiators of the FOREX market range from huge financial organizations that administer billion by individuals who trade a few hundred dollars.

Enter the FOREX trading online

Thanks to the Internet you can trade in the FOREX market the same way that dealers of major banks and investment funds.

All you need to start is a computer with internet access and a trading account with a FOREX broker.

As the FOREX trading works

In the FOREX market, one currency is converted into another. The single most important point in the FOREX market is the exchange rate between two currencies (a currency pair).

You've probably heard about it on the news:

CURRENCY PAIR                                       EXCHANGE RATE

EUR (Euro) / USD (dollars American)           1.4515

GPD (pound sterling) / USD (US Dollar)       1.6430

An exchange rate can change very quickly, several times a second; therefore, a lot happens in 24 hours a day, five days a week. In general, exchange rates reflect the health of the economies of countries. If the economies of the euro area are better than the US economy, the euro will rise against the US dollar (EUR / USD ↑) and vice versa.

How you make money in the FOREX market

Here is an example of a FOREX trading. You decide to buy 1000 euros in US dollars. The exchange rate EUR / USD at which you can BUY at this moment is 1.4500 so you pay $ 1450 US dollars.

Subsequently, the exchange rate EUR / USD in which you can SELL Euro for US dollars is 1.5500. You sell your € 1000 and will receive $ 1550. Having started with $ 1450, you now have $ 1550 - a $ 100 profit. Another hypothesis, the exchange rate EUR / USD in which you can SELL Euro for US dollars is 1.3500. You sell your € 1000 and will receive $ 1350. Having started with $ 1450, you now have $ 1350 - A loss of $ 100.

That's how you win or lose money in FOREX market.

Spread

Consult the FOREX quotes on your trading platform, you will see that there are two prices for each currency pair. One is the price at which you can buy, referred to as the "sale price", and the other is the price at which you can sell, referred to as the "purchase price". The difference between these two prices is known as spread. The selling price is always higher than the purchase price.

leverage

If your FOREX brokers offer a leverage of 1: 100, you can trade with 100 times more money than the one in your balance. This means that if you want to buy 100000 EUR / USD, you will need only 1,000 euros. With this lever you can take a position with a 100 times larger amount, resulting in 100 times earnings or losses; so you must be very careful when making trades.

Make your first transaction FOREX

To start, open a account and access. Then choose a currency pair (eg EUR / USD), choose an amount and press the BUY button, if you think the value will increase. Now you are a trader in a market used by millions of people worldwide. You will make money if the price EUR / USD rise and lose if he falls. Check your profit or loss in the current open positions window. You can hold this position for as long as you want. And when you no longer maintain its position, just close your transaction by pressing the X button in the open positions window.

long and short talks

In the example above, we bet that the EUR would rise against the USD, and so we buy EUR / USD waiting sell it later at a higher price. This is called long position. But what if we think the EUR will fall against the USD? Well, then you should do the opposite: to sell EUR / USD, hoping to buy it at a lower price later. The short trading allows make money when the exchange rate is falling.