Introduction
Contents
Before getting to know how to make money in Forex, let us understand what Forex is exactly. Forex is basically refers to the foreign exchange or currency trading market, where one type of currency is traded for another type of currency. Some participants in the Forex market simply seek to exchange currency for their corporate requirements such as paying wages and selling products, etc. Whereas; the greater part of the market consists of traders who venture out on exchange rate variations and stock prices. However, some of the currency traders have an extreme understanding of making money through Forex trading and take advantage of even the slightest fluctuation in the exchange rates.
More on Currency Trading
The foreign exchange market is a continuous cash market, which involves currency trading of various nations currencies, typically through brokers. All types of foreign currencies are simultaneously bought as well as sold across global and local markets consistently. Based on these, the investments either depreciate or appreciate in value, depending on the movements of the currencies. In fact, learning how to trade Forex and make money in Forex is a skill, as the market conditions of the Forex keeps fluctuating in response to the current events.
To understand more about making money in Forex, you must also understand the fact that, all currencies are traded in pairs. Within each pair, one currency is called the base currency while the other is called the counter or quote currency. Every quote for Forex is quoted in terms of base currency.
The major attractions to a short-term Forex trading and currency dealing to the private investors are:
1. 24 x 5 in a week and access to dealers of global Forex traders.
2. A huge liquid market potential, which eases trading of almost all currencies.
3. Risk exposure is controlled by standard instruments.
4. Various profit opportunities offered by the varying markets.
5. Total control in the Forex trading, the margin required is quite low. 6. Various options to do trading with zero commission.
Making money trading Forex
If you already have experience in any trading, it is quite easy to understand Forex trading and how to make money of it. To place a trade in the Forex is simple, as the Forex strategies are almost the same as other markets such as stock markets.
The main object to understand in Forex trading is to see a real profit, in an expectation that the currency that you have purchased would increase in its value when compared to the one that you sold.
The exchange rate is the ration of the first currency valued over the second currency. For instance, exchange rate of USD/CHF shows how many dollars of the U.S can be exchanged for a single Swiss franc or vice versa.
Understand the significance of leverage
To be able to make money trading Forex, you must understand the concept of leverage, which refers to a situation where you, as a trader borrow the money from a Forex broker and use it to exclusively for Forex trading. Leverage is all about minimizing risks and maximizing profits. With advantage, you will be able to make more profit with every trade you make.
This is because, when you decide to trade in Forex with a very little capital outlay, you will be able to invest in contracts of high value. Most Forex brokerage companies offer over 1: 100 for each account holder. Unlike the equity market, you have to come with 50% of the transaction value for each trade you make.
What are the currencies involved in currency trading or Forex trading?
In Forex, as we understand, you are normally dealing in currency pairs. There are 4 major pairs of currency:
1. Euro and USD (EUR/USD)
2. British Pound and United States Dollars (GBP/USD)
3. USD and Japanese Yen (USD/JPY)
4. USD and Swiss Frank (USD/CHF)
For instance, when you choose to trade the GPB/USD, when you make the purchase, your purchase the GBP against the U.S dollars whereas: when you sell, you have to sell GPB against the USD irrespective of the type of currency you hold in your account.
Forex strategies
Buy or Sell: This is the basic step to learning Forex trading. This step involves in you determining whether you want to buy or sell in this trade.
When you decide to buy, this literally means that, you decide to buy the base currency and sell the second currency. Here, you will have to make sure that the value of your base currency increases, for you to sell it back in a higher value. Technically, this is called, ‘going long’. Understand that, the term ‘long’ here represents ‘buy’.
When you decide to sell, this means that, you decide to sell the base currency and purchase the second or quote currency. Hence, you will have to make sure the base currency diminishes in value for you to buy it back at a lesser price. This is termed as ‘going short’ and just understands that: here, ‘short’ represents ‘selling’.
Bid and Ask: To have a fair understanding on Forex trading, you must understand that, all quotes of Forex come with two prices: Bid and Ask. Bid is the low price and ask is the higher price and the difference between these two is called spread.
Tips on making money in Forex
Have a complete understanding on Forex trading before you decide to get in and understand various ways of making money in Forex. Be familiar with all terms related to the currency trading. Hundreds of blogs, websites, and eBooks demonstrate these. Take your time to choose the Forex broker and have a comfortable relationship with the company. Make sure they adjust to your time of operation and your convenience.
Determine the pair of currency, which you think you would earn the most. Deal only with the popular currencies
Summary
Above all, there is something called the fundamental and technical analysis. While the fundamental analysis involves in examining the economic indicators, asset markets, evaluating currencies of various nations, the technical analysis will involve in predicting the price movements in the future, based on the best graphics, etc. In essence, how to make money in Forex involves a complete understanding of all Forex strategies and developing the required skill by exploring into the market.
If you are still wanting to learn the basics of Forex and learn more strategies then I recommend you go look at this here.
SOURCE WEBSITES:
http ://www.traderians.com/showthread.php?t=86
http ://www.ufxbank.com/PartnerSites/UFXBank EN/UploadedFiles/UFXBank_Forex-Ebook.pdf
http://ehow.com/how_4491 009_make-money-Forex-trading.html
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