WHAT IS FOREX ?
Forex: Simple means Foreign Exchange
The Foreign Exchange market, or forex, is one in which a nation’s currency is exchanged or traded for another at an agreed rate.
The forex market is run electronically within a network of banks, 24hours a day, 5 days a week.
It is the largest financial market in the world with an average daily turnover volume of anywhere between $3-$5 trillion dollars a day. Compare this to the stock market where daily volume is around $500 billion.
UNDERSTANDING THE CONCEPT OF FOREX TRADING
Becoming a forex trader is very easy ; consider that all you may need is a computer,internet connection, and trading capital however Before setting out to become a forex trader its important that you understand what is forex trading. Many traders think that trading is only based on exchanging currencies, but there is more than just what meets the eye. Different companies use different currencies to buy goods and services in various countries. For them to accomplish this business, they first need to acquire the local currency of that country they are buying goods from. For example, When you are going on a holiday outside your country, you will first need to exchange your currency for that of the country you are visiting in order to make transactions easy. Likewise, this applies to forex trading only that companies exchange huge amounts. Exchange rates keep moving during every trading as the exchange of currencies is done. Many people may not understand how these works. This article will, examine and outline the concept of forex trading and how it works to a layman understanding.
USING THE EXCHANGE RATE TO MAKE A PROFIT
The essence of every business is all about making profits and increasing your capital. As a forex trader, you can use the exchange rate principle to make profits. The most important thing is to be careful when to exchange and when not to. You have to be careful such that you buy a currency when the rates are low and sell it when the rates are high. By this, you will make huge profits. Let’s use the same example of going for a holiday to get a clear picture of how this principle works:
Let’s take for instance that you changed EUR5000 into dollars and received $6000, but you never spend any single money during your entire holiday. So you come back home with your $6000. After the exchange rate changed from EUR10 to EUR15 instead of getting back EUR5000 you get EUR7500. You have got an extra EUR2500 by simply maintaining your money in dollars when the exchange rate changed. This is now how the currency market trading works. You buy a specific type of currency for a certain amount and wait for the exchange rate to change. You hold on to the currency until the exchange rate fluctuates, then change it back as soon as the rates change, making a profit in the process.
TRADING TO SUIT YOUR LIFESTYLE
Using your holiday savings is not a sensible approach to forex trading. There is a more practical way of enhancing forex trading and ensuring that you make some money out of it. The best way to do this is by using online exchange offices popularly known as brokers. You can simply trade your currencies online and take advantage of the continuously fluctuating exchange rates. In the same way, you can make a profit using our example of going for a holiday, you can buy various currencies and make money out of it. Consequently, you can buy many currencies at the same time and wait for the exchange rate to change in your favor and sell them. This is known as trading in the forex market. You will be making significant profits, but you have to be careful because the exchange rates may sometimes turn against you, leading to considerable losses. Hence, you need to trade carefully by effectively monitoring the forex market and get to know the warning signs. By this, you will know when to buy and when to sell so that you reap great benefits from forex trading.
BENEFITS OF FOREX ONLINE
Online Forex Trading comes with many benefits to the trader so long as you undertake your trading with enhanced skills or follow an expert. Just like any other business, forex trading needs patience, discipline, dedication, and commitment for you to be successful. The following are benefits of forex online:
– You can undertake forex trading anywhere so long as you have an internet connection. You get the benefit of trading at the comfort of your living room or even at your favorite hotel without the need to travel long distance.
– The forex market is active the whole day; five days in a week. Therefore, you just chose your favorite time to trade. During weekdays, it is open 24 hours a day which means it clearly suits your daily routine.
– You will only need a small amount of money to start forex trading. It doesn’t need a huge capital to keep you going. You can start with as little as $200, and you can grow your account with time.
It is important to understand that forex trading will not make you rich overnight, but can supplement your income. Moreover, it can turn out to be a viable business if you invest your quality time in it. Scaling the heights to become a successful forex trader is a challenge, and it requires significant effort to reach your goals. You can talk to us at tradingintels for any assistance to get started.