What Is Forex ?
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Forex is the knowledge and art of trading different currencies and making profit through it. You know that each country has its own currency, and the currency of different countries can be bought and sold against each other. Forex traders are those people who make money through buying and selling different currencies against each other. Forex is not a new business and its history is as old as the history of money.
What is forex is a question that people ask a lot these days. There are people who have been making money through Forex from many years ago. Fortunately, with the help of computer and internet, Forex trading has become much easier. You can sit at your personal computer and trade from home without having to make any phone call or referring to any bank.
How Is It Possible?
There are brokerage companies that enable you to buy and sell different currencies through the Internet and some simple softwares that are called trading platforms. For any trade that you make, you pay a small commission to the brokerage company that you are trading through.You need to find a good, reliable and well-known brokerage company and sign up for an account with it. Then you have to fund your account. You use the money you have in your account to trade. Any profit that you make, will be added to your account and visa versa. Then you can withdraw the money you have made.
What Currencies Can You Trade?
In Forex, you deal with currency pairs. There are four major currency pairs: British Pound and USD (GBP/USD), Euro and USD (EUR/USD), USD and Japanese Yen (USD/JPY), USD and Swiss Frank (USD/CHF).In each currency pair, the first currency works as commodity and the second one works as money. For example when you choose GBP/USD to trade, if you buy, you buy British Pound against USD and, if you sell, you sell British Pound against USD. It doesn’t matter what currency you have in your account. The trading software and the brokerage system take care of the exchanges and transactions automatically.
How Can You Make Money through Forex Trading?
Buying low and selling high or selling high and buying low is the base of making money in Forex. For example If you buy GBP against USD when each GBP is equal to $1.9554USD and then sell it when it is $2.0235USD, you have made a profit. I don’t want to focus on more details in this article and explain how the profits and the money you make are calculated. I will talk about these topics in other articles. In this article we explain about the nature of forex trading in general.The big question is that how can you find out the best time to buy and how can you predict that if you buy, the price will go up and you will make a profit?
That is a million dollar question.
There are two methods to know the optimum time to buy and sell: Technical Analysis and Fundamental Analysis.
Technical Analysis:
In technical analysis, the direction of the price can be predicted using the the price chart analysis and also with the help of some special tools that are called Indicators.
Technical analysis might look a little complicated at the beginning. But it is much easier than what you think.
Technical Analysis is a science and art, and if you want to make money through Forex trading, you have to learn the technical analysis properly
It is not too hard to learn the technical analysis. If you are a focused and a serious person, you can learn it within a few months. There are a lot of free resources over the web that you can use to learn. There are some expensive training courses, but those who sign up for them are not happy and believe that they learned nothing. So don’t waste your money. If you are serious to learn, there are a lot of free resources over the Internet. You can also visit our website every now and then, or subscribe for our newsletter and receive our most recent articles automatically (you can subscribe at the end of this article.) You can learn technical analysis by referring to our website. We will do our best to cover all of the topics of technical and fundamental analysis on this site.
Fundamental Analysis:
Fundamental Analysis is used to predict the future movements of currencies’ prices, according to the economic and even political situation of the world, and important and developed countries like USA, UK, Germany, Japan and….
Fundamental analysis has a long term usage, but good traders can predict the sudden changes that happen after releasing an important news about the economic situation of an important country. For example when the news says that the economic situation of USA is improved for 5% in comparison to the last month, USD will become stronger and people start buying it. So the value of USD will go up because of the sudden demand increase. If you know the effect of the news on the price, you can take a proper position and make money. Of course there are two sides in this story which means if you take the wrong position, you will lose money.
Experienced and professional traders take the advantage of both technical and fundamental analysis. However, most traders are dependent on the technical analysis. Technical analysis is able to predict the price direction and movements.
Some Good Advantages About Forex:
- Forex is an online home based business that doesn’t need marketing, recruiting and advertising. You only deal with the currencies through the Internet. So you will not have to reply any email, make any phone call and spend any money on advertising, or deal with the customers, clients, affiliates, subscribers and referrals. You do not have to ship anything to any buyer. You do not have to be worried about competition in your Forex business, because in this business you do not compete with anybody.
- If you learn Forex trading properly, you can make a lot of money. Forex can be your full time job that makes thousands of dollars every month. I have to emphasize again that if you start working on Forex before you learn it properly, it can be risky and you can lose your money. It is like driving. If you drive a car, before you learn to drive properly, you will hurt yourself and others, but if you learn it properly first, driving will be pleasant and funny.
- You can make a lot of money by spending a small amount of money. Unlike other investments like stock market that you have to invest a lot of money to make a reasonable profit, you can make a good income through investing small amount of money. It means you do not have to have a big account. You can start with a small account, grow it and have a reasonable account after a while.
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