The Basics of Forex
How do I acutally make money trading forex?
Forex follows the regualar mantra of business: you need to buy low and sell high to make money.
The amazing chance to make huge profits in the forex market come from the daily fluctuations in the currency exchange market.
As opposed to the stock market, no physical goods are purchased. So you aren’t ever buying physical currency, but are relying on contracts for the amount and exchange rate of currency pairs.
This potiential in day trading forex is that the every day changes in regular currency exchange markets (which hover close to 1%) are multiplied by 100!
Different forex brokers have different leverage ranges, so the leverage factor could be even higher!
The advantage of trading with forex: leverage
The main advantage of trading forex is it’s incredible potential for investing leverage.
Essentially, “leverage” is the ratio of investment to it’s actual value.
If you used $1,000 to buy a Forex contract with a $100,000 value, you are leveraging your money at a 1:100 ratio.
The $1,000 is all you risk at once, but you have the potential to make a whole lot more than that.
This is the amazing thing about investing in forex, because you can make a lot of money with a very small investment if you do it properly.
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Tags: forex leverage, how the forex market works, investing leverage, why trade forex
How the forex market works
The forex market (or foreign exchange) is essentially where the currencies of all the different countries (including gold and silver) are traded.
For example: you could buy Japanese Yen with United Kingdom Pounds or sell Russian Rubles for Swedish Kroners.
Essentially, it’s just the trading of one currency for another.
Needless to say, when you trade currencies like this, you don’t have to purchase or sell anything physical – you trade and sell with your own base currency and any currency pair you desire.
A Definition of Forex
When we use the term forex, we are basically referring to currency trading. In many cases, this currency trading is also referred to as the foreign exchange, Forex, FX or market.
This market is bar none the largest and quickest growing market in the world today
The daily trade volume across the globe is more than 2.5 trillion dollars.
Who are the main participants in this market? Central and commercial banks, corporations, institutional investors, hedge funds, and regular everyday people.