Forex – What is it?
Forex is nothing but the Foreign Exchange Market. It is also referred to as FX and is the largest financial market in the world. It is an over-the-counter ‘Interbank’ market. It is an electronically run 24-hour market within a network of banks.
What do you trade on Forex?
On the Foreign Exchange Market, you trade with money or currency. In Forex trading you simultaneously buy one currency and sell another currency. The currencies are traded only in pairs and are traded through a dealer or a broker. The exchange rate of a county’s currency versus that of another country’s currency is a reflection of their economic condition over the other.
How you can make money by Forex
The objective is to exchange one currency for another, hoping that the price will change and the currency you bought will have an increase in value than the one you sold. You buy a currency as per the exchange rate of the other currency. The exchange rate is nothing but the ratio of one currency valued against another currency.
Currencies are always traded in pairs. In a Forex quote, the first currency is called the base currency and the second currency is called the quote currency. When you buy a pair, you expect the value of the base currency to increase in respect to the quote currency. Similarly, when you sell a pair, you expect the value of it to decrease with respect to the quote currency.
The currencies traded are:
• EUR/USD
• EUR/JPY
• EUR/GBP
• USD/JPY
• USD/CHF
• USD/CAD
• GBP/USD
• GBP/JPY
• AUD/USD
• NZD/USD
Trading foreign currencies is potentially challenging and profitable for all investors. But like everything else, this also has its risks and challenges.
Keep in mind…..
• There is no guarantee of income.
• You should have a positive attitude, patience, discipline, and motivation.
• Be aware of the risks and accept them.
• Do not trade with money you cannot afford to lose.
• Before you start anything take into account your investment objectives and experience level.
• Undergo a demo trading or a practice session for at least 6 months before you actually start trading.
• Find a good reliable Forex broker.