What is Forex and How can you Profit from It?

What is Forex and How can you Profit from It?

A question that a lot of people ask is what is forex?  Many people have heard of forex but are unsure about how they can make a profit from this.  Before you can learn about how to make money trading forex you need to know what forex is and all the tools you need.

What is forex?

Forex is the foreign exchange market where currencies are sold to make a profit.  We all know that different countries have different currencies and it is possible to trade these currencies against each other.  The forex market is a decentralised market where retail traders can trade using a trading platform provided by a broker.  This online trading has opened the world of forex to the average person allowing them to make money through the trading of currency.

Which Currencies can you Trade?

When dealing with forex trading it is important that you know which currencies you will be able to trade.  There are 4 major currencies which most traders will work with including Euros, British pounds, Japanese yen and US dollars.  These currencies are traded against each other in pairs such as USD/EUR.  Trading will always be in pairs where you are purchasing one currency against another.  The currency you are dealing in through your platform does not have any relation to the currencies you can trade as the brokerage company takes care of exchanges and transactions.

How do you make a Profit?

Knowing about what forex is and the currencies you can use is the basic knowledge that any new trader should have.  However, the real questions come when looking at how you will actually make money.  To put it simply, the money making strategy behind forex trading is to buy low and sell high.  An example of this would be buying Euro against the US dollar when the exchange rate is $1.3 to the Euro.  If you sell the Euro when the rate is $2 to the euro you have made a profit.

What About Trading Platforms

To trade in the market you will need a trading platform linked to a reputable brokerage company.  The platform enables to buying and selling of currency and once the trade is complete a small fee is paid to the brokerage company.  Trading platforms will vary in their displays, features and ease of use so it is recommended that you use a demo version first.

When choosing a trading platform you must be comfortable with the controls and happy that it includes all the features you desire.  Certain platforms include only the basic features of buying and selling with limited trend data or reporting.  More integrated platforms offer trends on the currencies, news which will affect the prices and advanced reporting.

A Few Benefits of Trading

Going into forex trading can offer a range of benefits with the most important being the ability to work from home and being your own boss.  If you are able to master trading then you will also be able to make quite a bit of money.  You do not have to invest a large amount to reap sufficient dividends either.

Forex is the trading of currencies through online trading platforms.  There are 4 major currencies which are traded and it is possible to make money through buying low and selling high.

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