All You Need to Know about Forex
Learn How Forex Traders Make Money
Forex is a market where millions of people earn on the difference in the prices of currencies. You might have heard about George Soros, who is one of the traders, but most are ordinary people with small capitals.
To begin with, let’s see how it happens on a simple example, without the currencies, quotations and everything else.
Imagine that you are not trading in currency, but with a regular commodity, for example, one bag of grain, which now costs 10 dollars.
There are two ways that you can make money on changing its price. Technically, it looks like this:
– If you think that the price for it will grow, you can buy it now, for example, for $ 10, and then sell, for example, for $ 20, putting these 10 dollar difference in your pocket.
– If you think that the price will fall, then you can make a so-called deal “sales without coverage.” You borrow a bag from the person who has it, sell it at the current price of $ 10, wait until the price drops to 8, buy back the goods, give back the goods that have been borrowed, and again put the $ 2 difference in your pocket.
Now imagine that all these actions can be fully automated:
– sale and purchase happen at the click of a button;
– the goods (if you first need to borrow it to sell) are provided to you automatically and are also automatically picked up when you made the transaction;
– add to this the existence for you of the seller and buyer at any time of the day and night at the current price in the market;
-execution of the transaction itself in a few seconds;
-automated calculation of the result from your trade;
-free methods of forecasting prices and news about the product itself
Learn The Basics of Working on Forex
On Forex, people do not trade goods, they trade currencies. One currency is bought and sold in exchange for another. The Forex market is huge, it surpasses, for example, the world stock market in dozens of times.
These people can participate in it:
– Ordinary consumers (firms and individuals). For example, the seller of Swiss watches in the U.S. needs to buy Swiss francs for dollars to pay for the next portion of goods from Switzerland, while the Finnish manufacturer of Nokia phones needs to exchange Euro for Dollars to pay for new mobile parts from the U.S.
– Investors who buy foreign currency to buy shares in another country. For example, the City Bank wants to buy shares of European BMW, they must first buy Euros with its dollars and then buy these shares on the European stock exchange.
– Speculators, from the super-rich people such as George Soros to ordinary students who trade on fluctuations in exchange rates.
Each currency on the Forex market has its own designation. For example, the Euro is recorded as Eur, and the U.S. Dollar is recorded as Usd. Since one currency is bought and sold for another, the exchange rate is denominated in two currencies. It is called a currency pair and is usually written across the line. For example, the euro/dollar exchange rate (or Euro/Dollar currency pair) looks like Eur/Usd.
Now about The Price
The currency pair means how many U.S. dollars you need to be able to purchase one euro. You need to remember that both the rise and fall of the price mean that these words refer to the first currency. If the price of Eur/Usd has increased from 1.32 to 1.33, it means that the Euro has grown and now you should give more dollars for it. If the price fell 1.32 to 1.31, it means that the Euro fell, and now it is given fewer dollars.
If this is clear to you, it is now easy to remember that you are conducting all transactions with the first currency in a currency pair. Thus, if you are making an operation for the sale of Eur / Usd, then you sell the euro and do it for dollars if you buy, then you also buy the euro, the dollar only measures the price and participates in the calculations.
Change in the price of the minimum possible value is called a change by one point.
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