Online Forex Trading Explained
Forex trading means trading in foreign exchange, trading in currencies that are "foreign." Every currency in the world has a value in relation to every other currency. If this was not the case, Forex Trading would not exist at all.
Buying one currency using another is the way it is done. As it happens Forex Trading involves two currencies.
You can use any currency to buy any other, but there are certain factors that determine what currency to buy and with what currency to do so. The varying value of the currency that has been bought, determines the profit or loss of the trader.
The value of the purchased currency in relation to the currency with which it has been purchased keeps changing. Your gain or loss in any transaction depends on rise and fall of the purchased currencies.
A Risky Business Indeed!
Forex trading is also a very risky business to be involved in, since a large investment on your part could be completely lost if the expected change in the currency you have purchased, does not happen.
The biggest business in the world, FOREX, has a daily turnover to the value of 5.3 trillion dollars. Come to think of it, Forex is not new. It is said that the ancient romans too had a hand in Forex Trading! Then why is it not popular? Well most probably because, Forex is not for just anybody.
Web Designing, Video Creation, Graphics, Content Writing, Social Media, SEO, And Everything Else You Need For Your Online Business ...
|
There are many who have made millions by trading in Forex, and continue to do so from the confines of their homes. Thousands of people all over the world are making big bucks trading only in Forex.
Currency Fluctuations Rule
How do they do it? Ability to predict the market? Experience? Luck? Well, the ability to make correct predictions requires knowledge, experience, and in the initial stages, proper guidance. Experience is one thing that could lead to taking correct decisions.
Being able to predict the changes in the values of the various currencies of the world is the pre-requisite to succeeding in the Forex trade. Those who are able to make accurate predictions always gain while those who cannot, end up losing.
There are various factors that determine the fluctuating values in the currencies of the world. Forex trading does not require that you access and analyze data on all these factors.
But, a knowledge of the factors involved may be able to influence your predictions. An interest has to be satisfied by observation and then participation. Of course caution is most vital.
Currency Pairs
A currency pair obviously involves two currencies. As the basic exercise in Forex Trading involves buying one currency using another. The two currencies involved in a Forex transaction are referred to as the base currency and the quote currency. The base currency is the currency with which the purchase is made. A currency pair will thus indicate the quantity of quote currency that is required to buy one unit of the base currency.
PIP
The change that occurs in a currency pair in terms of the exchange rate is measured by a PIP. As the fourth decimal place of the quoted currency is the indicator, a PIP measures a very small change in a currency pair. The exception to this is the Japanese Yen, which is quoted in only two decimal places. A PIP could vary up to 70 times in a day.
To Trade Or Not To Trade?
Basically the whole thing boils down to buying a quantity of a currency and playing the waiting game. If you are one such person who can make a right prediction for a particular transaction, you will invest everything you have in that particular transaction. If that prediction does not come right, everything you have would become everything you have had!
The simplest way of explaining this is that the trends which govern the styles of spending, the varying prices of global products and many other factors contribute towards the fluctuation of the values of currencies.
Knowing the trends that have an impact on the variations certainly will help to make decisions on trading. Experience which is gained by observing and understanding changes and their influence on currencies, is a factor which requires time. Time, like months and months of observing.
Keeping a track of the history of the behavior patterns of the currencies involved influence predictions to a great deal. In short you have to know something about Forex in order to start trading, and you need to start trading in order to learn about the trade!
Getting Started In Forex
First of all you will need to know what exactly Forex is. Then you need to know the mechanism that drives it. The next step is to find out how to make it work. It is then should you decide whether you should have a go at it or not.
You may ask yourself the question if it works for others why would it not work for me? It is only by experimenting that you will get to know if it will work for you or not. Whatever the case may be, let me warn you again that Forex trading can be extremely risky and could result in heavy losses.
Predicting The Forex Market
Forex experts predict the market taking past happenings into consideration and comparing it with the expected trends. If anyone can predict the market accurately and continuously, he would soon become rich beyond his wildest dreams.
Well you don't physically pay money and buy some other currency, keep it in your pocket till the value appreciates and then sell it off,
These things are done online and you actually don't need to handle money although you can withdraw your profits if you have any, when you want to.
Forex Trading has in some instances been automated such that robots do the work once you activate them. However, the element of risk involved in Forex Trading is still not completely eliminated.
Banks are the biggest traders in Forex. Currency is not the only thing that Forex trading involves. Commodities like gold, silver, and oil are also involved in Forex trading.
Trading Forex Online
However you can start trading with virtual Forex trading mechanisms that are available online. Participation in this kind of thing only gives you the basic experience and affords you to get a feel of the set up.
There are some online programs via which you could start off with as little as US$1.00. In short, Forex Trading is a dignified form of gambling. It is business that involves a high degree of risk. The higher the investment, the greater the risk. So, the decision is yours. If you play the game and lose, the fault is yours!
Right now I am experimenting with one particular trading site, and if it turns out to be favorable, I shall post a link pointing to that site soon ... ... So, stay tuned.
