You Totally clueless about forex? Wanna know what is Currency trading? or Forex trading? or FX trading? Here's an introduction to the Forex (foreign exchange market).
START
# What is Forex?
forex is a Global market that allows you the exchange of one currency for another.
If you’ve ever traveled to another country, you usually had to find a currency exchange shop (booth) at airport, and then you exchange the money you have in your wallet into the currency of the country you are visiting.
this picture shows the exchange rate of 1 Dollar to Rand currently. i wrote " True Exchange Rates" because when you use Trading Software, a company that own the Trading Software will give you edited Exchange Rates so that they will be able to charge you for using their software.
the picture shows exchange rate as 1 Dollar equal to 14.62 ZAR ( South African Rand). Meaning if you fly from South Africa to United States, you gonna Pay R 14.62 at currency exchange shop to get 1 Dollar that you will use to buy items when you arrive in United States. This Exchange rates keep on changing, sometimes u you pay 11 rand to get 1 dollar, sometimes 16 rand ect. The exchange rates keep on changing every second, every hour, every, day or year (Fluctuates). So, forex gives you a software to See when this changes happen and you can take Advantage.
Lets see how Exchange Rates appear on a MetaTrader 4 (MT4) Trading Software.
True Exchange Rates says 1 Dollar Equals to 14.62 rands when you buy or sell this two currencies. but on this Trade Software, the 14.62 is now 14.63 when you buy and 14.60 when you sell.
How to Take Advantage of this Fluctuating Exchange Rates
Real Life ExampleLets say Exchange rate says 1 Dollar Equals to 2 rand, You would pay 2 rand to get 1 Dollar that you will use when you Arrive in USA. then lets say you arrived in USA and you did not Spend the 1 Dollar you Bought for 2 rands, now you are going from USA back to South African. You will go back to Currency Exchange Shop and exchange the 1 Dollar to get South African Money. Since Exchange Rates change regularly, you will exchange the 1 Dollar via new Exchange Rates, then Lets say the new Exchange Rate says 1 Dollar equals to 14 Rand. then when you Exchange that 1 Dollar you will get 14 rand.
Remember, you bought that 1 Dollar for 2 rand, now you got 14 for selling the Dollar (exchanging via new rate in your favor).
14 - 2 = 12 Rand. you made 12 Rand Profit along the way
If new Forex Exchange Rates where saying 1 Dollar equals to 1 rand. you would get 1 rand for Selling the 1 Dollar you bought for 2 rand.
2 - 1 = 1 rand. you would have a loss of 1 rand along the way
That's basically how Forex Works
So in Forex Trading, you are not going to travel. In the real world people travel, companies buy and sell stuff, politics do this and that. All those actions make value of currencies fluctuate every second. So, Forex Software will Allow you to Buy and Sell Currencies by Sitting behind your Computer or Phone and know when to buy and when to sell, yet there are things you need to know so read on
There are many factors that cause exchange rates to go up or down. One of the factors are Forex News (Forex Events). During this Forex News, the exchange rates will change, so we will share the strategy we use to Buy when rates are low, and Sell when rates are high to make profit
More Clarity on Buy and Sell
Assuming you are South African, and you visit Japan. You would exchange South African money (ZAR) to get Japan money (YEN). In forex we say you sold South African money and bought Japan Money.
if Exchange rates says 1 Zar equals to 5 Yen and you have 10 Zar in your wallet that you would sell your 10 zar to buy 50 Yen.( 10 zar x 5 yen = 50)
Then if you keep the 50 yen you bought for 10 Zar, when new exchange rates come, you can make or lose money
If new exchange rates says 1 Zar = 2 Yen,( also means 1 yen = 0.5 zar),
you take the 50 Yen you bought and sell them back to buy your Zar
50 yen x 0.5 Zar = 25 Zar.
This means you would have made money because you sold you 10 zar to get 50 yen, now via new exchange rates to sold the 50 yen and now you got 25 zar. You lose or make profit via the same process.
# What Is Traded In Forex?
Buying And Selling Currency Pairs
Forex Market Size And Liquidity
The Different Ways To Trade Forex
