Before we can understand Forex Trading, what it Forex??
Forex also called (foreign exchange market, FX, or currency market) is an Online Market
where you can Buy or Sell Currencies.
Currency is money that a particular country uses.
b) What is Forex Trading?
People who trade currencies in forex market are called forex traders or forex Retail Traders,
Their mission is to make profit by speculating on a value of one currency compared to another currency and this is why currencies are always traded in pairs.
The value of one currency doesn’t change unless it’s compared to another currency. Value of a currency can be high or low when is compared to currency of another country.
Value of currencies change every second, value can go up or down depending to supply and Demand.
c) How Supply and Demand works
- Supply is the amount of product or service available, demand is the desire for buyers to buy it. These are factors that control value of price.
- If buyers buy a lot, price will go up, if they buy less price go down. If supply of product is higher than the desire for buyers to buy the product then price will go down, if supply is low and the product is demanded then price go up.
- These rules also apply to currencies. If people buy lot of products from United States than from South African, value of United States Dollar will be high Compared to value of South African Rand.
- Example
- USD (United States Dollar) is currency used by United States of America, ZAR ( South African Rand) is currency used by South Africa.
- Before supply and demand starts, 1 USD equal to 1 ZAR.
- USD (United States Dollar) is currency used by United States of America, ZAR ( South African Rand) is currency used by South Africa.
- Before supply and demand starts, 1 USD equal to 1 ZAR.
- Then when buyers start to buy, if products and services of United Sates are bought 5 times than of South Africa - 1 Dollar is 5 times higher than Rand, meaning 1 dollar equals to 5 Rands
- If products and services of United States are bought 17 times higher than of South Africa - then 1 USD equal to 17 ZAR
- Computers are monitoring value of currencies that's why forex chart can draw Bars when value of a currency goes up or down compared to another. and you can clearly see the zones where price is likely to go up or down
Here is the the value of USD compared to ZAR currently
- If products and services of United States are bought 17 times higher than of South Africa - then 1 USD equal to 17 ZAR
- Computers are monitoring value of currencies that's why forex chart can draw Bars when value of a currency goes up or down compared to another. and you can clearly see the zones where price is likely to go up or down
Here is the the value of USD compared to ZAR currently
Captured from Google.com
1 USD = 17,1 ZAR
value of 1 Dollar equal to 17.1 ZAR
d) How to Trade
As a forex trader you can either choose to buy or sell. If you think value of a currency will go up compared to another currency then you press Buy, if you think Value of a currency will go down compared to another currency then you press sell.
Here is how it looks on a trading platform. all currencies are grouped in pairs so that it is easy to evaluate which currency can lose or gain value compared to another.
Our is USD and ZAR (USDZAR), first three letters are for United states dollar, the last three later are for South African Rand.
We observe that 1 dollar equals to 17,1 ZAR. if based on analysis you believe that dollar will again value, you choose buy. if you believe dollar will lose value you press Sell. you will make profit when value of currencies goes in direction of your choice, then lose when value of a currency goes against your choice.
