Make Money Trading ForexIn the FX market, you buy or sell currencies. Placing a trade in the foreign exchange market is simple: the mechanics of a trade are very similar to those found in other markets (like the stock market), so if you have any experience in trading, you should be able to pick it up pretty quickly.
The object of Forex trading is to exchange one currency for another in the expectation that the price will change, so that the currency you bought will increase in value compared to the one you sold.
An exchange rate is simply the ratio of one currency valued against another currency. For example, the USD/CHF exchange rate indicates how many U.S. dollars can purchase one Swiss franc, or how many Swiss francs you need to buy one U.S. dollar. Before you can really start trading your money, you should know some basic things about Forex Trading.
FX Quote
Before trading currencies an investor has to understand the basic terminology of the forex market, including how to interpret forex quotes. In every foreign exchange transaction an investor is simultaneously buying one currency and selling another. These two currencies make up what is known as a "currency pair." This is an example of a foreign currency exchange rate of the dollar versus the yen:
If selling, the foreign currency exchange rate specifies how much units of the quote currency you get for selling one unit of the base currency; in the above example, you will receive 85.32 Japanese Yen when you sell 1 US dollar.
You would buy the pair if you believe the base currency will appreciate (go up) relative to the quote currency. You would sell the pair if you think the base currency will depreciate (go down) relative to the quote currency.
Long/Short
First, you should determine whether you want to buy or sell.
If you want to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price. In trader's talk, this is called "going long" or taking a "long position". Just remember: long = buy.
If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called "going short" or taking a "short position". Short = sell.
Bid/Ask Spread
As with stocks, a forex quote includes a bid price (or bid) and an ask price (or ask). This can be easily illustrated with an example of a currency quote taken from the forex trading software:
The bid is the price in which the dealer is willing to buy the base currency in exchange for the quote currency. This means the bid is the price at which you (as the trader) will sell.
The ask is the price at which the dealer will sell the base currency in exchange for the quote currency. This means the ask is the price at which you will buy.
The difference between the bid and the ask price is popularly known as the spread.
Let's take a look at an example of a price quote taken from a trading platform:
Forex Spread On this GBP/USD quote, the bid price is 1.5825 and the ask price is 1.5829. Look at how this broker makes it so easy for you to trade away your money.
If you want to sell GBP, you click "Sell" and you will sell pounds at 1.5825. If you want to buy GBP, you click "Buy" and you will buy pounds at 1.5829.
Demo Trading
You can open a demo account for free with most Forex brokers. This account has the full capabilities of a "real" account. Why is it free? It's because the broker wants you to learn the ins and outs of their trading platform, and have a good time trading without risk, so you'll fall in love with them and deposit real money. The demo account allows you to learn about the Forex markets and test your trading skills with ZERO risk.
YOU SHOULD DEMO TRADE FOR AT LEAST 6 MONTHS BEFORE YOU EVEN THINK ABOUT PUTTING REAL MONEY ON THE LINE.
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