The term Forex is being used more and more in all kinds of ad campaigns and this isn’t so weird because Forex is a booming business! Forex stands for foreign exchange and is basically the trading of currencies. Trading these currencies is a lot more complex than just the trading of money when you go on holiday.
With Forex we don’t actually mean the type of currency exchange one does on holiday; we’re talking about much larger transactions. Forex traders open large positions where they trade one currency for another and such a position is usually closed the same day.
You don’t need a lot of money to get started with Forex. Losses and profits are calculated live and the purchased or sold currencies don’t have to be delivered. The difference between the price at the moment of opening a position and the price at the moment of closing a position determines your loss or profit.
How does the Forex market work?
The Forex market isn’t regulated. With Forex it is all about the trading of currencies. There is no Forex exchange building and there is no central location where all the currencies are bought and sold. The Forex market is always open because money needs to be able to change hands 24/7. Private traders can trade Forex from Monday to Friday at any given time.
How can you make money in Forex?
The value of a currency isn’t stable and is expressed in a pair with another currency. With Forex you can, for example, trade EUR/USD. You buy euros to then buy dollars. When the price of the euro goes up compared with the American dollar, you make money.
It is also possible to short on a currency pair like EUR/USD. You make money when the price of the euro goes down in relation to the dollar. The value of currencies is determined by several external factors, such as interest decisions made by central banks, transactions done by large companies and the monetary policy of governments.
Higher profits with Forex
With Forex you can make a lot more money by making predictions based on available data. It is impossible to exactly predict the price, but it is possible to predict the price with some level of certainty. I prefer to use the charts. By identifying the level that the price isn’t moving past, you can place orders on those levels and turn a profit. Managing the maximum amount of risk versus the potential profit plays an important role in becoming a successful trader.