What is Forex?

What is Forex? Forex is an acronym formed from the phrase FOReign EXchange. The acronym sometimes is further abbreviated to FX. Foreign exchange can be translated to mean several things. But for the purpose of this tutorial, it simply refers to buying and selling currencies of different countries. For example if you give 100US dollar in exchange for 90Euro you have just sold USD and bought EURO. People that engage in physical exchange of currencies are often refer to as Beure de exchange. Well, that is not what we are interested in. We are interested in selling and buying foreign currencies online.

So as webpreneurs, Online Forex Trading is actually the most appropriate term we ought to be using. Online Forex trading is the act of buying and selling different currencies with the intention of making profit. How does the profit come? It comes from the period fluctuations in the value of currencies being traded. For example if you buy $100 at 90Euro but later converted the same 90Euro back to $150, you have made a profit of $50 (this is over simplification and only meant to aid understanding, it is more complex than I just stated).

How does forex trading work?

For you to trade Forex online, you need a foreign exchange currency account for the business. Managing such an account on your own will require so much education and resources, so it is better if you employ the service of specialists that are referred to as Forex Brokers or Market Makers. Many of them offer free account for new traders. Some even provide demo accounts that you can use to learn how the market operates.

As a forex trader you will be required to choose a currency pair that you want to trade. For example, assuming you decided to trade USDollar against the European Euro, you can use $100 to purchase 90Euro at the beginning of the month and give instruction to your broker to sell same at the end of the month. If the 90Euro is sold for $120 then you have made a profit of $20. However, if it is sold for $90 then you have lost $10.

Forex trades can be placed online through a broker. Orders are usually placed with just a few clicks and the broker then passes the order along to a partner in the Interbank Market to execute your instruction. You close your trade when you instruct that the currencies be sold and the proceed from the sale be credited back to your account. When you close your trade, the broker closes the position on the Interbank Market and credits your account with the loss or gain. How often you choose to close your trade is entirely dependent on you. Technology has made it possible for all this instructions to be executed with lightning speed.

The foreign currency market is highly volatile and can be quite unpredictable sometimes. You should understand that as in any other business, there are risks. For you to make profit trading Forex Online, you must acquire experience and learn to really understand how the market works. Even though there are resources to help you achieve your goal as a trader, there are no absolute guarantee. If you assume that you can wave a magical wand and become successful overnight, you are in for a very rude shock.

The purpose of this website is to assist you in acquiring the necessary experience that will aid your success as an online forex trader.

Benefits of Trading Forex Online

1. Low startup capital

You don’t need a huge amount of money to start trading forex. You can start with as low as $50 dollars and grow your account. Actually, it is advisable to start with fund you are willing to loose without crying.

2. The market is open always.

The forex market is worldwide therefore it is not tied to the day time of any particular country. Trading is continuous as long as there is a market open anywhere in the world. Technically, trading starts when the foreign currencies markets open in Australia on Sunday evening, and ends after forex markets close in New York on Friday.

3. Low Transaction Cost

In online forex trading, the cost for a transaction is built into the price. So you can easily estimate what your cost is. The transaction cost is called the spread. Technically this is the difference between the buying and selling price of the currencies.

4. High Liquidity – Easy to Cash

You can easily convert your account balance to cash whenever you have need. You can easily move money from and into your account without much Liquidity is the ability of an asset to be converted into cash quickly and without any price discount. In forex this means we can move large amounts of money into and out of foreign currency with minimal price movement.

5. Leverage (Trading With Borrowed Fund)

Some Forex Brokers allow their traders to trade the market using borrowed funds. This gives the trader the ability to use more fund than he has in his account to trade in the market. For example, a trader who is giving a 20:1 leverage will be able to control trade worth $20,000 even when his account balance is just $1,000. What is given as leverage differs from one broker to another and sometimes the experience of the trader is also considered.

6. Unlimited and Unrestricted Profit Potential from Rising and Falling Currencies Value

The forex market has no restrictions for trading. You are free to make as much profit as you can. There are no limitations to what profit you can earn from trading online. Also, the foreign currency market operates outside the jurisdiction of individual countries.

Forex Trading is one of the ways that people are making legitimate money online. However, it is an online business that requires much learning and hardwork from an entrepreneur. You can bookmark this page or subscribe to my RSS feed so that you will not miss subsequent updates to this post about Forex.

1 comment:

  1. mennn u have really gone far in forex ooh, isaw ur comment on my page i just posted some good stuff about profiting in forex. keep it up fom joekudi