Learn Forex - How To Make Money Trading
Forex, The Trade Process Submitted By: Tom Leroy On the forex
market we are trading currencies, exchanging a currency for another.
So we buy a currency hoping its value will increase compared to
the value of the one we are selling. Yes, we, at the same time,
buying a currency and selling another currency. An example may
be a little more understandable.We have dollars and want to buy
euros. The pair traded here is EUR/USD, and the exchange rate
is 1.25. You can read it like this : 1 euro equals 1.25 dollar.
We hope that the euro value will be higher so that later we will
buy more dollar.
The exchange rate increase to 1.35, in
this case we bought 1 euro using 1.25 dollar, and it now equals
to 1.35 dollar. So we exchange our 1 euro back into dollars and
now have 1.35.We bought 1 euro for $1.25 and sell it back for
$1.35, we made a 10 cents profit. Of course on the forex market
you will not buy only one euro, this will be few hundreds or thousands,
depending on your budget and the leverage offered by the broker.Exchange
rates are always moving. When I say that you "hope"
the value will increase, many factors can be used to predict the
rate, based on technical or fundamental analysis.
This is not the topic of this article so
let's have another example of a selling trade.We take the same
pair (EUR/USD) as above starting with the same exchange rate (1.25).
We want to sell euros so we can buy it later at a lower price.
Here we hope, or know that the value of the euro will depreciate.
We sell one euro for $1.25. The exchange rate drops to 1.15. That
means that now we only need 1.15 to buy our euro back.
We exchange our dollars back into euros
and again, make a 10 cents profit.When you buy or sell, you always
buy or sell the base currecy. The base currency is the first one
in the pair. In the pair EUR/USD, the base currency is the euro
and the USD is called the quote currency. When you decide to buy,
you buy euro and sell dollars. When you decide to sell, you sell
euros and buy dollars. Think that you always need to exchange
something two times. If you buy something and want to make a profit
from it, you would prefer to sell it at a higher price. And so,
if you are selling something that you will need to buy again,
you would prefer to have it at a lower price.About the Author:You
can find more forex resources on Forex Business Opportunity website.Learn
Forex at http://www.ForexBO.com.
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