What Forex Market is… Exactly?
Here’s a topic a lot of people requested. In this article, I’ll cover the essence of Forex market and how to make money with it.
Forex is an abbreviation of “foreign exchange”; obviously, it all revolves around profiteering through trading foreign currencies.
It is really an art to make cash on foreign exchange, and even though people have been doing that for a long time indeed, it is only since the last decade that Forex has acquired such enormous popularity.
People are now wondering about the nature of this most peculiar market. It is not new, and many individuals benefitted via Forex many years ago, and many continue doing so nowadays.
Due to the enormous progress of web technologies, anyone can start trading on Forex market right from the comfort of their homes.
How Everything is Done in Forex
There are certain brokerage businesses out there which provide you with all necessary support for trading foreign currencies via Internet. This goes from software, technical support and credit leverage needed for conducting currency purchases.
Of course, it comes at a price. Every trade, successful or not, requires a small commission payment to go to the brokerage company, which is fair enough.
Firstly, you will have to find a trustworthy brokerage service and sign up for a free account. Afterwards, you fund it with cash, which is going to be used for trading purposes.
Whatever you earn will add up to your account – or be deducted from it. You will be able to withdraw your earnings any time.
Currencies Available for Trade
When trading on Forex market, you don’t deal with solo currencies, but with pairs of them. The major ones are British pound sterling and US Dollars (GBP/USD), USD and Swiss Frank (USD/CHF), Euro and USD (EUR/USD) and, finally, USD and Japanese Yen (USD/JPY).
For every currency pair, the first one is base currency, or commodity, while the latter is actual money. If you have chosen to trade with GBP/USD, you can either buy Pound against Dollar, or sell it – once again, against Dollar.
Don’t worry about issues of conversion, the software you’ll be trading through will take care of that for you.
The basic tactics can be put rather simply: you need to sell high and buy low, or buy low and sell high. Either is OK as long as you don’t lose money.
Purchasing GBP against USD when the former equals to, for instance, 1.8675 USD and then selling it at 2.0575 USD will bring you profits.
If you sell GBP against USD, you need something quite opposite. Of course, there are many nuances to the trading strategies that a simple article won’t cover. So let us discuss some other important basics.
The ultimate question is: How does one know when to buy? How do they predict the rise or the fall of the currency exchange rate in order to make money on trading operations?
It is only fair to ask such questions – solving them would make you a good trader.
Two approaches exist on learning about the due time to purchase or sell your currencies: technical analysis and fundamental analysis.
Technical Analysis for Forex
In the technical analysis, one can foresee the changes in the exchange rate by looking through the chart analysis and using special indicators that will help to determine the market trends.
Technical analysis is scientific and consequently complicated to master. However, if it’s your intention to start trading on Forex market, you will need to study it profoundly, in particular if you want to be an intraday trader.
Being well-motivated and persistent, you will master the drill in several months’ time. To help you get through this, there are many free materials online to read and learn from.
Fundamental Analysis for Forex
Then there is fundamental analysis, which is normally used to determine long-term trends and predict the volatility of currencies based on macroeconomic factors.
This involves studying the economies (and quite often – political issues) of the key Country’s such as USA, Japan, China, Russia, Britain and Germany.
Fundamental analysis helps to make far-reaching forecasts about the situation on Forex market; however, good traders are capable of predicting fast changes which usually depend on the news and the market’s reaction at it.
For instance, if there’s news of unemployment rising in USA compared to previous month, dollar is likely to suffer and decrease in the price.
If you are aware of such subtle connections, you could take the right position in time to make some cash. On the other hand, should your forecast fail, you can lose money.
Seasoned traders can successfully utilize both technical and fundamental analyses, while the majority of people who deal with Forex market depend on technical analysis alone.
Advantages of Forex Market:
1 – All you need for trading on Forex is your brain, your computer, specialized software and a trader’s account. It is fully home-based online income opportunity. Nothing to market, nobody to refer and/or recruit, no cold calling or advertising. The only things you will have to do are trade currencies online and analyze the market.
2 – Once you have learned how to trade properly, you could start making quite a lot of money. It is more than doable to make Forex trade your full-time venture which will bring you thousands of dollars monthly. However, trading with no prior knowledge can result in the loss of money and, worst of all, disappointment in this wonderful money-making opportunity. It is pretty much like driving a car – would you sit and drive if you didn’t know how, would you? Well, why should foreign exchange market be any different?
3 – As brokerage companies provide you credit leverage; you can spend small sums and earn much. Unlike trading on stock market, where it takes a lot of money to make a substantial sum, with Forex you can invest much less. For instance, a $5,000 account could earn you approximately $5,000 monthly, provided that you are a thoughtful and experienced trader. Skilful traders can double their accounts each month, so everything is possible!
4 – Both foreign exchange and stock markets are impervious to growing competition. In fact, they make use of it. While every other business would suffer, Forex prospers and helps traders to profiteer even more.
You Can Thrive Even with Competitors Around
Naturally, supply and demand are the two powers which govern each and every kind of market. With many buyers and sellers, volatility will increase, prices will become more dynamic.
On Forex, this is ideal conditions for making money by trading currencies.
If you decide to make money with Forex, competition will be the last thing to be concerned about.
Undoubtedly, trading on Forex market is a perfect option for part-time or even full-time income online.
If you are motivated and knowledgeable enough, you will be able to make a decent income. That is simply by trading currencies online, with no marketing, recruiting, advertising or anything else that usually prevents people entering online business.
Precisely this is the beauty of Forex.
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To your online success,