The forex market is like any other market, but people here trade currencies instead of goods and services.
What is forex
The forex market is like any other market, but people here trade currencies instead of goods and services.
What is a forex broker?
Anyone can trade Forex, but that is available exclusively via private parties called brokers. Practically, the broker is your” door ” towards forex, with which you can enter the market
What is a currency pair?
Currencies are traded on the market within the pairs-for example, the euro, and the US dollar. – Do you want to buy the euro against the US dollar Open a EUR / USD position and press “buy”. Do you want to buy the US dollar against the euro Do the same and select “sell”? It’s simple – just remember that what you are doing is applied to the first currency of the pair.
How to make money on forex
A person buys a currency pair at a lower price and sells it at a higher price, thus income is the difference between the buy and sell prices. The broker gets a small commission from your trades, called: spreads.
For example
Let’s say you have 1 100 in your trading account, and you want to trade the EUR/USD pair. The pair’s exchange rate: is 1.25, meaning you get 1.25 USD for every 1 euro. The exchange rate is similar to the price card you find in all stores – the only difference is that the price in Forex changes all the time.
Then, you make the prediction. For example, you think the euro will rise against the US dollar.
So you buy 80 euros for the 1 100 you own, and wait for the exchange rate to change.
Let’s say it went up from 1.25 to 1.35 – this means that you are in a winning position, and therefore you can close the trade at this point. And now you can transfer the 80 euros you own for 108 US dollars, thus getting an estimated profit of 8$.
If you think this amount is not worth it, here’s the great news: your broker can help you make a lot of money through a special tool called leverage. Leverage is an amount you borrow from your broker to double your deposit.
For example, if you use a leverage of 1:3000 at FBS – from a trade similar to the one in our previous example, you will get 2 2400 from just one trade. That is, you invest$ 100 and trade 3 300,000! Not bad, right.
Just remember: larger profits involve greater risk, so risk management is an important element while trading.
How to make predictions
Last question: How do traders decide which currency pairs to trade, and when to sell or buy them
The exchange rate depends on supply and demand which change according to the country’s economic situation (GDP, inflation level, the current state of the labor market, etc.). Therefore, the political, economic, and social factors that affect the local economy also affect exchange rates. Knowing the mechanism of the impact of these factors on profitability is the key to forex trading.
