What is Forex?

If you have ever traveled to a foreign country, you may have needed to exchange your money. If so, you’ve already participated in forex trading. Forex is the short form of foreign exchange. Forex is a bit more than that, for example, companies buy goods from other countries in order to buy them they need to obtain the local currency. First, just like us when going on holiday, the difference is they will exchange huge amounts. When these companies exchange these huge amounts, they will actually move the price because of the demand for the currency that they need increases, when the demand increases, the price increases. With all this exchanging going on around the world the exchange rates constantly move.

This is how it works when currencies are exchanged, they have a certain price the exchange rate as in any market the price of a currency is determined by the law of supply and demand. If there are many people or companies that want to change euros into dollars, the price of the dollar will rise against the euro and so the exchange rate will change. Let’s use an everyday example to explain how you can actually profit from this, say you live in Europe and went on holiday to the United States. Let’s say that you changed your 500 euros into US dollars at the rate of 1.4 dollars for every euro you got 700 US dollars. But you do not spend any money at all so you still have 700 dollars after you come back and the exchange rate moves from 1.4 to 1.3 instead of getting just 500 euros back you actually get 538.5. You have gained 38.5 euros simply from holding your money in dollars while the exchange rate changed. This is essentially how we trade in the forex market; we buy a certain amount of a currency hold on to it whilst the exchange rate moves then change it back making money along the way.

Now the question arises that how to decide when the right time to buy is exactly what one needs to learn. You can imagine traveling a lot and saving a bit of money on your holiday budget and then exchanging it. It’s not really a practical approach to trading currencies. Fortunately, there is an easier way to do this you can trade currency through online exchange offices called brokers. What this means is that you can exchange currencies online throughout the day and take advantage of the constantly fluctuating exchange rates just as in the example of when you went on holiday you combine different currencies and make a profit as the exchange rates. Forex online with a broker has many benefits, you can trade Forex from your home or anywhere that you have an internet connection. The forex market never sleeps, it is open 24 hours a day five days a week. So, it suits your daily routine, you do not need a huge budget to get started as little as a hundred and fifty dollars is enough to begin trading and building your account over time. Of course, it will require some learning until you get there but this is exactly what MT4 Trading experts are here for, to help you learn how to trade in a way that can suit your individual lifestyle and to help you navigate your way through the forex market.

Leave a Comment

Your email address will not be published. Required fields are marked *