A clear explanation of Forex Trading

A clear explanation of Forex Trading

A clear explanation of Forex Trading

If you are looking for a good investment, direct your eyes to Forex trading. It is a worldwide exchange of foreign currencies sold for a profit depending on the market trends. The market involves anything including people, banks, global corporations that add to more than 1.5 to 3 trillion dollars of activity every single day. With all this capital floating around, there are many people who do not understand who forex trading works. I hope that in this report, I will explain to you in a very simple way the basic concepts of forex trading.

With forex trading you aim to buy currencies at an exchange rate for another currency, this is called a currency pair. For example you might exchange the US dollar for the Euro or you may exchange the British pound for the Mexican peso. The American dollar is used as the unit to determine what the value of the other currencies are, because the less the American dollar is worth the less of any international currency is. This rule applies to every other currency as well. If the currency would get you less in US dollars then the currency isn't worth much.

With forex trading you will spot a fluctuation in the right direction for your investment. Decimal format is used to calculate the exact exchange rate for currency internationally. For instance a US dollar might get you 1.30 euros. You make a profit when the number moves up a point. The more this number moves up the more profit or pip you make. A pip can be a unit of twenty dollars, ten dollars, or less depending on what type of account you are playing with and the size of the lot.

Unlike the SEC, forex trading is accomplished over the phone or online.. A large proportion of the money that is exchanges originates from only five percent of the market banks and large corporations. The other 95% originates from small time investors who have a small amount of money in their account to play with.

When you start forex, you will be faced with many technical words such as Fibonacci retracement, which means the level at which a market trend will break, and fundamental analysis which simply means information you are fed over the news. However, these words should not stop you from becoming a good player in this market since they are easily learned.

The basic point is to buy one currency at an exchange rate that will increase in value to a point where you will be able to buy more of a currency which is worth less at the present time because of the increased value all centralized around the US dollar. I hope this information will be of help to you when dealing with forex trading.

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