Meaning of Forex and the currency market
If you have ever traveled abroad, you may have had to exchange your money for a different currency. If so, then you have already participated in foreign exchange operations, which in a shorter way we call Forex .
What is Forex and Forex trading?
Forex trading in a nutshell
As you can imagine, currency trading is little more than currency exchange for a vacation. Companies use different currencies to buy goods . To buy these goods, they need to get the local currency first, just like you would when you go on vacation. The difference is that these companies are going to exchange large amounts.
With all the currency trading going on around the world, exchange rates are constantly on the move. Is that how it works:
The forex market is like exchanging money during your vacation
When currencies are exchanged, they have a certain price, it is called the exchange rate. As with the price of anything, the price of a currency is determined by the laws of supply and demand.
If there is a high demand for a particular currency, for example, many people or companies want to exchange their national currency for the euro, the value of the euro will then will then increase and therefore the rate of exchange will change against other currencies. You can use this principle to make money. To illustrate this, we are going to use the example of going on vacation.
Let's say you live in Europe and you go on vacation to the United States. You will have to exchange euros for US dollars. For example, if the exchange rate at that time is $ 1.40 for one euro. If you exchange € 500, you receive $ 700.
Two weeks later you return to your country, and you still have $ 250 left, since you will not be able to use dollars in your country, what you do is change them back to euros.
And you notice, however, that the price of the euro against the dollar has changed, the exchange rate is $ 1.30 for one euro. So you are going to get approximately € 190. If the exchange rate had been kept at $ 1.40, only € 180 would have been raised. So, money has actually been made.
Therefore :
The value of a currency will increase if there is a greater demand for it, causing its exchange rate to change against other currencies.
Success in trading consists of using the exchange rate to make a profit
Here is an even clearer way to demonstrate this principle using the same example:
Let's say you have exchanged € 500 into US dollars and received $ 700, but have not spent any money at all and came back with $ 700. After the exchange rate has gone from $ 1.40 to $ 1.30, instead from getting € 500 again, you now receive € 538.5. You have earned € 38.5 for the simple fact of having saved your money in dollars and wait for the exchange rate to change in your favor. This is essentially the way in which we do trading in the forex market. We buy a certain amount of a currency, hold on to it until the exchange rate fluctuates, then change again once the exchange rate has fluctuated, and we make money in the process.
Trading to suit your lifestyle
Using an office or bank to change and save some money from your vacation budget is not a practical approach to currency trading.Fortunately, there's a neater thanks to do this: through online exchange offices called brokers .
What this means is that you can exchange currencies online and take advantage of constantly changing exchange rates. At the same you can buy different currencies in the example of going on holiday, and make a profit when the exchange rate between the currencies change, this is the trading with forex .
Online currency trading has many advantages:
You can do trading with forex from home or from anywhere you have an Internet connection.
The forex market never sleeps. It is open 24 hours a day on weekdays and can be adapted to your daily routine.
You do not need an outsized capital to start out . As little as $ 100 is enough to start trading and building your account over time.
Forex trading won't make you rich overnight, however, it can provide you with an income stream, alongside your normal job. It can even turn into a business, depending on how long you are willing to invest.
Of course, a little it takes effort to get there, but this is exactly what tradingforexybinarias going to do, to help you learn trading in a way that suits your lifestyle and help you navigate through the market currency.
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