You are here: Home / Banking / An Introduction to Forex

An Introduction to Forex

forex-tips

While many people are looking to tighten their belts in the current economic crisis, there are others who are pursuing an alternative route; they are making additional money. One of the most popular methods of earning when you’re not at work is by trading on the forex markets.

You may or may not have heard of forex, but all it refers to is the foreign exchange market. This is where people trade currencies in order to make a profit. They are able to do this because there are constant fluctuations in the value of one currency against another.

This is explained through currency pairs, which show the value of one currency compared to another. An example would be GBP/USD1.59. Simply, this means that 1 GBP is worth 1.59 dollars. If you bought at this rate, but the value then went up to 1.62, you’d make a profit of 0.03 USD for every pound you bought. You can also sell, in which case the reverse would be true.

The forex market is very different to other forms of financial trading, and the reasons are certainly beneficial to those looking for extra income. Where the stock exchange is open for only a limited time each day, forex can be traded for 24 hours on each weekday. This means that you can fit in some trading time whatever hours you work.

Another major bonus is what’s called leverage or trading on a margin. This means that whatever money you put in can be scaled up, meaning you can earn larger profits. Of course this also means that your losses would be increased too, should prices not move the way you expected.

Forex isn’t a gamble; you don’t simply buy or sell currency and hope. Traders look for signals that suggest the direction prices are going to move in. There are an infinite number of ways in which events can be interpreted, and it is getting these interpretations right that makes people successful. There are roughly two different types of signals; those that come from the news and economic announcements, and those that can be seen by watching patterns on price charts.

Getting started isn’t particularly difficult. You do certainly need to do your research first, to make sure that forex is right for you, and that you understand how it all works, but beyond that, it’s straightforward. There are multiple products you need to be aware of too, such as futures trading, options, CFDs and more.

The first thing you need to do is to register with a broker; the company that handles all of your trades. There are usually several different types of account, ranging from entry level to large-scale professional. You then download a forex platform, which is the software from which you conduct all of your trades. These two are linked up, and you’re ready to go.

Forex trading is an excellent way of making extra money, as long as you’re clued up on what it entails, and you understand the risks involved.

 

 

About John Evans

Comments are closed.

Scroll To Top