Forex exchange rates
- Pini Soliman
- August 05, 2013
How To Be A Foreign Exchange Trader
Being a forex or foreign exchange trader no longer means you have to work for a bank in one of the world’s financial centers. These days you can trade on your own behalf, from anywhere.
Since the rise of the internet many people are doing this from their own homes, making money in their spare time or even making a full time income. But what is forex trading and how does it work?
A foreign exchange trader deals in currencies. He or she will sell one currency that seems to be falling in value, to buy another that seems to be rising. There are always two currencies involved in a trade (a currency pair) because when you want to buy dollars you have to have another currency to exchange for them.
In the beginning it is best to be involved with just one currency pair. Most people start out trading in the EUR/USD market, that is the euro against the US dollar. This is the biggest forex market. There is plenty of information available for this market and it tends to have lower costs and be relatively stable.
Nevertheless forex is a very volatile market. This means that the prices can rise and fall steeply and quickly. The risk is high. It is easy to lose money. In fact, some losses are inevitable, so you should manage your account so that you never risk too much on one trade. You can use stop losses so that your broker will automatically sell if the price goes a certain way against you. The aim is not to have no losses, but to make sure that your profits are higher than your losses so that you end up with a net gain.
You will need access to a computer with a high speed internet connection any time that you want to trade. Unless you use a robot to control your currency trading, you will also need time where you can concentrate on learning a profitable system and then on trading itself. You pretty much need to be able to lock yourself away in a room to do this, at least for a couple hours a day. It is no good trying to trade from your desk at your day job with your boss interrupting you, or using a computer in the family den with kids climbing on your knees wanting to play games. You must be fully concentrated on the movements in the market or you could miss the right moment to either open or close a trade.
If you are a cautious person who likes a solid investment with predictable low returns, you should not become a currency trader. Forex traders are people who enjoy risk and love the challenge of trying to turn a profit in a fast moving market.
It helps if you are strongly focused on your goals and not easily swayed by emotion. It is important not to let fears of losses or dreams of huge wealth divert you from your strategy. You also need to stay aware of financial news, not only in your own country but in all of the major world powers, because this will affect the forex markets. With these characteristics and a good trading system in place, a foreign exchange trader can reap substantial gains from his or her investment.
How to Gain Money with Forex as A Way to Earn Outside Income
Many people prefer to rely on several sources of income rather than working at a single job. A secondary source of income often consists of investment in areas concentrated on trade, like the stock market. However, one of the fastest-growing secondary sources of income for many people is the forex market, where individuals buy and sell currencies. Let us see how to gain money with forex.
Every country in the world uses a currency as the basis for the functioning of its economy. For the US, the currency is the dollar (USD); for the EU (EUR), it’s the euro; for Japan (JPY), it’s the yen, etc. In the forex market currencies are paired to conduct transactions, with one currency balanced against the other. For example, at any given time, the dollar may be exchanged for the British pound at a certain rate, perhaps 1.25 dollars to every pound. That means that every pound has a value of 1.25 dollars, expressed as GBP/USD 1:1.25. Since the values of currencies rise and fall, the rates at which they are exchanged also rise and fall. While the rate between the dollar and the pound may presently be 1:1.25, that rate could rise or fall at any time. Therefore, the rate could be 1:1.20 or 1:1.50 in one hour or one day. The way to earn income off of these rates is to buy currencies when they have a low value and sell them when they have a high value. If one believes that the dollar will gain strength as in the example above, he/she could buy dollars while they are still relatively low in value and then exchange them later when the dollar’s value will have increased, realizing a profit in the exchange.
When trading in forex, the investor buys one of these currencies against the other. Using the example above of GBP/USD at 1:1.25, one may decide to buy 1,000 GPB against the dollar. Therefore he/she will need to spend 1,250 USD to execute that transaction.
The most commonly traded currency pair is the USD/EUR. Both currencies have maintained a high level of stability for a period long enough to gain the trust of investors. Among currency pairs, trading USD/EUR is considered relatively safe.
However, other currency pairs experience much more volatility. Rates among other currencies rise and fall steeply and quickly. Thus, while the investor potentially experiences handsome profits, the potential for stinging loss is also present. Trading in forex thus involves risk and the investor must be aware of that fact before delving into the forex market. Almost every investor experiences some loss, however the savvy or well-advised investor realizes more gain, and therefore more profit.
For this reason, most investors do not rely solely on their own instincts and decisions when making trades. Rather, they consult professional forex brokers experienced and knowledgeable in the forex market or use software based on tested algorithms to make decisions on what currencies to trade and when to trade them.