Forex
What is forex trading?
There is a huge amount of information out there on forex trading. Many sites offering their “holy grail” or selling you “secret methods” and that sort of thing. The truth is that there are no secrets to trading forex, and there are unfortunately no quick and easy ways for someone to make a million.
Now that we have that out of the way, we can look at some of the good things! forex can be very lucrative if treated properly and treated like a business. We’ll go into more detail about that later on in the course. First, let us look at what Forex trading is all about.
EUR USD Forex Chart – 4 hours with blue and red colour candles
How do forex traders make money?
The above image is a screenshot from the MetaTrader 4 platform, it is still the most popular Forex trading platform available even though MetaTrader 5 has been out for quite some time.
The above chart is showing us the exchange rate between the Euro and the United States Dollar. As Forex traders, we look at these charts and try to figure out what is the most likely direction the chart will continue. The more practice you have, the more likely you are to get it right. Once you’ve made your decision, you go ahead and place a trade.
To keep the numbers simple, we will choose the exchange rate of 1.17000. The chart is showing 1.17896, but we’ll use the easier number just for this example to be clearer. Nowadays, you can trade from anywhere on your mobile phone
How do you profit in forex?
So based on whatever forex trading strategy you are using, you decide the the EUR USD pair is going to continue going up. And you buy on that. So you are buying Euros and selling Dollars. Lets say you buy 1’000 Euros, at the exchange rate of 1.17000, it will cost you 1’700 Dollars to buy those Euros.
After a day or a week the chart has moved in the direction you predicted and the exchange rate is now 1.175000. Your strategy says that it is time to close, or maybe you’re just happy with the profit you’ll make. So you close the trade.
Because you bought Euros and sold Dollars, you now do the reverse. Don’t worry, Meta Trader does all of that for you! So you now sell back the 1’000 Euros you purchased and get back 17’500 Dollars. Or initial cost was 17’000 Dollars so you have made a return of 500 USD on that trade. And that, in a nutshell, is what Forex trading is.
