Forex: Make Money with Currency Trading

At first, the sound of making money in the foreign exchange market, or Forex, sounds tad complicated. The sound of Forex, believe it or not, is enough for people to stop considering it as a moneymaking option. What they fail to realize is that the Forex is a great way to make money with currency trading.

It all began in the 1970s, when currency exchange rates were introduced and the price of each currency was determined by the economic principle of supply and demand.

Since then, the Forex has thrived and showed no signs of crashing down for good. After all, who doesn’t use money in buying and selling? At the moment, there must be many questions in your mind about how to make money with currency trading. It’s high time to put all your reservations to rest.

What makes Forex so different, huh?

There are a number of qualities that make the foreign exchange market unique, ultimately allowing you to make money with currency trading. For one, it is the most fluid financial market, with currency trade at around 1 to 1.5 trillion dollars every day.

Make Money with Currency Trading - Dollar Bull

With this amount of money being traded on a daily basis, the price of a major currency can take a time before it is significantly affected. At the same time, this allows currency brokers and traders to buy and sell positions however fast they want.

Another quality of the Forex market is that its open for 24 hours.

Although most brokers are open at 2 PM Eastern Standard time (Sunday) through Friday, 4 PM, you can create your own trading schedule and trade with market hours of different continents – Europe, Asia and US.

How does Forex work anyway?

Before jumping into the Foreign Exchange Market, you have to know the various technicalities and ways for you to make money with currency trading.

The principle behind Forex trading is to exchange your currency with another, with the expectation that the currency you bought will increase in value or the currency you sold will decrease in value, thereby earning you a profit. For example:

• You exchange your 50,000 US Dollars for 37, 234 Euros (At the moment, 1 dollar has an exchange rate of 0.74 Euros).
• After two weeks, you can exchange 37, 234 Euros back to US Dollars (with a profit) if the Dollar-Exchange rate has increased.

Because of the changing value of the currency over time, you get more of what you originally traded. You can also trade it with other currencies in the process, if you think your currency can earn more with it.

How do I read these complicated FX Quotes in the first place?

Generally speaking, a lot of people understand the general principle of how Forex works. The next big problem is in understanding the technicalities in the market. It all starts with reading an FX quote.

Because currency trading is always done in pairs, you will notice quotes like GBP/USD, EUR/USD, or EUR/JPY all the time. But what do they mean?

The currency on the left side of the slash is the base currency. The base currency simply means that you are buying that currency in exchange for the quote currency (the currency on the right side of the slash). Together, this is the pair that you will either sell or buy in the Forex market.

How do I know which pair to trade?

Trading in Forex is done by either going long (buying) or short (selling). By going long, you have the intention of buying the base currency and selling the quote currency because market trends show that the base currency will increase in value. Selling short, on the other hand, is about letting the base currency decrease in value so you can buy it back later for a lower price.

While at it, there are also two distinct prices for a trade: the bid and the ask price. The bid price is basically the price the dealer is willing to trade the base currency for the dealer’s quote currency. The ask price, on the other hand, is the price a dealer will sell the base currency in exchange for another dealer’s quote currency.

At the end of the day, the ask will determine the price of the trade.

What if I don’t have 50,000 US Dollars?

Without a huge sum of money, you may think you can no longer make money with Forex trading. This is not true at all. You can resort to margin trading, which is essentially currency trading with a “borrowed capital”. With account balance as small as $250, you can open online trading account and start to trade currency pairs.

With this guide, you can now make money with currency trading – starting with online trading. You can start with AvaFX, CitiFX Pro or all the other online trading platforms.